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What keeps the payments ecosystem rolling smoothly is a payment gateway, since it makes online payments for customers and companies. You don't need to be a payment gateway specialist if you're an online retailer, but it's worth learning the basics of how an online payment moves from your customer to your bank account.
The concept of a payment gateway is the technology that collects and transfers payment information to the acquirer from the customer and then transfers the approval or decline of payment back to the customer. A payment gateway securely validates the card information of the client, guarantees the funds are available and finally helps merchants to get paid. It serves as an intermediary between the website of a merchant and its purchaser. It encrypts confidential credit card numbers, ensuring that data is transferred through the merchant securely from the client to the acquiring bank.
In other words, the payment gateway acts between the customer and the retailer as the middleman, ensuring that the transaction is carried out safely and promptly. How merchants incorporate the required software can be simplified by an online payment gateway. The gateway handles the customer's confidential card information between the acquirer and the retailer as the middleman throughout the payment processing.
You might be wondering, if it's just a middleman, why do you need a payment gateway? We'll take a step back and highlight the online payment is processed as a card-not-present transaction before we answer this issue. As you would usually do if you processed the payment in a brick-and - mortar store, the client's card cannot be physically swiped on a POS terminal. Therefore, you can only rely on the card data entered by the customer on the payment tab. But how can you be confident that their card is the card the customer is using? The fraud risk is substantially higher in card-not-present transactions, and this is where a payment gateway does its magic.
What would happen if you removed the payment gateway from the flow of online payments? Fraudsters will have better access to the card data that you process, revealing fraud and chargebacks to your business. In addition, fraudsters can also find additional ways to facilitate fraudulent transactions, making you even more vulnerable to fraud and undermining the credibility of your brand.
The gatekeeper of the payment data for your customer is a payment gateway. A payment gateway transmits the information from you, the retailer, to the acquirer and the issuing bank for online retailers using data encryption to keep unauthorised threats away from the confidential card information. A payment gateway also prevents retailers from expired cards, insufficient funds, closed accounts, or exceeding credit limits, in addition to fraud control.