Buyers’ Guide In Choosing A Payment Gateway Provider

10/21/2015 18:04

If you still don’t have an online payment gateway, you’re doing business in the past. From getting set up with a merchant account to automating deposits and recurring billing, online payment processing is what's happening in today’s fast-paced and competitive business environment.

What is a Payment Gateway?

A payment gateway is actually a system of computer processes that transfer, verify, submit and receive transaction information to the credit card network on behalf of the merchant, using secure Internet connections. The payment gateway is the infrastructure that allows a merchant to accept credit card and other forms of electronic payments.  

Some of the main features of a payment gateway include:

Software application designed especially for ecommerce, although it can be used to authorize payments in traditional brick and mortar businesses.

Encryption of payment and personal data.

Communication between the financial institutions involved and the business and the customer.

Authorization of payments.

How Does a Payment Gateway Work?

A payment gateway performs very specific processes. It is actually a lengthy, regulated process, even though the transaction authorization happens only seconds after the customer submits the check-out button on your site.

 How does a payment gateway facilitates online transactions between you and your customer?:

The customer submits credit card information on the merchant’s Web site, on a secure page.

The transaction is encrypted and the merchant submits the customer’s credit card information to the payment gateway.

The payment gateway receives the information from the merchant, and then passes it along to the merchant’s bank processor, using a secure connection.

The merchant’s bank processor submits the transaction information to the credit card processor.

The credit card processor routes the transaction and verifies the information and funds with the customer's issuing bank.

The credit card issuing bank will either approve or decline the transaction and send the results back to the credit card processor, and it also provides the transaction results to the merchant’s bank processor.

The merchant’s bank processor sends the results to the payment gateway. At this point in the transaction, the payment gateway stores the transaction on behalf of the merchant and the customer. The authorization process by the payment gateway is complete -- in just a couple seconds.

Finally, the transaction is completed when the credit card-issuing bank sends the funds to the credit card processor, which passes the funds to the merchant's bank for deposit to the merchant's bank account.

What to Look for When Choosing a Payment Gateway

Payment gateway service providers offer a number of features and value-added services.

Five things you should look for when choosing your payment gateway vendor.

Cart Compatibility: One of the first things you need to consider is compatibility with your existing shopping cart system.  This is a crucial consideration, especially if you have already purchased your shopping cart system.

PCI-Compliance: The payment gateway is the company that will handle and store your customer's credit card information. Any payment gateway provider you choose must meet PCI-compliance standards.  

Multiple card and Currency Support: Another important feature of a payment gateway is the type of credit cards and type of currencies they can process.

Reoccurring Billing and Phone Order Support: In some cases where you offer support or subscription-based services you need to ensure that the payment gateway supports prepaid billing and automated recurring billing (ARB), and that it also offers management tools for reviewing a customer's account balance and history.  Another important feature is the capability to log in and manually process customer transactions -- a phone order for example. This service is called a “virtual terminal,” and it is a service the payment gateway provider you choose should offer.

Fraud Detection and Prevention Service: A good payment gateway will offer automated tools to help fight credit card fraud, including the capability to identify suspicious transactions and to make sure the provider supports industry standards like the Address Verification System (AVS). This security feature ensures that the customer's credit card billing address matches that of the credit card issuer's information.

eCommerce Processing

In electronic commerce, a payment gateway is the term used to describe an application service provider that authorizes and processes electronic payments between you, your customer, the customer’s credit card-issuing bank and your own bank

One of the most important aspects of any online business is the ecommerce processing of payment. You want to be able to accept payment on your web site, no matter the hour of the day. 

In order to accept credit cards and online payments, you need a processing system that can help your site handle payment transactions without you being present. It is a good way to truly ensure that you are automating your ecommerce web site, and provide for the convenience of your customers.

Shopping Cart Integration

Online shopping carts are the software programs that allow customers to select the items they want from an online store and then start the checkout process. Your shopping cart software should be compatible with your other ecommerce software so that it all works together seamlessly. Your shopping cart can tell your payment gateway how much needs to be charged, and offer other pieces of information.


Alipay is a third-party online payment platform with no transaction fees.

Alipay provides an escrow service, in which consumers can verify whether they are happy with goods they have bought before releasing money to the seller.


PayPal is generally seen as the definitive way to pay people online because customers do not have to be members of PayPal in order to complete transactions when you use a PayPal payment gateway. It is possible to serve just about anyone. The versatility is one of the reasons that PayPal is very popular as a payment provider. Transactions are secure, and it is generally easy to set-up and integrate PayPal payment options. But it is not necessarily the best.

Paypals’ Alternatives

There are plenty of great ways to accept and receive payments from others, some designed for specific purposes and others just aiming to be better ways to handle money.