What Is a Payment Gateway and What Is It for?

So, you’re setting up your online store. In brick-and-mortar, it’s easy: goods and cash are are exchanged between a customer and a seller in person. But when you do your trading online, the first thing you need on your site is a payment gateway. Why is that? Well, there are many reasons, including comfort, better support, legal factors, and – first of all – security.

How Payment Gateways Work

In short, a payment gateway is an intermediary that connects all the parties involved in a purchase: the customer, the merchant, the banks they both keep their accounts in, and (nowadays necessarily) third-party security services.

  1.   The customer proceeds to the checkout page that is a part of a payment gateway, when they have chosen the purchase.
  2.   The gateway requires their card number and extra data (like CVV code, expiry date, and maybe more).
  3.   The gateway sends this data from the customer’s browser to the merchant’s server where details like transaction amount are checked.
  4.   The gateway sends the data from the merchant’s server to the payment processor of the bank that issued the card.
  5.   The bank resends the information to the association (VISA/MasterCard/AmEx) and checks whether the transaction is possible (whether there is enough money on the account, whether the amount does not exceed the user set limit, and so on).
  6.   When the transaction is authorized and confirmed to the merchant, they ship the goods.
  7.   At the end of the day, all the transactions sum up, and the banks actually transfer the funds.

Of course, this is a simplified description, but it shows how many various parties get involved. In addition, a payment gateway can use various anti-fraud services to check transactions details almost in real-time. This helps in preventing fraud by declining transactions if the fraud probability gets too high.

Why You Need a Payment Gateway for E-Commerce

Well, a merchant can just post your card number on their website and receive payments manually. But there are reasons against this:

  •  It may be illegal for entrepreneurs in your country (and probably it is)
  • If you trade actively, you won’t have enough time to manually process all the purchases;
  • No security services are involved, so you are left exposed to fraudsters;
  • Your card number can be used by criminals in illegal activities;
  • It’s not as comfortable for customers that are mostly at more ease with payment gateways, and this can be among the main reasons.

So, connecting a payment gateway is a must for e-commerce, unless you are using a platform with a built-in gateway. These platforms, though, can be too expensive in terms of fee, plus there is a chance you sell goods that are not welcome on this particular platform, despite being legal in your country. For a standalone online store, connecting to a payment gateway is the first thing to do.

Start at the Gateways

No wonder that the entrance to the world of e-commerce starts with the gateway. Not only does it provide quicker and more comfortable transactions; it only increases safety and security. Luckily, there are great gateways with decent support and easy embedding, so just choose yours!

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