Payment Gateway and Online Payment Processing Guide
We explain how payment gateways work, how they relate to PCI compliance and how you can securely process credit cards online with payment gateways using TransNational Payments.
Table of Contents
What is a Payment Gateway?
A payment gateway allows merchants to accept credit card payments by facilitating a secure payment transaction through the transfer of information between a payment portal (think your website or mobile phone) and the front-end processor. Gateways are payment services that process credit cards online through an e-commerce site or in person through a credit card terminal.
5 Frequently Asked Questions About Payment Gateways
1. What’s the difference between a virtual terminal and a payment gateway?
Payment gateways let you accept credit card payments (in person or online) by transferring money between your merchant account and a payment processor.
A virtual terminal turns your computer into a credit card terminal and allows you to manually process payments right from a web browser. It’s great for remote billing or taking credit cards over the phone. Virtual terminals are ideal for businesses that don’t need an online store but do need to accept remote payments through phone, mail or fax.
2. What’s the relationship between merchant accounts, payment processors and payment gateways?
Payment Gateway The technology that moves money between your business’s bank account and your client’s credit card bank
Payment Processors The bank or entity that processes your payments
Acquirers The banks or financial institutions that manage your merchant account
Merchant Account Essentially a bank account for your business
A merchant account is what establishes a business relationship between you and your merchant services provider (e.g., the bank account for your business). With traditional credit card processing services, you cannot take payments until after you apply and are approved for a merchant account. A payment processor is the bank that actually processes the payment request. When customers pay with a credit card, payment gateways connect merchant accounts with payment processors by transferring credit card information between the bank that issued the credit card and the bank account for your business.
3. How do payment gateways automate businesses?
Whether you need to swipe, key-in cards or process checks, it can all be done via your browser from any computer with a payment gateway. Payment gateways, such as TransNational Payments’ payment gateway, offer many features that can help automate your business, such as recurring billing and reporting. The recurring billing feature stores your customers’ information and allows you to automatically charge them on a recurring basis.
4. What’s the difference between a payment gateway and a payment switch?
The payment switch is part of the payment gateway and is responsible for making sure incoming payment requests (transactions) are directed to the right place. When the payment gateway receives a payment request, the transaction is routed to the payment switch (this process is called “transaction switching”), then the switch routes the transaction to the correct issuing bank for approval.
5. If I already have a payment gateway provider do I still need to worry about PCI compliance?
Yes. All merchants who process credit card information must be PCI compliant, and having a PCI compliant gateway is only one part of that requirement. Fortunately, if you use TransNational Payments as your payment processing system, you are PCI compliant. TransNational Payments will ensure that your business is properly operating under the specified guidelines of PCI, using only PCI certified POS systems or devices and provide ultimate protection to your business and its customers.
What is a Virtual Terminal?
A virtual terminal is the link merchants need to accept credit card and ACH payments online securely and efficiently from their own computer.
A virtual terminal can be used to process credit card and ACH transactions from any computer with internet access anywhere in the world, allowing you to securely and efficiently handle a series of additional tasks including the verification, reporting and processing of credit card and ACH payments.
Virtual Terminal: How It Works
With a merchant account from TransNational Payments, you can use your computer’s web browser, an internet connection and a USB credit card swipe reader to perform a variety of functions including:
- Process swiped retail credit card transactions
- Manually enter mail order/telephone order (MOTO) credit card transactions
- Manually enter ACH transactions
- Receive authorization responses
- Generate receipts
- Issue refunds to a customer’s credit card or ACH account
- Capture previously authorized transactions
- Store credit card or ACH payment information in a customer vault for future billing
- Set up automatic customer billing for recurring charges
- Confirm transaction status
- Upload batch files
- Access, create and save a variety of standard and customizable reports
Shopping Cart Integration
Virtual shopping carts allow visitors to your website to choose items for immediate purchase or to be stored for later purchase. Virtual shopping carts facilitate the collection of billing address, shipping address and payment information to be processed by a payment gateway, which can be integrated with various shopping carts.
What is a Customer Vault?
The customer vault, like TransNational Payments’ customer vault, allows merchants to transmit payment information through a Secure Sockets Layers (SSL) and process transactions without accessing cardholder information directly. Said another way, the customer vault securely stores customer information, including payment methods.
The customer vault allows transactions to be processed for repeat customers, without the need to re-collect billing information and without the need to store billing information in your system.
If you use TransNational Payments’ recurring billing, customer information must be stored in the payment gateway customer vault. You can also use it for non-recurring transactions so your customer doesn’t need to re-enter their information each time they make a purchase.
Recurring Credit Card Billing and Invoicing
Recurring billing solutions, such as TransNational Payments’ recurring billing solutions, allow you to automate your billing procedures for a simpler payment process and steady cash flow. Recurring billing is great for an array of business types who want to provide secure and easy ongoing payments for their customers on a periodic basis. Recurring billing (recurring payments) is a perfect solution for customers who want to automate their monthly payments and great for small business owners who do not want to have to worry about late payments. Some prime examples include gym memberships, cable bills, electric bills, subscription-based services and more.
How does recurring billing work?
If you have a customer that purchases something for your business on a frequent basis, offering recurring billing might be a great solution for them. To set this up, a merchant is required to get their customer’s permission upfront to run their card one time, store their information, and then continue to withdraw a specified payment on an on-going schedule.
What are the benefits of recurring payments for my business?
There are many benefits your business will see by setting up recurring billing including:
- Fewer late payments and collection issues
- More predictable cash flow allowing for better planning for your business
- No paper invoices or receipts to keep track of
- Saves time and money by no longer having to process individual payments
- Spread out payments for your customers making bigger ticket items easier to buy
- Stronger customer retention and increased revenue growth
What are the benefits of recurring billing for my customers?
Along with the many great benefits for your business, there are also ways recurring billing benefits your customers including:
- Environmentally friendly and convenient
- No more late fees or payments
- More control over monthly budgeting by always knowing what payments are coming out and when
- Payments are automatic so there is no need for them to keep on top of monthly bills
- Spread out their payments if they want to purchase bigger ticket items
How to Setup Recurring Billing and Invoicing
Recurring payments help you get paid faster and are easy to setup. Watch our recurring payments video to see how easy it is to setup.
Payment Gateway Fraud Screening Tools
Our online payment gateway also offers fraud screening tools to reduce the risk of fraudulent transactions. Fraud screening tools include: Address Verification Service (AVS), card code value (CCV) and card verification value (CVV). An internet payment gateway also helps prevent fraud and reduces your liability by storing the credit card transactions in the gateway (instead of on your website, also known as your customer vault).
How Payment Gateways Support Online e-Commerce
A payment gateway is an e-commerce service that processes credit card payments for online and traditional brick and mortar stores. Payment gateways facilitate these transactions by transferring key information between payment portals such as web-enabled mobile devices/websites and the front-end processor/bank. Payment gateways fulfill a vital role in the e-commerce transaction process, authorizing the payment between merchant and customer.
In essence, a payment gateway is an e-commerce service that allows merchants to accept credit card and other forms of internet transactions securely via your website. Remember, if the payment options on your e-store aren’t set up in the correct manner, you could suffer loss of orders placed on your store. This means you’ll experience a significant drop in sales because of unsatisfied customers. Implementing the right payment gateways however, can prove key ensuring long-term success of your online business. Since not all the payment gateways functions in the same manner, it’s crucial to make the right choice.
Payment Processors vs. Payment Gateways: What’s the Difference?
If you are a business owner, the terms payment processor and payment gateway are likely not foreign to you. In fact, they are likely something you have spent quite a bit of time thinking about it. However, understanding the difference between the two may at times seem complex, but it doesn’t have to be.
A payment processor analyzes and transmits transaction data — essentially they are responsible for sending payment data from the merchant to the issuing bank and then to the acquiring bank. Traditionally, a payment processor would furnish you with processing equipment such as your credit card machines and so on. This is the payment solution that you are most likely already acquainted with.
A payment gateway is very similar to a payment processor in that it is a tool that transmits payments between the customer’s bank and yours. The main difference however is that it is primarily used as a tool for e-commerce or card not present transactions. In other words, it is essentially a point-of-sale terminal for online transactions. A payment gateway is often one of the services offered by a payment processing company, such as TransNational Payments. However, the downside is that not all payment processing companies offer them.
Payment Gateways and Security Standards
Payment gateways encrypt data using SSL before sending it through the credit card network to protect the buyer’s sensitive account information. This means the buyer’s credit card information is coded in a way that makes it difficult for criminals to access it as the data is communicated between the different participants in the payment chain.
PCI compliance is a security checklist created by the Payment Card Industry Data Security Standard (PCI DSS) to help reduce fraud. All organizations that process credit and debit card payments, and all merchants that accept card payments, are responsible for their own PCI compliance.
For a variety of reasons, merchants often end up cobbling together a payment processing system from a number of different companies. They might use a payment terminal from one vendor, payment gateway from another, and a point-of-sale system from a third.
While each individual product or service might be PCI compliant, it doesn’t guarantee that the merchant, as the entity accepting card payments, is PCI compliant. That’s because PCI compliance pertains to the entire payment landscape, which includes how merchants process payments, how merchants connect those systems and how merchants manage their customers’ data.
TransNational Payments will ensure that your business is properly operating under the specified guidelines of PCI, using only PCI certified POS systems or devices and provide ultimate protection to your business and its customers.