What Is a Payment Gateway and How Do They Work?

What Is a Payment Gateway and How Do They Work

Learning how to handle payments for your e-commerce business can be intimidating if you’ve never had to deal with payment gateways or a payment processor like Provident Payments in Las Vegas. This is something that many new business owners struggle with in the early stages of starting a business. Luckily, we’re here to help you figure out what a payment gateway is and how they work so that your small business can be well on its way to collecting payments online and on the go.

So,

What is a payment gateway?

Essentially, a payment gateway acts as the medium between your e-commerce store and us, your payment processor, who receives the data for the payment from your customer. Once your customer has entered their payment information into your online store, it acts as a middle man by taking care of the data securely and delivering the information to the payment processor.

As the middle man of the transaction, the payment gateway makes sure that there is enough data entered by the customer to authorize and finalize the transaction. It then protects the details of the credit card by encrypting every bit of sensitive information to ensure that that your customer’s bank information can be passed safely between them and the merchant.

Payment gateways allow e-commerce stores to function by doing all of the leg-work behind the scenes— from collecting the customer’s information, sending the information to the payment processor, and then returning the transaction details back to the original website it is the main component of online shopping.

It really is quite simple once you look at it like that.

How does a payment gateway work?

Even though payment gateways are working behind the scenes to ensure that every transaction goes through smoothly with complex processes like encrypting sensitive data, the overall process is much more simple to understand.

First, an order is placed when a customer proceeds to check out and enters their payment information.

Then, the payment gateway receives and encrypts the customer’s information for security.

That information is then sent to the payment processor like us here at Provident Payments.

From there, the payment processor finalizes the payment and displays a message to the customer informing them of a successful transaction.

Then the customer can return to the online store to continue shopping! It really is as easy as that.

How to choose the best payment gateway

There are dozens of payment gateways available to merchants these days between Paypal, Amazon Pay, and Square— just to name a few. But how do you know which one is right for you?

There are a just a few things that you will want to consider when choosing the best payment gateway for your business. First, consider what fees your payment gateway will charge you and how those fees will be charged. Can you expect a flat monthly fee or will the fee be charged in relation to each transaction?

Most commonly, payment gateways like Paypal will charge you a processing fee for each transaction. This is something to consider. Additionally, if you are just starting your online store you may want to have a payment gateway that is user-friendly and easy to set up.

Let Provident Payments Get You Started

At Provident Payments, we can help you get started when it comes to choosing the right payment gateway and payment processor for your business based on a custom solution designed just for your business. Contact us today to get started!