Banks no longer dominate the payments realm.

Imagine how tough life would have been if you had to rush to the bank for every small little transaction. Thanks to ever-advancing technology for saving us from this hustle. and present-day, digital payments is an industry on its own, and hence comes the competition for the players within. Let us explore this lesser known but highly used industry.

Digitization of payments was a colossal jump towards the goal to achieve an effortless, convenient, quick, and secure payment method. Perhaps, we have achieved all of it. Digital payment methods saw massive developments in few years and a lot more is expected in the future.

What are payment gateways?

A payment gateway is a software application that allows merchants (a specific bank account required for card payments / online trading) to accept payments made with credit/debit cards for in-store and online transactions. It safely encrypts payment information and transfers that data between three things; the merchant’s store or website, the bank that processes the payment, and the bank that issued the card used to make the purchase.

A payment gateway can be categorized either as entirely digitally (with credit card information being channeled) or physically, with an in-store POS system at a brick-and-mortar location.

Amongst many, one of the most important aspects of a payment gateway is that it has strong security standards in place to keep the cardholder data safe during transmission processes. When a purchaser uses their payment card, the payment gateway securely sends the customer’s card information to the payment processor. Some gateways also offer merchants a broader range of payment processing features and benefits.

How does a payment gateway work?

The customer selects the items they want to purchase and proceeds to the payment page. Most payment gateways offer a variety of options for your payment page. Some payment gateways offer the below options for the payment page your business needs:

Hosted payment page

An out-of-the-box payment page where customers are transmitted when they are ready to checkout. The payment gateway securely receives the transaction data before it passes it to the acquirer. It reduces the PCI burden for online merchants if you do not collect and/ or store the cardholder data on your server.

Server-to-server integration

This is also known as direct integration as it allows communication between two servers; the merchant’s server with the payment gateway’s server.

By requesting the card details on the payment page, a direct transaction can be initiated.

Client-side encryption also known as encryption-at-source refers to encrypting sensitive on the client-side device before forwarding it to the merchant’s server. This enables the merchant to simplify the PCI compliance requirements.

Step 1: The customer enters their credit/debit card details on the payment page. (details including the cardholder’s name, card expiration date, and CVV number). This information is then securely passed onto your payment gateway, based on your integration (hosted payment page, server-to-server integration, or client-side encryption).

Step 2: The payment gateway encrypts the card details and executes fraud checks before they send the card data to the acquiring bank.

Step 3: The acquiring bank sends the information securely to card schemes (like Visa, Mastercard, etc).

Step 4: The card schemes perform another level of fraud check and then send the payment data to the broadcasting bank.

Step 5: The issuing bank, after performing fraud screening, approves the transaction. The approved or declined payment message is transferred back from the card schemes, then to the acquirer.

Step 6: The acquiring bank sends the message back to the payment gateway who then transmits the message to the merchant. If the payment is approved, the acquirer collects the payment amount from the issuing bank and holds the fund into your merchant account.

Step 7: Deposits the funds into the merchant's account, which is known as the settlement; when the actual settlement will occur, depends on the agreement the merchant has with their payment gateway.

Step 8: according to the message, the merchant may either display a payment confirmation page or ask the customer to provide another payment method.

Key merchants

Google Pay

Google Pay is a digital wallet platform and online payment system established by Google to power in-app, online purchases on mobile devices, allowing users to make payments with just click from their digital devices.

Bhim UPI

BHIM is an Indian mobile payment App developed by the National Payments Corporation of India. The ‘UPI’ stands for Unified Payments Interface. The app intends to facilitate e-payments directly through banks and encourage cashless transactions.

Paytm

Paytm is an Indian e-commerce payment system and financial technology company. It offers a vast variety of online payments advantages like mobile recharges, utility bill payments, travel, movies, and events bookings as well as in-store payments at grocery stores, fruits and vegetable shops, restaurants, parking, tolls, pharmacies and educational institutions with the Paytm QR code.

Key players in payment gateway

Paypal

It is an eCommerce payments platform designed to assist people and companies to send and receive payments without providing financial information. It is one of the top-rated payment gateways that lets users send or receive payments across the globe with just an email address.

Amazon Pay

This is a payment gateway designed especially for Amazon merchants and shoppers. It is an effortless, quick, and secure payment solution that helps people across 8 countries presently. It is designed to provide a smooth shopping experience for both online retailers and seller.

Zaakpay

This is another popular payment gateway that allows all international and Indian MasterCard credit cards, Visa credit cards, Discover and Diners credit cards. It is a secure, easy, and quick gateway that allows payments in a few clicks

Conclusion

All this information on payment gateways could be overwhelming but it is important to know how our most important information is being processed and not being misused at any step as a customer. Whereas, Finding the right online payment partner is a key decision for a business.