How to Integrate a Payment Gateway: A Brief Guide
Any business that sells online wants to provide a fast, secure, and easy-to-use service that meets both customer and business needs.
To achieve this high level of service, every business owner should take measures against fraud, offer various payment options, integrate with third-party platforms, improve the customer experience, and much more.
To manage financial transactions, e-commerce businesses should turn to banking software services to embed payment gateways.
The careful selection or development of a gateway plays a leading role in determining the flow of the purchasing process, including accepted currencies, transaction fees, supported payment methods, and more.
This article will help you choose the right payment gateway, understand different types, and effectively integrate one into a website, e-commerce platform, or app.
What Is a Payment Gateway?
A payment gateway is a vital part of any buying/selling process online. It allows customers to purchase goods and services much easier by enabling the transfer of money from the customer’s account to the seller’s account within a few seconds.
Apart from sending and receiving payment data, payment gateways ensure that transactions performed are secure. They encrypt transaction data and use security protocols to pass and receive the data.
Integrating with a payment gateway offers many advantages both for businesses and clients. Here are some simple benefits:
- Faster Transactions: Payment gateways process transactions quickly, saving time for both businesses and customers.
- More Payment Options: Businesses can offer diverse payment methods, which makes it more convenient for customers to pay.
- Fewer Mistakes: Integration reduces errors in payment processing, guaranteeing a smoother experience for everyone.
- Safer Transactions: Payment gateways use advanced security features to protect customer information, building trust.
- Global Reach: Businesses can accept payments from around the world, adjusting to different currencies and preferences.
- Easy Tracking and Reporting: Integration provides real-time tracking and generates useful reports for analysis.
- Regulatory Help: Payment gateways assist businesses in meeting industry standards and regulations.
- Efficient Refunds: Handling refunds and chargebacks is simpler thanks to payment gateways, which adds to customer satisfaction.
How Does Payment Gateway Work
A payment gateway covers a wide range of financial operations from money authorization, when the system verifies that the buyer can pay for the ordered item, to a refund in case of a canceled order.
Below is a detailed description of how it works:
- The customer confirms the order and fills in the transaction data. Encrypted data reaches the merchant app’s server via a secure connection.
- The app passes the transaction data to the payment gateway. The gateway reads the data and verifies it with the issuing bank, e.g., that the transaction performed won’t exceed the buyer’s bank account balance or credit limit.
- After that, the encrypted card information is sent to the card’s network for data verification, e.g., Visa, Mastercard, or American Express.
- As the card network approves the transaction, the data goes to the issuing bank that connects to the acquiring bank to move money. This way, the money from a buyer, aka an issuing bank, goes to a seller, aka an acquiring bank.
- When the transfer is complete, the issuing bank sends back the confirmation within the same chain of participants.
The scheme below might seem complicated; however, the whole process takes just a few seconds.
The Types of Payment Gateways
There are several types of payment gateways to choose from depending on the size and needs of your business.
Let’s highlight their pros and cons as well as consider their integration difficulty so that you can easily choose the one for your company.
Hosted Payment Gateway
The hosted gateway redirects your customers from the app to its platform to make the purchase and takes them back when the transaction is complete. Among the most famous of them are PayPal, Amazon Pay, SagePay, etc.
One of the key advantages of such a solution is a simple integration process: for the apps using popular e-commerce platforms (like Magento or Shopify), it might be enough just to install an extension.
In case you have a custom web or mobile application, you might want to hire software developers for help, but most service providers have detailed guidelines explaining how to integrate their payment gateway.
Integrated Payment Gateway
With an integrated gateway, the customers stay in your app, a