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What is Payment Gateway? Research Team | Posted On Wednesday, February 13,2019, 11:43 AM

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What is Payment Gateway?



Nowadays, most of the businesses and commercial centers are shifting to payment gateway system rather than traditional banking system, especially the online ones. Payment gateways help streamline the process of payment as it allows the customer, complete the transaction from a single page and offers the merchant’s control over customer’s experience.

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What is the Payment gateway?

A payment gateway is e-commerce software that authorizes payments for online merchants, retailers, e- businesses as well as traditional businesses. It authorizes the payments of credit cards and protects details on the credit cards by encrypting sensitive information contained. This process ensures that personal/private details are passed securely between the customer and the merchant. Payment gateway acts like a third party that enables the merchant collect payments securely from the customer account. The money is directly transferred to the merchant’s bank account.

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Payment gateway types:

Payment gateways are one of the best ways to make transactions as it enables individuals transmit money electronically as well as avoid the hassles of carrying cash. There are four main types of payment gateways to choose from. They are as follows:

  • Hosted payment gateways: Hosted payment gateways direct the user to a new page away from the site’s checkout page. When the customer clicks on the gateway link, they are redirected to the payment service provider (PSP) page. The customer fills in his/her payment details and after payment is redirected back to the website, the checkout process is complete.
  • Self hosted payment gateways: on this type of payment gateway, the customer’s details are collected within the merchant’s website. After the details are requested the data collected is sent to the payment gateway’s URL. In some payment gateways the payment data is provided in specific format whereas others require a hash key or secret key.
  • API hosted payment gateway: with hosted payment gateway the customers enter the credit or debit card information directly on the merchant’s checkout page and payments are processed using an API (Application Programming Interface) or HTTPS queries.
  • Local bank integration: local bank integration gateways redirect the customer to the payment gateway’s website i.e. the bank’s website where the customer enters their payment and contact details. After the payment is done, the customer is redirected to the merchant’s website along with payment notification data.

Payment gateway Features:

Listed below are some of the special features of payment gateways:

  • These payment gateways store payment information so that the customers can experience smooth transactions and avoid re-entering the same information repeatedly. The information is encrypted to provide safe storage.
  • The payment gateways provide highly secure transactions as they encrypt sensitive information before transmitting them to the processing bank.
  • The payment gateways levy charges based on subscription. Subscription based pricing is becoming increasingly popular in payment gateways. The subscription offers a recurring bill feature, so that you can automate the payment system.
  • Payments gateways must be entities that process payment cards, helping the user avoid costly fines and make secure payments.
  • Payments gateways are designed specifically to suit needs of the user. You can customize as per requirement.
  • Payment gateways generally integrate with other tools like accounting software and online shopping portals.

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List of Payment gateway in India:

Listed below are the commonly used payment gateways in India:

  • CC Avenue: CCAvenue supports almost every bank and payment option available. It is reliable and used by high volume e-Commerce websites like Snapdeal. This payment gateway is specifically designed to suit the needs of startups if they wave off the annual maintenance charges completely.
  • Insta mojo: this app is easy to use and  thousands of users are using it to collect payments for ebooks, reports, tickets, tutorials, merchandise, invoices, services, and much more.
  • Cash free: Cash free is a next generation payment gateway that helps Indian businesses collect and disburse payments and includes Visa, MasterCard, Rupay, UPI, IMPS, NEFT, Paytm and other wallets, Pay Later and various EMI options.
  • EBS: EBS is owned by French based Ingenio group, which is a global leader in payment processing services. However, there are mixed reviews for this payment gateway.
  • Paytm: You can integrate this payment gateway in your website. Unlike other traditional payment gateways, it allows payments only from Paytm wallet.
  • MobiKwik: there are over 25 million users that have MobiKwik accounts and 650+ merchants who are using payment gateway service.
  • Oxigen wallet: Oxigen Wallet is India’s first RBI approved non-bank wallet to be integrated with NPCI allowing instant money transfer from the Wallet to 60+ banks and vice versa using the Immediate Payment Service.

Payment gateway integration:

A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers, bricks and clicks (These operate both online and offline), or traditional brick and mortar. The payment gateway works through a virtual terminal system.

A virtual terminal is a browser-based version of a physical credit card terminal. This terminal allows you to add a customer’s credit card information. The virtual terminal will then process the transaction directly through computer’s web browser. It is even possible to use a mobile device through an online web form. Processing rates will always drop when the card is present.

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How payment gateways work?

A payment gateway is a tool that enables customers and merchants set up cash free transactions. It enables both parties to authorize and process transactions electronically which are directly transferred from the bank account of the customer to the merchant. Here are the basics of how the payment gateway works:

  • The customer places an order and enters payment information. An online transaction is processed as a “card-not-present” transaction.
  • After receiving the customer’s order who is willing to pay by credit/ debit card, the merchant sets up transaction order.
  • The merchant securely provides all the transaction details and transfers order information to the payment gateway.
  • The customer provides PIN details and presses the enter button for further processing of the transaction.
  • The transaction is routed to the issuing bank to request transaction authentication.
  • After a successful authentication process the transaction is either completed or declined by the issuing bank or card.
  • Payment gateway sends messages to the merchant accordingly.
  • The bank settles the money with the payment gateway and consequently the payment gateway settles the money with the merchant. 

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