If your business accepts credit card payments, you’re likely using a merchant payment gateway to process your cards. But what exactly is a payment gateway?
Simply put, a merchant payment gateway is cloud-based credit card processing software.
A payment gateway facilitates communication between the different entities in a credit card transaction, from the merchant’s bank, to the card-issuing bank, to the credit card network, and everything in between. It’s the engine under the hood, doing all of the back-end, hidden work of processing credit cards and ensuring that everything runs smoothly and the merchant receives the funds into their account.
A credit card transaction begins with the customer, who swipes their card or supplies their information to the merchant. The merchant enters this information into their system and it passes through a payment gateway. From the payment gateway, the information is passed to several different bodies. For example, for the card to be approved, a message must be sent to a credit card network, the card-issuing bank, and back to the merchant. And that’s just the first step in the process!
Payment gateways do more than ferry messages between entities in the transaction process. Oftentimes, they feature useful tools and integrations to help merchants save time and money.
- Some payment gateways have virtual terminals built in, allowing merchants to accept credit card payments directly within the payment gateway.
- And some payment gateways are integrated into accounting software (also called ERP, or Enterprise Resource Planning) and ecommerce shopping carts, acting as the back-end processing software.
A payment gateway integrated into an ERP allows merchants to run and accept credit card payments within the native environment of their ERP, while an ecommerce integration powers online shopping carts that can accept credit cards.
When choosing a payment gateway, there are several features that you should consider:
If you’re a business that accepts credit card payments, you want a payment gateway provider that offers 24/7 support. Accepting credit card payments can be risky—a card may be declined, or a customer may issue a chargeback—and having the support you need at the time you need it is crucial to keeping your business running smoothly.
Handling credit card information is a serious concern. Businesses don’t want to be held liable for breaches or compromised data—so look for a payment gateway provider that adheres to strict PCI compliance standards and takes steps to safely store customer data. Encryption and tokenization are best practices that can set payment gateway providers apart. Don’t let lax security come back to haunt you, and invest in a provider that uses the latest technology to protect customer information.
Not all payment gateway providers are created equal. Some providers utilize level 3 processing in order to cut interchange rates and slash fees, while flat rate pricing ensures that merchants aren’t losing money to nickel and dime transaction fees. Bottom line: read the fine print, check the pricing, and make sure you’re partnering with a provider who will truly add value to your business.
Finally, look for a payment gateway that gives you comprehensive and flexible reporting tools that allow you to better manage your credit card transactions. You’ll be able to drill down, better understand the data, and make changes to be more profitable in the future.
Payment gateways streamline the credit card payment process. Find a merchant payment gateway you can partner with, and you’ll be empowered with tools and features that save time and money.