This world is working on the basis of networks that are created due to the connections between people. These connections are a result of middlemen being involved. People don’t realize how indispensable this middleman system is. Many middlemen have said that in this world, the ones who actually encourage and become a source of these connections are the real players. The middlemen increase the value of a network by connecting the people that are a part of it. This article will mainly focus on one middleman that aids connections in the online payment industry. When a person is doing an online transaction, he or she will demand reliability and dependability. Let’s focus on what your role, as a trader, is in this system.

THE BASICS OF A PAYMENT NETWORK

In simple words, what happens in an online banking system is that the money is sent by the buyer from his or her account to the seller’s account through the online payment system. The online system can be divided into three parts:

THE ALMOST MIDDLEMEN:

They are the ones that are going to link you (the seller) and the payment gateway with each other. This is done through API. They will pop in at different points of the billing process, like when notifications regarding payment is sent, to manage the subscriptions, and it also will manage your checkout.

PAYMENT GATEWAY:

They are the ones we were actually calling the middlemen of the online payment system. They are also the ones that actually handle your trader account. This is an account that every trader needs to keep to be able to manage the payments that are specifically related to business.

PAYMENT SERVICE:

They are a mixture of both mentioned above. They will make billing even easier for you now. The only drawback of going with this option is that you will not have the flexibility of choosing your own payment gateway or even your choice of trader account.

WHAT DOES A PAYMENT GATEWAY DO?

The role of a middleman can be explained very well by the following roles that the middleman has. Let’s list the roles down for you now:

A BRIDGE:

A payment gateway is basically the middleman who is trying to bridge the gap between the buyer and the seller. This is just like Uber, which connects the person in need of a taxi to a person who is in need of a passenger. The payment gateway provider will exactly be in the middle of the process, reducing the distance between your bank, the seller’s bank, and the bank that is the issuer. No matter what the physical distance is, the payment gateway provider will do its work.

A GUARANTEE:

As the middleman of the whole process, the payment gateway provider has to maintain quality. It has to do so to be able to keep a good reputation as these things work on word of mouth basis mainly. The payment gateway provider makes sure that whatever details are provided are authentic and are worth sending forward as the guarantee is to be provided by them. To prevent any activities that may even be near-fraudulent, specific tools are used to screen out customers.

A RISK BEARER:

This is one of the most important roles that the payment gateway providers play. They provide you with security. They keep all the secret information secure that may include your credit card pin or other confidential information as well. They also have to keep up with some standards that ensure that the customer remains safe.

AN INSULATOR:

It plays a major role in keeping the two parties at a safe distance from each other. This is done so that the parties can indulge in a healthy interaction. It is easier to send the details through a gateway provider rather than controlling all the information flow by yourself.

THERE ARE THREE MAIN ACTIVITIES THAT A PAYMENT GATEWAY PROVIDER INDULGES IN:

AUTHORIZES:

It is a validation procedure through which the customer’s information is validated and then a thumbs up is given for the process to continue smoothly.

CLEARING:

The second important action that the payment gateway provider performs is that it clears the money transfer. It makes sure that the money has been transferred from the bank account of the customer to that of the trader.

REPORTING:

Another essential action that the middleman performs is that it records all the transactions that take place and inform the parties that are involved in the process.

THE PROCEDURE IN DETAIL

For the process to take place, there are some participants that are to be involved. Here are the people that are involved in a conventional:

CUSTOMER:

He or she is the person who decides to pay for the product or is forced to! Anyway, they are willing to pay the money to get their hands on the product.

TRADER:

This is the person or company that wants to sell the product at the price that is in the tag.

ONLINE WEBSITE:

This is the platform that the trader is using to sell his or her products and this is where the customer interacts with the company also.

TRADER’S BANK ACCOUNT:

The whole process is taking place to get money into the bank account of the trader in the end!

ACQUIRER:

This is the bank that has opened the trader’s bank account and it processes card payments for the trader as well.

ISSUER:

It is the bank that takes the payment from the customer and provides the payment to the acquirer. All of this is done on behalf of the customer.

CUSTOMER’S BANK ACCOUNT:

This bank comes into the process when the payment is not through the card. It makes the payment for the customer in that case.

PAYMENT GATEWAY:

The middleman between the trader, the customer, and the banks that are involved in the online transaction process.

AS WE HAVE NOW RECOGNIZED THE CHARACTERS THAT PLAY THEIR PARTS IN THE PROCESS OF AN ONLINE TRANSACTION, LET’S MOVE ON TO THE SEQUENCE OF EVENTS:

• After the customer has selected the product that he or she wants to buy, they will select the buy button in the online website that they have opened on their browser.
• The browser that the customer is using will encrypt the data of the transaction. This is done for safety purposes and after this, the data is sent to the browser of the online server.
• The server of the online website receives the data and the customer’s IP address. After this verification takes place, which involves verification of the trader, the customer, and the payment gateway provider as well.
• The payment gateway then comes into action. It will ensure that the online website is authentic and reliable. After this, it will allow the customers to see what payment methods are available to them.
• Once the method of payment has been selected, the payment gateway will forward the details of the customer to the acquiring bank, if it is a card payment, or the trader’s bank, if the method of payment is not through the card.
• What the acquiring bank does is it will forward the payment to the issuer bank, if it is a card payment, or to the bank of the customer, in case the payment is through any other method.
• The issuer bank will approve the transaction by having a look at the customer’s card’s limitations. The message will be delivered to the payment gatewaythrough the acquirer.
• The last step involves the deliverance of the message to the customer and the trader. This one is called the “Auth.”

AND GUESS WHAT?

The whole process will take almost 2-3 seconds to be successful. But wait, there is one final step left! In the case of payments that are made through the card, the issuer bank has to clear the transaction with the acquirer bank. This step will take some days in case there are physical goods involved in the transaction. Normally, the Auths that don’t have any issue and have been approved are submitted to the acquirer bank by the trader. The acquirer bank will then the issuer bank to settle the funds that are outstanding. After the acquirer receives the funds, it will transfer them to the trader’s account. This period may be called the settlement period and it will take up to 4 business days to complete the process.

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Online shopping reduces the hassles of the traditional purchase. It is also budget-friendly, time-saving and convenient. Despite the hectic schedules, people can minimize the burden while achieving optimal comfort.

However, online fraud has been a big concern for business owners and consumers out there. So, how to lessen the risks? Understanding payment fraud is a great start.

The most common is online spoofing or phishing. It is typically the process of accessing an individual’s details thru fraudulent websites or emails. The information can include passwords, usernames, credit card numbers, bank account numbers, and more.

The most widely used strategy for phishing is to redirect a user to a website. They are usually asked to update their details. What they don’t know is that they are tricked into revealing their information to an unreliable provider.

Phishing can occur via SMS, email, instant messaging, and other electronic means.

Another online fraud is data theft. Sometimes, dishonest partners and employees steal credit card data from a company and use it for fraud. That’s why ecommerce sites and other online shops take stringent measures to avoid privacy breaches.

So now that you’re certain about some online frauds in payment processing let’s know the best option to reduce the risks. With the prevalent cases, there are many solutions to choose from. One of the most reliable choices is a payment gateway. But what does it mean? And how does it help in reducing online fraud in payment processing? Keep reading for further details!

WHAT IS A PAYMENT GATEWAY?

A payment gateway has been popular for the past decades. Despite that, many people don’t know much information about it. A payment gateway enables online shops to accept face-to-face sales, charging a client’s credit or debit cards. It is invisible to your consumers and operates behind the scenes to process or validate a payment.

With the use of a tokenization and secure communication methods, a payment gateway communicates between your ecommerce website and your partnered bank. Then, the client’s data are collected, verified and approved. After that, what’s next? The payment is accepted, debiting a customer’s account. This gives your customers a comfortable experience throughout the checkout.

When selecting payment gateways, choose the one that supports global processing networks. Not only does it allow you to guarantee uptime, but this also protects your daily revenues. Plus, you can minimize unnecessary processing expenses thru flexible and intelligent transaction routing.

HOW DOES IT HELP IN REDUCING ONLINE FRAUD IN PAYMENT PROCESSING?

A payment gateway is responsible for a variety of tasks. It particularly makes customer transactions safe and valid. For every checkout, a payment gateway does the other things quickly and seamlessly. Here are a few of them:

• It receives any encrypted data from a web server. Then, it sends the information to your chosen bank’s payment processor.
• It forwards the transaction information to the card association. The bank also reviews and examines every authorization request. Plus, they have the power to approve or deny the application.
• The payment processor receives the data and sends the request to a payment gateway. The latter relays the information to a web server. Then, it interprets the data, providing the right response to customers.
• Let’s say the order has been granted, your ecommerce site processes or fills it right away. The best examples can include providing a download link for the software and alerting staff that a product must be packaged or prepared for delivery.

The process can be long and stressful. But the truth is that it happens in a few seconds. The efficiency and speed associated with the right payment gateway give your clients the confidence with the safety and security of completing a transaction.

WHAT TO LOOK FOR IN A PAYMENT GATEWAY?

Every ecommerce site, online store or business needs an excellent way to secure payments. However, with many choices over the internet, it’s an overwhelming decision for startup owners and other seasoned companies. Not only do you need to consider the technical problems of setting up a payment gateway, but you will also have to think about the convenience for your target market. Most importantly, your option’s security should not be overlooked.

WHY IS A PAYMENT GATEWAY IMPORTANT?

As a merchant service, a payment gateway is utilized as a third party to authorize all credit card transactions. As you collect a client’s credit card details, you will send it to your chosen gateway. Then, it will forward the data to a bank and credit card company.

The credit card service provider will relay back a response, informing ecommerce sites whether or not the credit is available. Then, the transaction will go thru with the peace of mind.

More than that, a payment gateway has other proactive features, and these can include fraud detection. For those online shops that have lost a big sum of money because of fraud, a payment gateway is an excellent option you can ever have.

MAIN CONSIDERATIONS TO WEIGH IN MIND

There are lots of payment gateways to choose from. Before you make a big decision, take your time and pay attention to the following pointers:

CLASSIC OR MODERN

Do you prefer a modern payment gateway setup or a classic one? Whatever the case may be, decide what you want.

A classic payment gateway requires you to apply for a merchant account. A modern payment gateway, on the other hand, allows you to get the most out of their services without one. It is more convenient to set up. But you need to prepare your pocket.

COMPATIBILITY

While there are various payment gateways, only a few options are simpler to integrate. Although most companies strive to provide excellent compatibility, issues still arise. So, select a compatible and perfect solution.

Invest now in a quality and effective payment gateway!

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