Digital businesses and the digital payment industry have seen significant growth in the last decade, more so after the pandemic set in. Every year, thousands of new businesses are coming up. This not only increases the number of digital transactions taking place but also ups the level of competition in the market. Today, startups and new businesses can lose customers over small features that their competitors provide and they don’t. This includes a preferred method of payment.
In online businesses, digital transactions are a critical component. Any payment gateway services a business opts for must cover all bases and ensure the highest level of security and efficiency.
Functions of an Online Payment Gateway:
A digital payment solution takes on several challenges that new businesses face and alleviates the level of responsibility on business owners. The various functions of digital payment solutions are:
- Payment method processing:
All the payment details a user enters, their credit card details, and their IP addresses are all shared and processed through a digital payment gateway. It acts as a virtual cash register for accepting, processing, and storing transactions.
- Data encryption:
Payment gateways encrypt the personal data that can identify the user submitting it. This allows the data to be transmitted and interpreted safely only by the authorized recipient.
- Request authorisation:
To verify personal data validity, payment gateways initiate authorisation requests for transactions. For instance, if shoppers are using a debit or credit card, a payment gateway redirects them to the 3DS page of the issuer.
- Fulfillment or capture:
Suppose a payment gateway gets approval or positive authorisation response. In that case, it relays this positive response to the e-commerce store and enables the transaction to move to the following step.
Sales combine the authorisation decisions and combine them into a single process. Usually, this happens when transactions are simultaneously fulfilled which is quite similar to POS payments within a store.
- Geo-location options:
Some specialized payment gateway services include promotions customized for specific regions.
Factors to Consider While Choosing a Digital Payment Solution:
There are various factors for a business that depends on their choice of payment gateway services. This makes choosing a payment gateway a critical decision for business owners and planners. Take a look at some factors that can serve as effective metrics to measure potential payment gateway partners.
- Availability of services:
Startup owners must choose where their largest customer base lies. Based on this information, choose a payment processor that operates in that area, country or city and reach your customers. Most major payment gateway providers maintain a list of countries that can be checked against to understand whether you can use their services or not.
- Transaction fees:
Every payment gateway provider applies a form of payment against transactions made using their services. This fee could be based on the types of transactions, the number of transactions, the type of card, and the payment method used. Choose a gateway that offers a model you are comfortable using. For example, new businesses benefit more from a per-transaction fee structure as their customer base is not established yet.
- Recurrent bill payment systems:
Today, a large volume of subscription-based businesses have come up. Several businesses like OTT platforms, music websites, and furniture rental companies function on a subscription-based business model that requires customers to make a fixed payment every month, every quarter, or every year. Some payment gateway services allow businesses to set autopay or repeat payment functions so that customers don’t need to make manual payments for the same amount each month. With due consent, the payment is made directly to the business’ account from the customer’s account to reduce the time taken and avoid late fees for customers.
- Additional charges:
Most payment merchants and gateways levy additional charges besides the standard transaction fees apply. These are miscellaneous expenses that include account setup fees, account maintenance charges, withdrawal charges, deposit charges, and chargeback fees, among others. For new businesses, these additional charges could reduce profit margins significantly.
- Multiple modes of payment for customers:
Online merchants must reduce as much friction as possible between the customer and successful transaction completion. This means using a payment gateway that offers the widest range of payment methods available for customers. Customers should have the option to choose from credit card, debit card, mobile wallet, and digital payment platform options as they checkout from an e-commerce platform.
Payment fraud is one of the largest and most ominous threats to any digital business. Several online customers confess to having concerns regarding the security of their data and payment information when they shop online. Startups and digital businesses must choose payment platforms that adhere to several governing body regulations created to ensure payment security. One example of certification to check for in your digital payment solution is the Payment Card Industry Data Security Standard or PCI DSS.
With the rising competition level in the e-commerce domain, your digital payment solution can make a significant difference. Partnering with the right gateway services drives brand loyalty by improving the customer experience.
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