The Essential Guide to Set Up a Secure Payment Gateway

As a small business owner, you have some important decisions to make. So far, you might have been running your business with traditional payment methods like cash, credit, and debit cards. But times are changing now and especially this pandemic has gripped us all, forcing everything to move online. In this wild chase, more than 80% of the payments happen online today. 

Small businesses like you are looking for ways to get paid faster and customers around the world are looking for a more secure mode of payment. However, you cannot go to a shop and buy a payment gateway like how you used to buy a coffee machine. There are some factors that you should keep in mind before you purchase a payment gateway for your small business. 

In this article, you will learn how payments work and various factors to consider before you pick a payment gateway for your small business. 

Payment Gateway 101

Payment gateways are different from payment processors. Some payment processors are also payment gateways, but they are technically different. 

A payment gateway is like a middleman between the payer’s bank (issuing bank)and the merchant bank. It does not actually process the payment, but it facilitates the payment processing by nudging both banks and communicating the payee, receiver, and payment details to both the merchant and issuing banks. Also, the payment gateway conveys the status of the payment to both sides. 

What do payment systems do?

A payment gateway does three things while processing a successful payment. 

1. The payment gateway checks and verifies the payer’s card details. 
2. Checks if the payer has sufficient funds to make the payment.
3. Conveys approval or denial status of the payment.

How do payments work online?

As a small business owner planning to get paid through payment gateways, you must have a clear understanding of how payments work with a click of a button. Having a clear picture of this will help you to make choices when you buy a payment gateway. 

Payments are processed in two stages. One is authorization and the other step is the settlement. In nutshell, in authorization, the payment gets approved and in the settlement part, the actual payment happens.

Let us dig deeper into each step. 

When a customer clicks the checkout button on your e-commerce site or payment link, the information is sent to the payment gateway. The payment gateway reads the information and sends it to the payment processor. As soon as the payment processor gets this information, it requests the bank of the customer to approve the payment. The bank sends a confirmation request to the customer, generally with a one-time password (OTP), and verifies the payment request. Until this is the authorization part. 

In the settlement part, once the bank verifies and approves the payment request, the payment processor transfers the money to your account. This is how online payments work.

All these processes happen within a couple of seconds. 

How to choose a payment gateway?

If the payment gateway is not convenient for you or your customers, you might miss out on recurring sales and potential customers. That’s why you need to be wise about choosing a payment gateway for your small business. 

Here are some factors to consider before you choose your payment gateway.

Types of cards accepted

Cards are globally the most common mode of payment. So, in order to retain your customers, you must make sure that your payment gateway supports all types of cards, without any friction. When you have a large customer base in your neighborhood, your payment gateway must accept the cards that your customers are comfortable with. If your business runs in a locality that uses Diners Club cards the most, you must be able to accept payments from it. 

Holding time

Payments can happen within a flash from the customer’s end. But at times, payment gateways do hold the funds for a few days. This holding time varies with the gateway, ranging from 1 to 7 days. But don’t think of this as a disadvantage. Because the hold time helps you in case of refunds and chargebacks. So, choose the one that works best for you. 

Security

When technology grows, there is an equal number of fraudulent practices. So, it is your responsibility as a small business owner to keep the payment process safe and secure for your customers from your side and for you as well. Each payment gateway comes with its security standards. Make sure the one you choose comes with fraud detection and other security tools. 

Multiple currency support

When you have an e-commerce site, you are open to global customers. International customers mean multicurrency transactions. So, if you have your business crossing borders, you should choose a payment gateway that accepts multi-currency transactions. And have an eye on the payment gateway fee for each multi-currency transaction. 

Portability

Data portability is not a very popular feature that has been considered for a payment gateway. But this feature could be a savior when you expand your business and change your payment gateway accordingly. With payment gateways that support data portability, you can transfer your transaction data easily. But don’t worry if your payment gateway does not support data portability. You can use third-party applications like PayTraQer to sync your ongoing and historical transactions into QuickBooks. 

How does your small business benefit from payment gateways?

Improved customer experience

Customers are the key focus of any business. Customer satisfaction highly depends on the ease and convenience that they have while making purchases from you. 

It is a turn down when customers do not find their usual payment methods. Customers expect fast and friction-free payment options and payment gateways better win this game than primitive cash or card payment methods. Payment gateways are easy, convenient, and fast. Better payment mode gives you an edge over your rivals. 

Easy recurring payments

Payment gateways come with the recurring billing feature. If you offer any monthly or bimonthly or even annual subscription plans to your customers, you can automatically send bills and get paid faster on the move. 

Payment gateways use auto-debit mechanisms and automatically draw up bills and transfer amounts on set dates, as per-instructed by your customer. You can easily manage your bills and get paid faster.

Get paid on the go

Anyone with a smartphone, from anywhere- can browse through your site and make payments. If you are selling products across borders, make sure that your payment gateway supports multi-currency transactions. And if yes, it is a clean way of getting paid, as the payment gateway takes care of all the conversions incurred. But you have to check the gateway fee for international payments. 

Not just international payments, it is an easy mode of payment for your local customers as well. They don’t have to visit your store and wait in the queue to settle their bills. They get to play with a single tap, anytime and anywhere.

Easy and instant payments

No matter if you have an e-commerce store or a local brick-and-mortar store, payment gateways make you get paid instantly without any hassles. 

All you have to do is send a payment link to your customer and they can straightly pay by clicking the link, without any friction. While they can place an order through phone and texts, you can also send payment links through email, WhatsApp, or even text messages to your customers. You can get paid just on the go.

Safe and secured payments

As a business owner, you will be looking for a faster mode of payment, while your customers are looking for a secured and safe mode of payment. Payment gateways ensure fortified data security. Once a payment is initiated, the gateway scrambles the information and safely encrypts the data before sending it to the processor. 

Most payment gateways come with fraud screening features and secure customers’ sensitive information with utmost care and technology. 

Easier bookkeeping

Payment gateways not only make your payments easier, but they also make your bookkeeping easier than ever before. You can use a payment switch and streamline your incoming payments to the desired bank and other transactions to dedicated bank accounts. 

Also, as all the payments are happening online, you will have digital records for every penny in and out of your account. This streamlined payment flow makes your bookkeeping easier and more efficient. There is no need for manual keying or double entry. 

You can even connect your payment gateways to your accounting software using third-party integration tools and auto-import your transactions straight into your accounting application. If you are using QuickBooks, for instance, you can integrate your payment gateway using PayTraQer and get your transactions automatically recorded into QuickBooks as they happen real-time. 

In Conclusion

Now you must have a clear understanding of how payment gateways work and how to choose the right one for your small business. Do your research and pick what works best for you. 

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