Do You Need A Payment Gateway or Acquiring Services?

payment security

Payment gateways exist to ensure companies and organisations that process online payments, get paid. Both parties – the customer and merchant – need this to be secure, fast and efficient.

Acquiring services, also known as a merchant acquirer manage the funds and absorb any initial risk from fraud – friendly or otherwise – once funds have been processed through an online payment gateway. Any company or organisation that wants to accept payments needs to have secure, reliable systems in place to process payments and manage funds and refunds, as required, from customers.

How Do Payment Systems Work (Processor, Gateway, Acquiring)?

Every time a customer makes a purchase online, the following steps take place – from the moment card details are entered to the payment being accepted or declined:

  1. Data collection: payment processor stage

A customer selects a product or service, proceeds to the checkout, and then enters payment details – using a credit or debit card*. Once the payment processor collects this data, the payment gateway – a secure mid-level system – transmits this to your merchant acquirer and the card issuer/issuing bank for authentication.

  1. Authentication

At this point, the secure Card Network transmits the information to ensure the payment is valid and the customer has the funds on the relevant card to make the purchase. The Merchant ID is set with this information so that the funds are sent to the correct merchant account.

  1. Authorisation

Within seconds, you should receive confirmation that the transaction has been approved (or declined). You can then confirm dispatch of the products or services.

  1. Payment settlement

Depending on your merchant acquirer and payment gateway, receiving the funds from the customer can either happen in real-time or within 21 working days.

Refunds can still happen within – and sometimes beyond – this timescale, depending on your terms of service and card issuers buyer protections rights and terms – which means funds can, in some cases, be returned to the customer’s account after or before a settlement has taken place.

With some payment gateways, you can have a complete integration with a merchant acquiring service, allowing you to transfer funds to your main business or corporate account after refund windows have elapsed – thereby ensuring that refunds don’t disrupt cash flow. With others, you are managing two separate services that need to arrange an integration that suits your organisation.

What are the Payment Gateway service options?

Merchants have two options: Hosted and Non-hosted payment gateways.

#1: Hosted Payment Gateway

Although a customer may not realise it, a hosted gateway solution is one whereby they are directed to another page – managed on another website – to complete their payment. This reduces the PCI DSS burden for merchants. Hosted gateway solutions can either redirect customers to a branded gateway page that appears to be part of the merchant’s website, or to the secure payment gateway’s page. The latter option can reassure customers that their transaction is secure, as they can see the payment is processed by a trusted payment gateway provider.

#2: Non-hosted Payment Gateway

Non-hosted gateways are when online customers can go through the payment process on your website, without leaving. At a minimum, you are going to need an SSL certificate for your website and from the payment gateway to process payments this way, plus an investment in firewalls and other security measures – especially with new data protection legislation coming into force soon.

Before working with a payment gateway, you need to have the following in place:

  • A merchant account from an acquiring bank – Secure Trading are able to offer end-to-end online payments with our own acquiring services as well as payment gateway. We also have a network of trusted global acquirers to ensure our customers can access the right merchant account for their needs.
  • Alternatively a good relationship is needed with your bank, if you want them to extend merchant services (a minimum transaction amount of £10,000 is usually required, plus a further £10,000 bond when opening a new account – more if you are in a high-risk industry).
  • A business plan – sometimes even necessary when an established brand launches a new product/service and needs additional payment and merchant services
  • A website with online, legally enforceable terms of service
  • Management accounts and a profit and loss projection – for at least the next six months if launching a new product/service.

How to select the right payment gateway?

  • Security. Cybercrime, fraud, “friendly” fraud and data theft is on the rise. Don’t take risks with customer payment details, especially with GDPR coming into force in 2018. A secure payment gateway that is Level 1 compliant with the Payment Card Industry Data Security Standard (PCI DSS) is an invaluable ally against rising cyber crime and fraud. It is also worth noting that customers who don’t feel secure when about to make a payment will abort their transaction.
  • Value for money. Value means something different for every customer. For some, it depends on how many transactions – and what they are worth – your payment gateway processes every month. Always ensure you are getting the support and service you expect for the amount you pay.
  • The range of payment options. Has your payment gateway caught up to the range of payment options that some customers now expect (including PayPal, Apple, Android and Samsung Pay); including those who are buying online from overseas – can they pay quickly, easily and using their own currency?
  • Levels of support and service. Are issues resolved quickly? Are they used to dealing with similarly sized organisations? Are other customers happy with the service they are receiving? Check out Service Level Agreements to ensure their terms are aligned with your business needs.

An effective payment gateway will help increase conversion and customer retention. Convenience, speed, and security are key to this, and these can be differentiating factors between different providers.  Your online payment services provider should not just be facilitating payments, but also supporting your business or organisations strategic plans for reaching new markets, growth and exploring new opportunities.

To find out more about our online payment services, speak to one of our payments experts. Call +44 (0)808 301 8281 or email [email protected]

* As well as accepting credit or debit card payments, there are many Alternative Payment Methods (APMs) available that can help increase conversion and streamline the customer journey. Find out more about Alternative Payment Methods here.