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E-retail sales surpassed $4.2 trillion worldwide in 2020 as the Covid-19 pandemic forced people to shop online from the premises of their homes.
Purchasing online requires a different payment process than transactions in a brick-and-mortar store. Thus, a merchant has to provide a system to allow customers to pay for products at the time of sale. People want it as simple as a point-of-sale device in the physical store. Integration of payment gateway into a website is necessary to make it happen.
In this blog post, Devox Software will share its extensive experience to help you better understand the integration of payment gateway. We’ll tell you how it works and why you need one. Also, you’ll find a list of options to choose from and what to consider when selecting a payment gateway system.
What is a Payment Gateway?
A payment gateway is a digital payment service that allows merchants to accept credit card purchases from customers. Payment gateways are the portals used to enter card information or credentials for other services like PayPal.
An online payment gateway sends customers’ information to the merchant bank to process the transaction. This technology is the simplest way to transfer payment data from the customer to the acquirer. It validates customers’ details securely and ensures a sufficient amount of funds to complete the transaction. It encrypts sensitive credit card details when it passes via the merchant from clients to a bank.
How Does It Work?
A payment gateway works as a middleman between a client and a merchant, ensuring the transaction happens efficiently and securely. Here’s a detailed step-by-step description of the way the payment gateway works:
Step 1: Customers select a product or service they want to buy and are redirected to the payment page.
Step 2: Customers input their card details on the payment page. After, this information is sent to the payment gateway.
Step 3: The payment gateway encrypts the information and sends it to the acquiring bank.
Step 4: The bank sends the information to the payment system, e.g. Visa, Maestro or Mastercard, to perform a fraud check.
Step 5: The customer can see whether the payment is approved or not when the bank sends the notification to the customer via the payment gateway.
Considering this huge amount of card information transfers, it leads to the reasons why you need to integrate payment gateway into your online business website.
Why is a Payment Gateway Important?
Payment gateways help enable smooth online transactions and get the bank approval. The main advantages that businesses can gain from using a payment gateway also include:
- Safeguarding customer payment data. Without a payment gateway, hackers would be able to access the card data you process and expose your business to a data breach.
- Protecting a merchant. The payment gateway works both ways. It also helps to protect a merchant from expired cards, insufficient funds and exceeding credit limits.
- Accepting different payment methods. Businesses need to provide the possibility to accept credit and debit cards as well as alternative online payment methods. A payment gateway makes it easier to offer different solutions to match clients’ needs and demands.
- Improving user experience. Payment gateways often offer additional features that can majorly improve the user experience. For example, customers can easily set up a profile, store their information and perform transactions in fewer clicks without entering the payment information again.
While payment gateways offer many benefits, choosing the right one for the business can be a bit more complex. Thus, it’s also essential to understand the steps of integrating payment gateway in website.
How to Integrate a Custom Payment Gateway Into a Website or App?
Two essential steps allow an online credit card payment system to be set up on any website or web application.
- Choose a payment gateway that would suit the business’s needs. Online payments cannot be processed without payment gateways. Read on as we provide more information about features worth considering when selecting one.
- Create your merchant account. A merchant account is a business bank account that allows businesses to accept and process card transactions.
- Set up your webshop. Most online businesses use third-party software that will help create a webshop. Creating a code from scratch is a long process and requires hours of web development. The software handles the code creation for the ordering page and transfers payment information to the gateway. It is essential to leave this task to professionals to guarantee a safe and secure result. Devox Software is a reliable vendor that can help with setting up and integrating payment gateway into a website efficiently and sustainably. Learn more about professional web development here.
- Add payment methods. This step differs from service to service. Usually, you would need to manually enter payment gateway information for each payment method you plan to accept, for example, Visa and Mastercard. It is done in the online store’s administration.
- Test the gateway. Payment gateway services typically provide accounts that allow performing fake transactions. Testing your gateway’s integration is vital to ensure that the payment process is working correctly.
Online Payment Gateway: Transaction Types
As online payment transaction goes through the five stages we’ve mentioned above, there are also different types of transactions that payment gateways support and can perform.
Authorization
An authorization of a transaction ensures there are enough funds on the customer’s credit card. The transfer doesn’t happen yet but only guarantees sufficient funding in the bank account.
Capture
This transaction happens when the authorized money is settled between a customer and a merchant. So it captures the amount on the customer’s card and transfers it to the merchant’s account.
Sale
A sale transaction is a combination of authorisation and capture. In this case, the money is charged and transferred at once. This type of transaction is used when a company fulfils an order immediately, for example, provides immediate access or service.
Refund
If orders have been canceled, the merchant needs to submit a refund for a transaction. The refund is limited to the original authorized amount and can only apply to sale or capture transactions.
Void
A void transaction is a transaction that has been canceled but hasn’t been settled yet. It shows as a pending transaction on the customer’s account and will disappear within 24 hours while the process is complete.
Payment gateways are not created equal and without limitations. Thus, it happens that they might not perform all transaction types mentioned above. It depends on the service provider and the type of its infrastructure.
Payment Gateway Types and Providers
There are generally three types of payment gateways:
Checkout on-site: non-hosted (integrated) payment gateways
This type of payment gateway is mostly used by large-scale businesses. The checkout and payment processing work through their system. This way, they get more control over the process as every detail and improvement can drastically change the customer shopping experience. It also comes with more responsibility for storing, securing and conducting initial verification for each transaction.
These are some of the most common providers of non-hosted payment gateways:
- Stripe
- Adyen
- PayU
- Authorize.net
- PayPal Pro
Checkout on-site, payment off-site
In this case, the front-end checkout takes place on the merchant’s site, but the payment processing occurs through the gateway’s back end. This method is often used to simplify the payment process, but it doesn’t offer much control over the user’s payment experience. In addition, the security of each transaction falls under the responsibility of the payment gateway provider.
Redirection: hosted payment gateway
A hosted payment gateway is a third-party checkout system redirecting the user to alternative payment methods, for example, allowing the use of PayPal. Thus, a user will leave the website to a PayPal payment page to handle the complete transaction and then be sent back to your website to finish the checkout process.
Small businesses use a hosted payment gateway to incorporate the convenience and security of a larger platform. Redirection offers simplicity but also means less control for the merchant.
Here are some of the examples of redirect payment gateway providers:
- PayPal Express
- AmazonPay
- Square
Is It Worth Creating a Custom Payment Gateway?
You probably know that it can take months or years to build a payment gateway from scratch. But if your question is whether you will save money in the long term if you build your own gateway—here is an answer.
Everything depends if your processing volume is large enough and the functionality you wish to incorporate into your gateway. Hosting your own payment gateway solution eliminates credit card processing fees. Owning and operating an independent payment gateway also comes with the extra cost of paying for servers and gateway product maintenance.
What Are the Industry Requirements for a Payment Gateway?
Here you should decide if developing your own in-house gateway eliminates the third-party gateway processing fees, so they offset the cost of gateway maintenance.
Businesses that work domestically and internationally need to protect their corporate and customers’ personal and financial data. Therefore, they must know and adhere to the payment processing compliance standards.
The PCI payment gateway is a payment system compliant with The Payment Card Industry (PCI). PCI DSS is a set of security standards and practices developed to improve the security of card information during and after a transaction and defend cardholders from theft. PCI DSS noncompliance can result in a security breach. Businesses not only use customer financial information but can also suffer from a loss of reliability from their customers, future sales, or a threat of legal actions and fines.
There are four levels of PCI DSS compliance. All four of them focus on distinct categories:
- Collection: Where and how will the cardholder information be collected, e.g., merchant’s server, customer’s browser, or the payment gateway server?
- Storage: Where is the data going to be stored, e.g., on the servers of the merchant or the payment gateway?
- Transmission: How will card data be transmitted through the gateway?
- Processing: Who will process the card information–the merchant or the payment gateway?
PCI DSS compliance aids the security of customer information and protects against cyberattacks. PCI Security Standards Council provides more information about PCI DSS.
What To Consider In An Integrated Payment Gateway?
Here are four things that need to be evaluated when searching for a gateway vendor or ensuring you have the right system in place:
Scalability and availability
Payment gateways might have to handle more than triple their usual volume around the holidays, new launches or sales. The last thing anyone would want is for it to crash during the most important and lucrative time.
It is essential to determine the typical average and peak volume a payment gateway is ready to handle and support in advance. Ask about a protection layer from crashing and maintenance windows that can reduce availability. In case of a crash, ensure that vendors don’t take long to recover the system.
Integration options
In choosing a payment gateway, focus if it helps you accomplish your business goals with the least cost and effort. Considering integration options as one of the main requirements for your decision-making process can solve business needs and save you major development efforts in the future. For example, if you plan to build a mobile app, ensure a vendor provides mobile SDKs for integration and supports mobile payment methods.
Business requirements
Your business model and goals will help you narrow the selection as well. For example, you should consider your plan to sell cross border as you would need to provide the ability to pay with local payment options and cards. When it comes to your business model, do you offer one-time purchases or subscriptions? If you work B2B, there is always a must for invoice payments.
The platform you select now should meet your needs for at least the coming five years, as many vendors have onboarding fees and switching between platforms is majorly redundant.
Security
Despite PCI DSS compliance, there are also other security and regulatory questions to consider. In an integrated payment gateway, evaluate the scope of PCI compliance you will be responsible for–would you have to handle card information?
In addition, different countries have different requirements — GDPR compliance and 3-D Secure are a must in Europe, while the U.S. market requires compliance with the California Consumer Privacy Act.
Integrate a Payment Gateway with Devox Software
Integrating a payment gateway in website is an exciting yet time- and effort-consuming process. It is crucial to wage in all the costs and preserve your business and customers from all the possible risks of fraud or crashes.
If you are looking for a trustworthy web development services provider to help you add payment gateway to website — do not hesitate to reach out to Devox Software.
We provide cost- and time-efficient solutions. With an extensive portfolio of successful cases, we know every single pitfall that might result in failures, and we know how to avoid them. Devox Software is a team of fintech experts and experienced security professionals who will help you create the perfect solution in no time.
