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What is a Payment Gateway?



When you pay for a purchase online, how much thought do you put into how that payment works? The chances are it never crosses your mind. But behind the seemingly simple process, there is a myriad of key interactions and communications between a handful of organisations that allow your payment to go through. Although the transaction couldn’t occur if any of these processes were incomplete, a key and vital component that must be especially paid attention to is the payment gateway. The payment gateway serves as the link between the consumers bank account and the merchant’s bank account. It communicates whether or not a payment has been declined or accepted and accommodates the transfer of funds between the two bank accounts.

Read on the find out why your business needs a payment gateway!


Why Does a Business Need a Payment Gateway?

Plain and simply; if you want to accept card payments online, then there are two components that you need to ensure you have. A merchant bank account and a subscription to a payment gateway.

These two crucial aspects are the most important part of your payment infrastructure.

Although this may seem like a simple and somewhat obvious answer, it shifts focus onto what having a payment gateway allows you to do and what it means for a small business. Card payments are becoming more and more prevalent and are showing little to no sign of slowing down.

The very nature of running a small business means that you will likely be fighting an uphill battle, especially in the modern day where huge retail giants utilize enormous economies of scale to drive prices down. That’s why small business owners need to capitalize on every opportunity to cater to the modern consumer; convenience is key, and the height of modern convenience is online shopping. 


How Does a Payment Gateway Work?

Now that you understand why your small business needs a payment gateway, we must ask ourselves how exactly a payment gateway works:

1 - When your customer enters their card details and presses pay, that information is fraud checked and securely sent to your acquiring bank.

2 – The acquiring bank then sends the information to the card network (companies such as Mastercard & Visa)

3 – After another layer of fraud checking, the card networks proceed to send the payment data to the customers bank, where it is either declined or approved.

4 – The decision makes its’ way back to the payment gateway, who will inform the business attempting to take payment. The business’s website will then provide a “payment approved” screen or ask for an alternative method of payment.

5 – Once approved, the funds are deposited into the business’s merchant bank account for settlement. 


Setting Up a Payment Gateway

Understanding why you need a payment gateway, and how a payment gateway works are the first two steps to taking online payments on your website.

However, how do you set up a payment gateway? First things first; research.

One of your core considerations should be up-time. Existing customer reviews on sites such as Trustpilot serve as a very crystal clear indicator of how reliable a payment gateway is.

Afterall; if the gateway is down then you can’t take payments. Another core consideration should be the customer service scores. Setting up and implementing a payment gateway into a website can be a daunting process for first timers.

Ideally, a payment gateway should have excellent customer service that help you integrate the gateway into your website. Also, if anything does go wrong, they should be on hand 24/7 to guide you through until the issue is resolved.

Conclusion on Payment Gateway

In the modern era of commerce, convenience is king. And shopping is more than ever on the terms of the customer. That’s why it’s not only important to have an online presence, it’s important to be able to sell and merchandise from that online presence. 

If your business isn’t taking online payments, then now is a better time than ever to change. Advancements in payment technology are being delivered at a break-neck speed, making payments more accessible and better integrated for smaller businesses up and down the country.