Payment Gateway

What is a Payment Gateway?

A payment gateway is a service that authorizes and processes debit/credit card or PayPal payments for online merchants and traditional brick and mortar businesses. A payment gateway facilitates these transactions by encrypting sensitive data and transferring it between a payment portal (a website or a mobile device) and the bank/front end processor.

How does a Payment Gateway work?

Ultimately, payment gateways facilitate communication between your website or brick and mortar store, the payment processor and the bank that issued the credit card being used to complete the purchase (or PayPal in case the PayPal payment method is used). Security is a major component of all payment gateways, therefore every transaction that occurs between the merchant and the issuing bank is encrypted to protect sensitive financial information.

Although the transaction process takes only a few seconds, several steps are accomplished during that brief window of time. Once the customer is prompted to a secure payment page and places an order, the transaction data (credit card number, CCV2 information, etc.) is encrypted and sent to your payment processor through the gateway. The payment processor communicates with the credit card’s issuing bank and retrieves feedback in a form of an approval or a declined message. The response is then transmitted to the payment gateway, which communicates it to your website. Finally, the information is interpreted and an appropriate response is generated. If the transaction was approved, the merchant fills the order.

The most popular payment gateways

Being able to accept online payments is the only way for an eCommerce business to grow and expand its earning potential. At the same time, it’s important to understand that having the right mix of payment gateways on your store can also play a major role in generating revenue. Not having the right payment gateways available will most likely lead to cart abandonment and lost sales.

There are several popular payment gateways that customers recognize and trust, but you should also consider adding additional gateways that are less known internationally but are tailored to your target markets and countries. Different payment gateways are supported in different countries.

The most popular payment gateways you should consider for your online store include:

How to choose the right Payment Gateway for your online store

With so many different payment solutions out there, deciding which payment gateways to integrate can be a drag. To ensure you’re making the right choice, ask yourself a few simple questions:

  1. PayPal: $0.10 per transaction
  2. Stripe: 1.4% + 20p for European cards, 2.9% + 20p for non-European cards
  3. Square: 2.75% per swipe, dip or tap, 3.5% + 15¢ per keyed-in transaction
  4. SecurePay: 2.4% per transaction
  5. Worldpay: 2.75% + £0.20 (pay as you go)
  6. Authorize.net: 2.9% + 30¢ per transaction
  7. 2Checkout.com: 2.4% + 30¢ (UK), 2.9% + 30¢ (US); country-dependent
  8. Braintree: 1.9% + £0.20 for most transactions

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Justas Markus: CEO & Co-Founder of GetFound XL and a blogger at Entrepreneur.com, Observer.com, Influencive.com and others. Catch up with Justas on Twitter.