What is a Payment Gateway
Payment Gateway is a service that helps you authorize payments for carrying out electronic transactions. It authorizes payments for online retailers and e-businesses. It helps by providing tools to process payments between banks, customers and businesses.
Main Features of 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.
Apart from the above, many Payment Gateways provide feature tools that help customers to find out breakup of various cost paid by them in an electronic payment example shipping cost, handling cost, taxes etc. Other Payment Gateways include tools for fraud detection.
Why is Payment Gateway needed?
You cannot think of carrying out electronic payment transactions in your website, without a Payment Gateway. If you want to sell any of your products or services through your website in such a way that a user has the ability to pay to you by using his debit or credit card you need to have tie ups with any of the Payment Gateways so that the money gets transferred in a safe and secure manner.
Types of Payment Gateway
There are two types of Payment Gateways:
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Payment Gateways that require Merchant Account
This type of Payment Gateway can be availed by applying for a merchant account at your local bank or at any of the third party companies that offer this service. The advantage of using this type of Payment Gateway is that you get more competitive rates for per transaction cost. The disadvantage of using this system is that you will have to incur more cost at the initial set-up.
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Payment Gateway that does not require a Merchant Account
For this type of Payment Gateway, you don’t need to have a Merchant account. The advantage with this type of Payment Gateway is that the initial set-up cost is low. The disadvantage with this type of system is that you need to pay more for per transaction cost.