What exactly is a payment gateway?
A payment gateway is a network that allows your customers to transfer funds to you. Payment gateways are very similar to the point-of-sale terminals found in most physical stores. Customers and businesses must collaborate to complete a transaction when using a payment gateway.
After your customer places an order, the payment gateway verifies the customer's credit card information and determines whether they have enough funds in their account to pay you.
Why do you need to have a payment gateway?
When you integrate with a payment gateway, your customers can make purchases whenever they want, whether you're in the store or not. Allowing your customers to shop at their leisure benefits both them and you.
As a business owner, you understand how difficult it is to get paid at all. Instead of going through the hassle of agreeing to pay on a certain day and then forgetting to do so, many customers prefer to pay right away and be done with it. Payment gateways enable them to do so, creating a win-win situation for you and your customers.
Customers' top concern when making online payments is security. In 2017, the total loss from credit card fraud in the United States was $2.5 billion. Payment gateways significantly reduce the risk of credit card fraud. The payment gateway receives the customer's credit card information in a secure manner. This means that only the customer and their issuing bank will have access to their data.
How do online payments work in conjunction with a payment gateway?
Before we get started, here are some terms you should be familiar with:
A merchant account is a separate bank account for receivables used by businesses. During a transaction, your customer's payment is initially transferred to your merchant account, where it remains until you transfer it to your company's main bank account. Accepting online payments necessitates the use of both a payment gateway and a merchant account.
A payment processor is a service that authorizes the customer's card details to ensure that they have enough funds in their account to pay when a business charges a customer for a purchase. If they do, the payment processor authorizes the transaction and the funds are transferred to the business' account; otherwise, the transaction is rejected.
The following steps describe how online payments work with a payment gateway:
Step 1: To begin accepting online payments, set up your website and connect it to a payment gateway.
Step 2: Your customer purchases something from your website by clicking your payment link and entering their credit or debit card information.
Step 3: The payment gateway receives the order and card information. The card information is securely transmitted to the payment gateway, ensuring that only your customer and their bank have access to their card information.
Step 4: Following that, the payment gateway verifies your customer's card information and determines whether they have sufficient funds to make the payment. If they do, the payment gateway will complete the transaction. Furthermore, the payment gateway uses anti-fraud tools to prevent fraudulent activities.
Step 5: The payment gateway then takes over and initiates the transaction by sending a request to the customer's issuing bank. The funds are then transferred from the issuing bank to the merchant bank, which deposits them into the merchant account.
Step 6: The merchant will receive a notification of the transaction's status. The length of time it takes to receive your payment is determined by the payment gateway you use. The majority of payments are received in real-time, almost immediately after the transaction is completed, but some may take up to 21 days if there are any processing errors.
Do you need a payment gateway?
The checkout page experience is becoming increasingly important in ensuring that your users are pleasantly surprised by a smooth transaction. This is especially true as more B2B businesses go online and adopt B2C payment practices. However, because they were designed with B2C consumers in mind, traditional payment solutions fail to account for the complexities of B2B trade. Because B2B trade involves more negotiations and varying payment terms based on the value of the goods or the size of the project, a one-time push payment solution is overly simplistic and exposes the businesses involved to payment-related risks. If you are a platform designed for businesses that deal with high-value goods or services, integrating a B2B escrow payment solution is critical.
What exactly is an Escrow?
A neutral third party acts as an intermediary, collecting, holding, and releasing funds for a transaction between a buyer and seller.
The buyer and seller will convey their agreement to the escrow service provider once they have agreed on the terms of the trade. The buyer must first fund the escrow account, after which the payment will be held by the escrow provider. The seller must then fulfill their obligations and provide proof to the escrow provider before they can receive the escrow payment.
Escrow services are not entirely new in the online eCommerce world, having previously been implemented for B2C customers. While this type of escrow protects both buyers' and sellers' interests, it isn't as flexible as B2B escrows because the use case is limited to online purchases of consumer goods. B2B escrows, as opposed to B2C escrows, are intended to account for different trade terms and payment schedules based on the buyer's and seller's negotiations. By providing the relevant data points in their API, the escrow provider's platform can account for these differing terms.
Due to their short turnaround times, digital escrow services are proven to be a boon in both domestic and foreign markets. Escrow services have historically been a part of the solution package offered by all banks, with the drawback of a longer setup and processing time. Currently, digital escrow is available, allowing P2P parties to establish accounts and streamlining traditional procedures through online KYCs to enable seamless commercial flows, particularly for online marketplaces.
Digital escrow service in India
Digital escrow services are offered by many companies in India. Among the most trusted is Vouch.
Vouch’s Digital Escrow service is a transparent way for buyers and sellers to build trust and secure a clean transfer of product and payment. Sellers can feel assured that they will be fairly compensated promptly, and buyers will feel confident that their orders will be delivered as expected and on schedule. Vouch Digital Escrow keeps you updated and informed at every step of the transaction process till the end. Vouch’s professionals are always available to assist you with all queries that you may have during the entire transaction process.
There is no scope for deceit or fraud since the payments, shipping, delivery, and execution are carried out under the honest and watchful eyes of the Vouch’s professionals. With Vouch, any business transaction becomes transparent, uncomplicated, and hassle-free.
Check back here to learn more about Escrow and how to protect yourself from fraud.
Safety is not just about protecting your credit, debit card number, and UPI accounts. It's about having control of your money till you've received the product or service you bought online!
As you're now aware of the importance of online safety, let's get your transactions secure on Vouch. It's just a click away.