Today’s article was generously contributed by Deanna Wharwood, a lifetime member of the U.S. military. Thanks, Deanna, for serving our country in more ways than one!
As a consumer, when you check out of your local convenience store, you may swipe your credit card through a point-of-sale device and your gas, coffee, and donuts are paid for. What if you are the retailer and your business is online? How do you as the retailer process their credit card information? Essentially, that is the job that the payment gateway.
What’s a Payment Gateway?
Payment gateways allow online merchants such as electronic store owners or auction sellers to accept credit card payments over the Internet. They authorize the cardholder’s credit, i.e, they check to ensure that the customer has enough money on their credit card to cover the charges. Then they place a hold on that amount so the buyer can’t turn around and spend that same money elsewhere before it gets transferred to the retailer’s merchant account.
A Payment Gateway is NOT a Merchant Account
Many people confuse merchant accounts with payment gateways but they are not the same. Merchant account services act, for the most part, as a liaison between your business bank account and the payment gateway. When a customer orders a product from your online business their card is processed via the payment gateway. The money is then moved over to the merchant account service. The merchant account service then moves those newly captured funds to your business bank account.
3 Tips for Choosing a Payment Gateway
- Is it PCI-compliant? If it is compliant, then the company’s security has been audited by a third party and met the industry standards. Since payment gateways store all your customers’ credit card information, your customers’ valuable information is secure.
- Does it provide good customer support? Clearly good customer support is essential, especially when your account receivables are involved. You will want to be able to reach a person on the telephone when there are challenges. And, you also want to make sure that you have back-ups to your invoices.
- Is it compatible? Finally, it is important that the payment gateway you choose be integrated to the third-party solutions you are planning to use. That means things like store front platforms and shopping carts work with your gateway.
Many payment gateways offer an array of security features, some of which will help you avoid becoming a victim of fraudulent orders! In the end, they will make your e-commerce business a less-stressful, more pleasant experience for you and your customers.