Every business needs a safe, quick, and easy-to-use payment system to offer their customers. It doesn’t matter if you are an e-commerce platform or just maintaining your online presence, having a comprehensive online payment processing service is vital. It has to satisfy the needs of your customers and your business. You have to choose an online payment processing service that will be protected from fraud, supports various payment methods, is convenient, and is compatible with your platform. That is why businesses need a payment gateway integration that can accept electronic payments and process credit or debit cards.
If you are a global operation, you will need global payment processing that will determine the currencies you can accept, transaction fees, how fast money gets in your merchant account, and the payment methods on offer. We here at Zed Network specialize in providing global payment orchestration layers for financial institutes, FX brokerage firms, FINTECH companies, and other multinational operations. So we know all there is to know about payment gateway integration and processing, and we thought we should let you know the essential things about it.
In an Invespcro.com report, over 23 percent of customers abandon their shopping carts because of a complex checkout system or too much information required to complete it. According to Zed Founder and entrepreneur Alan Safahi, choosing the right payment solution provider is one of the significant aspects of building the perfect e-commerce website. Now, before you decide what payment gateway integration you need, you have to know what it is and how it works. So let’s check it out!
What Is A Payment Gateway?
A payment gateway is a payment service that authorizes and processes payments in online and brick-and-mortar stores. It acts as a portal to facilitate transaction flow between customers and merchants. There are security protocols and encryption to pass the transaction data safely. According to Safahi, the data is transferred from the device to payment processors/banks and back. There are a few different transaction types payment gateways can execute. In the following passages, that’s what we will talk about. So let’s check them out:
It’s a type of transaction used to check if the customer has enough funds to pay for the order. But there is no actual fund transfer happening. Instead, it’s a way for the merchant to ensure if the customer has enough funds, and this type of transaction is used for orders that take time to ship/manufacture.
Capture is the actual processing of a previously authorized payment resulting in funds being sent to the merchant’s account.
Sale is the combination of authorization and capture transactions where the cardholder is first authorized, but the funds may or may not be captured. It’s a common type of transaction where that is mainly used for immediate purchases, like a subscription purchase or e-tickets.
It’s the type of transaction that happens when there is a canceled order, and a merchant applies for a refund payment processing to return the money.
Void is similar to refund, but it’s usually done if funds were not yet captured. So that’s about all the transactions you can expect from a global payment processing service. So now, let’s check out the payment processing flow you can expect after a payment gateway integration.
Payment Processing Flow
The payment processing infrastructure is a bit more complicated than you might think. When a customer goes to pay, they are taken to a small window, or a separate website, where they have to pass through the checkout. However, it’s not as simple as it seems.
Payment processing includes several financial institutions, or tools, verifying the transaction data on both ends that allow the customer to complete the purchase in a few seconds. Whenever a customer puts in the card number, expiration date, and CVV, the payment gateway performs several tasks in a matter of seconds. Here is the entire process that you don’t get to see:
Whenever the customer presses the buy now button and fills in the necessary fields to pass the transaction data, it is then encrypted and sent to the merchant’s web server via an SSL connection.
Merchant & Payment Gateway
Once the transaction data is received, a merchant passes it to the payment gateway via another encrypted SSL channel. If a payment gateway stores the data, it is then settled in a specific type of secured storage. According to Safahi, payment gateways don’t keep actual credit card numbers but rather save tokens.
The next step for the customer information is to go to the payment processors who provide payment processing services as third-party players. These companies are connected both with a merchant’s account and a payment gateway, transferring the data back and forth. Then the next step for the processor is passing the transaction to a card network.
The Card Network
The role of the card network is to verify the transaction data and pass it to the issuer bank. The issuer bank is the bank that produced the cardholder’s credit/debit card.
The issuer bank then checks the information then accepts or denies the authorization request. Then a bank sends a code back to the payment processor, which contains the transaction status or error details.
The payment gateway then gets the transaction status, and that is passed to the website.
The Customer & Issuing Bank
The customer then receives a message with the transaction status through the payment system interface.
Within the next couple of days, the funds are transferred to the merchant’s account. Then, finally, the transaction is performed by the issuing bank to the acquiring bank.
So now that you know the process, we can get into payment gateway integration and the different types of payment gateways out there. So let’s check them out!
Payment Gateway Integration
There are four main payment gateway integration methods, but all four methods usually differ by two significant factors. Let’s check them out:
- You must comply with the required financial regulations like PCI DSS.
- And the degree of user experience concerning the checkout and payment procedure.
So now that you know what the significant factors, let’s check out the regulations and types of payment gateway integration you can use!
PCI DSS And When Do You Need Them?
If you want to use a global payment processing solution and integrate a payment gateway but don’t plan on storing card data, you can skip this section. That’s because your gateway or payment service provider will carry out all the processing and regulatory burden. However, if you are dealing with sensitive financial data, you have to meet financial regulations considered the industry standard.
That’s where Payment Card Industry Data Security Standard (PCI DSS) comes in. It’s a vital element for processing card payments. The security standard started in 2004 and was created by the extensive four card networks: Visa, MasterCard, American Express, and Discover. Here are the steps to become PCI DSS compliant. So check it out:
- Defining your compliance level is the first step. There are four different levels of compliance determined by the number of safe transactions your business has finished. Transactions count if they are done by MasterCard, Visa, American Express, or Discover cards, and there are a specific number of successful transactions.
- Make sure you study the SAQ. It’s a set of requirements and sub-requirements, and the latest version has 12 different conditions.
- The next step is to complete the Attestation of Compliance (AOC). It’s an exam you take after reading the requirements. You will find there are nine types of AOC for different businesses. The AOC SAQ D – Merchants is specifically for retailers.
- The next step is to complete an External Vulnerability Scan by the Approved Scanning Vendor (ASV). You can find more about them here.
- The last step is for you to submit the necessary documents to the acquirer bank and card associations. Your records should include the ASV scan report and your filled-in SAQ and AOC.
So now that you know about PCI DSS compliance and how to apply let’s check out the existing payment gateway integration options. Let’s check them out!
A hosted gateway system acts as a third party where it requires your customer to leave your website to complete a purchase. That means the customer is redirected to a payment gateway web page to type in their credit card number. Once the customer completes the data input, they are redirected back to the merchant’s page. When the customer is redirected back to the checkout page, the transaction approval is shown.
Direct Post Method
The direct post method is a payment gateway integration that allows customers to shop without leaving your website as you don’t have to obtain PCI compliance. In a direct post method, the gateway usually assumes the transaction’s data will be posted to the payment gateway after a customer clicks on the “buy” button. Here the data is instantly transferred to the gateway and processor without being stored on your server.
This is where you don’t work with a third-party payment processor at the checkout stage. For this type of payment gateway integration, you need to obtain PCI DSS compliance. That means you will be in charge of everything from storing, securing, and conducting initial verification for each transaction. You can do this by installing a payment gateway solution available on the merchant’s website. There are white label non-hosted solutions you can use too for this as well. It’s a prebuilt gateway that can be customized and branded as your own.
The benefit of using a payment gateway integration is that it’s a dedicated source of revenue, as merchants that obtain all the necessary compliance become payment service providers themselves. That means you can use your business to process payments for other merchants for a fee.
However, there are challenges to being a payment gateway service provider. Along with the regulatory challenges, being a payment gateway provider brings a technological burden. You need to have an infrastructure to safely store transaction data, credit card tokens, etc. So make sure you consider all the parts before choosing a payment processing service for your business.
Choosing The Right Online Payment Processing Services
So there you go. Those are some essential things you needed to know about payment gateway services. As you can see, there is a wide range of aspects you need to take care of when checking out online payment processing services. However, if you are looking for global payment processing services, then Zed can help you out. We specialize in providing all-encompassing payment orchestration layers to companies that offer global transactions.
That’s not all. If you have any questions regarding payment gateways and payment processing, feel free to contact us, and we will answer all your questions. You can also drop your questions in the comments below or hit us up on our socials. And with that being said, that’s about all we have for you today. We will come back with something new for you soon. Until then, see ya!