Know All About Payment Gateway And Online Payment Collection Process

By Author: Sahil Verma
Total Articles: 160
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An online payment gateway allows businesses to collect payments from both consumers and businesses online. It is a service that secures the transmission of customer payment information from a website or payment solution to the chosen payment network for processing. It then returns transaction details and payment network responses to the business website.

In simple words for a business owner, it’s a tunnel that connects your bank account to the platform where you need to collect your payments from. Security is an essential component of all payment gateways, as sensitive data such as credit card numbers must be protected from fraudulent parties. The standard security protocols that protect the integrity of those online transactions are Secure Socket Layer (SSL) and Secure Electronic Transaction (SET). Its purpose is to ensure that information is securely transmitted between the customer and the merchant.

Here are the essential steps on how it works

A customer will submit an order, checkout from the cart, or any equivalent button on the website or payment platform that they ...
... visit.

The merchant sends order information to the payment gateway in a secure manner. Customers will then use their preferred payment method to complete the transaction. The transaction is then routed to the issuing bank or the 3D secure page, where transaction authentication is requested.

After the authentication process is complete, the transaction is either authorized or declined by the issuing bank, payment provider, or card (depending on the funds available in the customer's account).

As a result, the payment gateway sends a message to the merchant.
The bank settles the money with the best payment gateway, which then settles the money with the merchant.

Types of payment gateway integrations

Payment gateway integrations are generally classified into three types. You must make this decision based on what is best for your company.

Redirects

For example, redirects could include a PayPal payment option. When the gateway directs a customer to a PayPal payment page to complete the transaction (i.e., processing and payment), this is referred to as a "Redirect." This has the advantage of making things easier for the retailer. A small business can use a Redirect gateway to benefit from the convenience and security of a mature and secure platform, but this method also means less control for the merchant and a second step for customers.

Checkout on site, payment off-site

There are some advantages to handling your payments in this manner, such as simplicity, as there are redirected payment gateways. However, as with redirect payment gateways, you will not be able to control the user's entire payment process experience. You'll be at the mercy of the offsite gateway's quality and quirks.

On-site payments

Larger businesses typically use on-site payments that are completely handled on their own servers. The checkout and payment processing on the customer's behalf are all handled by their own system. In this case, you will benefit from having more control, but you will also bear more responsibility.

The following are some of the most common questions people have when selecting a payment gateway.

What is a payment processor?

A payment processor is typically a third-party company that a merchant has appointed to handle payment transactions. The transaction is carried out by the processor by transmitting data between the customer and the bank. Rather than building your own payment processing infrastructure, it's a quick and cost-effective way to accept payments. You simply need to sign up with a third-party payment processor to begin accepting payments on your website.

What is a merchant account?

A merchant account is an account that a company establishes with an online payment gateway. A merchant is a company that accepts payments through a payment gateway. Each merchant account within the payment gateway represents a business entity with a current bank account.

What is a merchant nodal account?

When you sell online, a merchant nodal account is created by the payment gateway. It's a special checking account where funds from card sales are held before being transferred to your regular checking account. When a customer completes a purchase, the funds are not immediately transferred to your checking account but are first captured by a special checking account. A merchant nodal account is a type of special checking account.
With a merchant nodal account, you will be able to accept payments via various channels, such as an eCommerce website or mobile devices.
What are the charges for a payment gateway?
A payment gateway typically charges a percentage of the transaction amount.

What is a settlement?

When a company collects money through the use of a payment gateway. They can receive a large number of transactions in a single day. These transactions are typically settled within two working days of the transaction date (referred to as T+2). A settlement occurs when money collected for a business is transferred into the business bank account. Regardless of the number of transactions, all payment gateways settle money in bulk. As a result, rather than receiving one transaction at a time in their bank account, a business receives a bulk settlement.

What are chargebacks?

Chargebacks occur when a customer pays for a product or service and then files a complaint with their own bank. A customer may do this for a number of reasons, including:

The customer received a product or service that did not meet their expectations.

The customer no longer desires the product or service and files a complaint.

The customer simply forgot they had completed this transaction. And when they see this entry on their card/bank statement later, they may believe it is a fraudulent transaction on their card.

In the event of a chargeback, the bank contacts the payment gateway, which contacts the merchant. The merchant must then provide proof of delivery or service to demonstrate that the customer received what was promised. The funds for this transaction will be held until further notice. A payment gateway may suspend your account if you receive too many chargebacks.

What is the online payment collection process?

Online payments quickly became a part of our daily lives. We conduct online transactions not only with debit or credit cards, but also with UPI, net banking, and wallets. This type of payment reduces businesses' operational costs because the more payments made electronically, the less they spend on paper invoicing and the costs associated with outdated collection methods such as cash, cheques, and collection agents. It also aids in customer retention by introducing convenience into their payment routines. Paying online is a feature that every business should provide because it allows you to scale and streamline your collections.

People are becoming more at ease with paying online. When members, customers, or supporters are ready to sign up, register for an event, or donate, they want to do so as soon as possible. In fact, websites that do not accept online payments are frequently regarded as archaic. Because you don't have to wait for the cheque to arrive or clear or deal with large amounts of cash, online payments are faster than manual payments.