Payment Gateway — What It Is, What It Does, and How It Works
What is payment gateway?
A payment gateway is a technology used by traders to accept purchases by debit or credit card. The term includes not only the physical card readers that are found in retail brick and mortar stores, but also payment processing portals that occur in online stores. However, brick and mortar payment gateways have begun in recent years to accept phone-based payments using QR codes or near field communications technology (NFC).
5 Trends in the Indian payment gateway market
Trend 1 — Payment gateways are consumer-oriented interfaces that are used to collect payment information.
Trend 2 — In physical stores, payment gateways consist of point-of-sale (POS) terminals that accept credit card information via card or smartphone.
Trend 3 — In online stores, payment gateways are the “checkout” portals used to enter credit card information or credentials for services such as PayPal.
Trend 4 — Payment gateways differ from payment processors who use customer information to collect payments on behalf of the retailer.
Trend 5 — There are also payment gateways to facilitate payment in cryptocurrency, like Bitcoin.
How Payment Gateways Work in India
The Payment Gateway is a central part of the electronic payment processing system, as advanced technology is responsible for sending information to the merchant’s acquiring bank, where the transaction is processed.
Payment gateway technologies are still evolving to reflect consumers’ new tastes and technical capabilities of consumers. In the past, terminals accepted credit cards with magnetic tapes and required customer paper signatures.
With the development of chip technologies, the signature phase could be removed in favor of a Personal Identification Number (PIN) entered directly into the payment gateway hardware. Today there are also contactless purchases, with many customers now using their phone as a payment device instead of plastic credit cards.
The architecture of a payment gateway will depend on whether it is a store gateway or an online payment portal. The online payment portals require application programming interfaces (APIs) that allow the website in question to communicate with the underlying payment processing network. The payment gateways in the store use a POS terminal that connects to the electronic payment processing network, either via a telephone line or via an internet connection.
Payment Gateway vs. Processing of payments
A payment gateway differs from a payment processor, a service that connects the client bank to the merchant’s account and facilitates actual effective movement. You can imagine them as two halves of the transaction: a payment gateway collects customer information for payment, and a payment processor uses this information to contact the bank and the customer’s merchant account, debit one account, and settle the other.
Example of India Payment Gateway Market
Dealers may have access to payment gateway systems through banking partnerships between traders or, if not, choose their own payment gateway system. Large banks such as Bank of America (BAC) and JPMorgan Chase (JPM) have sophisticated payment gateway systems that purchase customers along with their own merchant banking services. Finally, traders can choose a variety of payment gateway technologies, provided they are compatible with the merchant acquisition bank that is being used for payment processing.
A recent example of payment gateway is Easebuzz, which focuses on flexible mobile payments for retail businesses. The company’s easebuzz allows customers to easily accept payments at special locations such as congresses or agricultural markets, or through itinerant showcases such as catering trucks.
With Easebuzz Payment Gateway technology, a retailer can attach a small piece of hardware to his mobile phone, which allows the customer to wipe his payment card for processing via the electronic connection of the mobile phone. Easebuzz sends the payment information to a merchant acquisition bank, which then temporarily processes the information for the trader temporarily.
The new products are likely to further increase the versatility and speed of the payment gateways. In recent years, blockchain startups have even introduced payment gateways for cryptocurrencies.
FAQ on payment gateways
How much a pay footbridge cost?
Payment gateways typically charge a combination of initial configuration fees, a flat monthly rate and a small rate for each transaction. Some walkways may also charge a fraction of each purchase. For example, Easebuzz charges a two-cent fee for most card transactions as well as 2.6% of the payment volume. Stripe bills 2.9%, plus 30 cents per transaction. It can also be calculated for equipment and installation.
What is a White Label payment gateway?
A white-branded payment gateway is a payment gateway whose brand can be adapted according to their customer’s preferences. This allows traders to receive payments via third party services while using their own name and brand.
Can I build my online payment Gateway?
Although you can build a payment Gateway from scratch, it would probably be too expensive to be worth it. Easebuzz estimates that the construction of a minimum gateway for processing credit and debit card transactions could cost a quarter of a million dollars, not to mention additional headaches of international transactions, foreign currencies and compliance.
Is Google Pay a payment gateway?
Google Pay is a digital portfolio that facilitates interaction with payment gateways. Instead of carrying a credit or debit card, users can store encrypted card data on their phone, allowing them to pay safely without their card being present.
Is Paypal a payment gateway or processor?
Although sometimes described as a payment provider, PayPal offers similar services for a payment gateway and payment processor. PayPal’s business accounts share many features with a processor, allowing traders to safely accept and redeem payments in their bank accounts. PayPal also offers a gateway service called PayFlow.
The bottom line
Payment gateways are an important feature of the digital economy. Through the safe and secure transfer of credit card information safely and securely, these systems reduce some of the obstacles to online commerce. Although the first payment gateways consisted of simple card readers, today they are sophisticated systems for collecting and authenticating PIN numbers, signatures and other data for commercial transactions.