The rise of digital commerce has transformed the way we do business. With the increasing number of online transactions, digital payment has become the norm. Gone are the days of carrying cash or writing checks. Today, businesses and consumers rely on payment gateways to facilitate transactions.
A payment gateway is a software application that processes online payments securely. It enables businesses to accept payments from customers via credit cards, debit cards, net banking, and other digital payment methods.
As the world becomes more connected, online payment will continue to grow. In fact, according to GlobeNewsWire, the global online payment market is expected to reach $12.55 trillion by 2027. This growth is fueled by the rising adoption of e-commerce, mobile payment solutions, and contactless payment methods.
Online payment offers convenience and flexibility to customers, allowing them to shop from anywhere, anytime. With the increasing popularity of online payment, businesses need to provide secure and reliable payment options to stay competitive. Payment gateway plays a crucial role in ensuring a seamless and secure online payment experience for both businesses and customers.
To adapt to the changing landscape of online commerce, businesses are turning to payment gateway solutions. By integrating a payment gateway into their websites, businesses can accept payments from customers across the globe, in multiple currencies. The payment gateway also provides real-time reporting and analytics, helping businesses to track sales and manage finances efficiently. With a payment gateway, businesses can focus on delivering exceptional customer experiences, knowing that their payment processing needs are taken care of.
At VirtualSpirit, we are committed to staying up-to-date with the latest developments in payment gateway technology. We understand that the world of e-commerce is constantly evolving, and we aim to remain at the forefront of the industry. Our team takes every measure to ensure that all transactions are secure and protected. As part of our commitment to providing reliable service, we integrate only the best payment gateways to guarantee easy access for our clients.
In this article, we will delve into the details of how payment gateways operate and the best payment gateways that work seamlessly with VirtualSpirit.
What is a Payment Gateway?
According to Stax Payments, a payment gateway refers to a secure platform that securely captures and transfers the payment details of a customer to a merchant's bank account during online or in-person transactions. It can be likened to a cash register, except that it processes non-cash transactions such as credit cards, debit cards, eChecks, and digital wallets such as Google Pay, Apple Pay, Amazon Pay, and PayPal, among others.
Essentially, a payment gateway is a software application that creates a secure tunnel for customers to connect with and transfer funds to merchants during online transactions. It is also responsible for processing the customer's payment data in a brick-and-mortar setting, such as in a POS system or card reader. The primary function of a payment gateway is to securely capture payment information, verify that sufficient funds are available in the customer's account, and transfer the funds to the merchant.
How a Payment Gateway Works
Payment gateways refer to the software integrated into POS systems or card readers that handle transactions when customers use their cards for payments. Within the payment gateway, various parties play crucial roles in ensuring the completion of transactions according to Forbes. These parties include:
- Merchant: The individual, organisation, or business that offers products or services for sale and accepts payments via card.
- Cardholder: The customer who makes the purchase and uses a card for payment.
- Issuing bank: The financial institution that holds the customer's account and issues the card, whether it be a credit card or a debit card.
- Card schemes: Companies like Visa and Mastercard manage cards and oversee their use.
- Acquiring bank: The financial institution that holds the merchant's account and processes transactions on behalf of the merchant.
To put it in simpler terms, here is how a payment gateway works in processing transactions made by customers using their debit or credit cards.
- The payment gateway authorises payments made by customers and secures their cardholder information by encrypting it.
- It confirms the transaction amount with the issuing bank and then deposits the money into the merchant's account.
- The payment gateway connects to a debit/credit card network, such as Visa or Mastercard, to perform its function.
- It verifies the validity of the transaction data and the customer's credit card information. Once the gateway receives a response from the issuer regarding the availability of funds and the validity of the transaction data, it forwards the transaction to businesses and consumers.
Benefits of a Payment Gateway
According to Xendit, there are seven benefits of using a payment gateway, including:
1. Enhancing secured transactions
A payment gateway offers various advantages, and one of the most significant benefits is the increase in security for both customers and businesses. When customers make payments through a payment gateway, all the information is encrypted and transferred securely. This encrypted data ensures that it remains highly secure and can only be accessed by the customer and the business. This feature plays a crucial role in safeguarding both parties from credit card fraud and other security threats that are prevalent in online transactions.
Moreover, the use of a payment gateway helps reduce the risk of exposing sensitive information to hackers and cybercriminals. By utilising a secure payment gateway, businesses can significantly minimise the chances of customer data breaches, which can cause significant financial losses, legal disputes, and reputational damage. The encryption of data is a crucial component in protecting against data theft, hacking, and identity theft.
2. Reducing the cost
Using a payment gateway can save your business money by lowering the fees for processing payments. You can start using a payment gateway quickly without any extra fees, and it can make the checkout process smoother for your customers. This will free up your time to focus on other important aspects of your business instead of spending time processing payments by hand.
3. Providing flexibility
A payment gateway gives your business more options for receiving payments, making it easier for you to accept payments from a larger pool of customers. You can accept payments through different methods, including e-wallets, local banks, and international payment options such as Mastercard and Visa.
This allows you to expand your customer base and open up new revenue streams for your business. By integrating with different payment options, a payment gateway can help you reach customers who prefer to use different payment methods, increasing your chances of making sales. With more payment options available, you can cater to different customer needs and grow your business.
4. Improving customer experience
A payment gateway can enhance the experience of your customers by providing them with various options for making payments. It enables them to choose from a wide range of payment methods such as virtual accounts, credit cards, bank accounts, and more.
By having these options available, your customers can easily use their preferred payment method. This can help make the payment process smoother and more convenient for them. This can also contribute to customer satisfaction, as they can complete their purchases quickly and without difficulty. Moreover, by providing multiple payment options, you can attract more customers and expand your business.
5. Increasing sales
As your business expands, you'll want to find methods to make it more efficient. One of the most effective ways to do so is by using a payment gateway. A payment gateway provides your business with the ability to accept payments from customers worldwide, while also ensuring security against fraud and chargebacks.
Furthermore, a payment gateway can reduce the cart abandonment rate of your business. When customers see that they can pay using their preferred method, they are more likely to complete their purchase. This can result in increased sales and revenue for your business.
6. Easy integration
Integrating a payment gateway into your website or e-commerce platform is a straightforward process. You can easily do this by copying and pasting the API (Application Programming Interface) code provided by the payment gateway provider.
If you encounter any difficulties, a customer service representative is available to guide you through the process. This is a quick and simple way to start processing payments, even if you don't have any technical expertise.
With the help of payment gateway providers, you can ensure that your business is equipped with the necessary payment infrastructure to make transactions. This can help you save time and effort, allowing you to focus on growing your business.
7. Customer service
A payment gateway comes with the added advantage of having a dependable customer service team. In case you face any issue with a transaction, the customer service team is readily available to help you out.
They can help you set up your account, resolve disputes and answer any questions you may have. The customer support team is well-trained and equipped to provide guidance on the most suitable payment methods for your business. This ensures that your business operations run smoothly and that your customers always have a positive experience.
Best Payment Gateways that collaborate with VirtualSpirit
VirtualSpirit is proud to have partnered with two renowned payment gateways, Plaid and Stripe. This collaboration is aimed at providing seamless online payment services to clients of VirtualSpirit. Both payment gateways are popular and have a strong presence in countries where VirtualSpirit's clients operate. It is expected that the partnership will make it easier for VirtualSpirit's clients to access secure payment processing services.
In addition, Plaid and Stripe come with extensive API documentation and a set of pre-built tools and libraries that make the integration process smooth and hassle-free. These resources are available in the form of "gems" that can be easily accessed by developers to integrate payment processing capabilities into their apps or websites.
One of the significant advantages of the Stripe and Plaid payment gateways is that they offer a robust fraud prevention system that protects both businesses and customers. Additionally, both payment gateways provide support for multiple payment methods, including credit and debit cards, digital wallets, and bank transfers. This flexibility ensures that clients of VirtualSpirit can offer their customers a wide range of payment options to choose from.
The collaboration between VirtualSpirit and Stripe and Plaid is expected to be a game-changer in the digital payment space, offering clients an easy-to-use and secure payment processing solution that meets their needs.
