What is a payment gateway?

1. A payment gateway is a separate service and acts as an intermediary between the merchants' shopping cart and all the financial networks involved with the transaction, including the customers' credit card issuer and your merchant account. Think of it as a EFTPOS terminal in cyberspace. It checks for validity, encrypts transaction details, ensures they are sent to the correct destination and then decrypts the responses which are sent back to the shopping cart.

This is a seamless process and your customer does not directly interact with the gateway; as data is forwarded to the gateway via your shopping cart and a secure (SSL) connection. The shopping cart is configured via plugins to send information in a format that is acceptable to the particular gateway.

The proper choice of payment gateway is another vital element which will contribute to your success or failure as an online business
 
Since the payment gateway is the secure connection and transmission of the orders through to banking networks, it is independent of the interface (point of sale software or catalog/cart) that you use to transmit the order information through the payment gateway


How will I know when I have an order?
When using a payment gateway system in connection with the cart, you will receive all of your orders via e-mail. As a merchant you will receive 2 e-mail messages, the first is generated by the cart, and supplies you with the necessary information to fulfill the order, such as names, addresses, and items ordered. The second will come from your payment gateway, and will tell you the status of the order approval. You should wait to ship a product until you have received this order status message

What if the customer's payment method is declined?
If you receive a declined message from your gateway regarding an order, you will need to contact the customer and ask for alternative payment. The customer will not receive notification via e-mail of the approval status.

What about the security of E-Mail?
All information pertaining to credit card payment is stripped from all e-mail before being sent out.
 
Is the gateway just html that I copy into my website?

No. The gateway requires that the Merchant integrate their website into the gateway forms or API via CGI, ASP or other scripting languages.

What are the most popular payment gateways ?
Card Service International, Verisign payflow.

Cardservice international includes Linkpoint payment gateway
Payment gateways are necessary for online transactions to provide the secure connection for the transaction to take place. It is the payment gateway that allows you to submit a credit card and within a few seconds be told whether it was declined or accepted. LinkPoint API is one the most sophisticated levels of this service, enabling software companies, commerce service providers (CSPs), Internet service providers (ISPs) or cyber-wise merchants to add secure sockets layer (SSL) payment capabilities to their products, services or custom storefronts. Using the LinkPoint APIs, the Miva storefront product line has developed modules to support a seamless integration with their shopping carts. What this means to you the customer is a simple to configure payment gateway that is both powerful and affordable.

For the merchant who wants to get online fast with limited startup expenses and who currently does not have any form of online merchant account, then Cardservice International (which includes LinkPoint API) is the best choice. Since LinkPoint is already packaged in with the Cardservice International offering, it gives you the best ability to have your online store accepting credit cards quickly and affordably. If you already have your own online merchant account and only need a payment gateway, then VeriSign PayFlow Pro is the way go.

*****
VeriSign Online Payment Processing
VeriSign's Payflow Pro payment service is a flexible API-based solution
that allows sites to support multiple payment instruments including
credit cards, purchase cards, debit cards, electronic checks and ACH
payments (bank-to-bank transfers).

* Processes large numbers of transactions simultaneously
* Simplifies the security and processing of multiple payment
instruments
* Provides back-end connectivity to all leading payment processing
networks
* Ensures maximum security during data transfer through a Secure
Sockets Layer (SSL) connection between your storefront and VeriSign's
servers
Price: Setup fee: $199.00
Price: $39.95 for up to 5,000 transactions/month
*****

Is it easy to use payment gateways ?
You must have a moderate understanding of HTML/CGI/ASP in order to fully exploit the features of the Payment Gateway. Although it is true that most of payment gateway providers provide you with  the  snippets of HTML code that can be copied and pasted directly into a web site and it would "work", it is not likely that all of the specific needs you have with your web site will be met simply by copying and pasting this code

Payment Gateway Issues

As with any other ecommerce element, shop around, compare prices and read the fine print. Here are some of the major points to consider when selecting a payment gateway service.

- If you have already purchased a shopping cart package, ensure that the payment gateway service is compatible. If a service is not listed, contact the shopping cart vendor for clarification. Many vendors would be happy to support other payment gateway services if there is a demand for it.

- If you haven't yet selected a shopping cart, get a list of supported applications from the payment gateway service provider. A payment gateway may offer great pricing, but if the range of shopping carts or storefront software it supports is limited, the whole process of setting up for taking online payments may cost a lot more than you think. I've noticed some gateways only support horribly expensive and restrictive shopping cart software packages and services.

- Ensure the gateway at least offers AVS protection. The Address Verification System (AVS) AVS decreases the incidence of accepting fraudulent transactions by verifying the cardholder's billing address with the card issuer. Using AVS on your transactions may also benefit you by a reduction in fees charged by your Merchant Bank.

- Check to see what other types of transaction protection are offered to you as a merchant. These will probably be 'premium' services, the charges added to the basic servicing fees, but dependent on your products may be absolutely necessary. If you are engaged in the sale of anything that is youth or technology oriented, it's probably a wise move to pay for the extra service as chargeback rates on fraudulent transactions can cost you around US$30 per incident! For a rather disturbing report and some strategies regarding this issue, view:

Payment Gateways

What kinds of payment alternatives exist?

While credit cards are the leading method of payment for online purchases, offering multiple payment alternatives will bring improved convenience to your customers and increased confidence in your online business. The kinds of payment methods you provide will depend on your web site, your customers and your markets. For instance, in some countries, credit cards are not a common way to purchase online. Therefore, it is important to consider different payment alternatives for your international clients.

There are a number of alternative payment methods that exist, including the following:

Person-to-Person (P-to-P)

This transaction method enables payments to be made to an individual’s e-mail address without any need to send cash, cheque or use a credit card or chequing account. If you wanted to pay back a friend, that friend would only need an e-mail account to accept the payment. On the other hand, as a merchant, you require software that accepts P-to-P payments in order to receive funds. For instance, your customer has a P-to-P account, where he or she has deposited a certain amount of funds. The customer buys a product from your site and uses funds from his or her P-to-P account to pay for the purchase. Your web site will provide the customer with an option to pay through this method.

Electronic Cash/Digital Cash

E-cash is money that is converted to an electronic equivalent, and present either on a smart card, or on a consumer’s personal computer. The cash is normally used for making small purchases over the Internet.

Smart Cards

The smart card looks like a credit card, the biggest difference being it holds a chip that enables applications and data to be downloaded. Since it can store and process information, the card has the capacity to collect customer information as well as E-cash.

To use the card, the cardholder needs a PIN. To read the information on the card, a smart card reader is required. The reader is connected to the Internet, and enables the cardholder to transfer information from his or her computer to an online merchant’s site or from a point-of-sale terminal at retail stores. It also enables the card to capture data from other sources, such as the cardholder’s bank account. As a merchant, you require a smart card reader on your site to access payments from customers.

Digital Wallets

A digital wallet enables consumers to store their personal information online such as credit card and shipping details so they can carry their identity with them as they browse between sites.

A digital wallet comes in two forms - client-based or server-based. A client-based wallet requires that consumers download and install software on their computer. They input personal information into the wallet, which is secured and protected locally on their computer’s hard drive. When using a digital wallet, consumers will not be required to fill out order forms on each site they purchase from as the information required is readily available from their hard drive and automatically entered into the order fields of the online site.

A server-based wallet is acquired from a merchant’s site. When consumers complete a merchant’s Web form to make a purchase they are invited to sign up for a free wallet where they provide a username and password. The information they add to the Web form, including credit card number and shipping information, is stored on the merchant’s server or the merchant’s payment processor’s server. When consumers go to the same site to make a purchase in the future, their personal information is easily extracted for the purchase. The servers will have encryption security. As well, since certificates are used to verify the identity of all parties, the merchant is protected against fraud.

E-Cheque

An E-cheque is essentially an electronic version of the paper cheque, except it is created on a computer and processed via the Internet. To issue a cheque, a consumer uses an electronic chequebook issued by his or her bank, which displays all the same fields as a paper cheque. Before it is sent to the merchant, the consumer enters a PIN in addition to other required information and signs the E-cheque with his or her digital signature. The digital signature is stored with a bank so that the E-cheque can be verified as it moves through the payment process.

What types of payment gateways are there?

Payment gateways can be implemented through two methods. As a merchant, you can either house the gateway on your server, which requires installation of software, or you can choose to implement the payment gateway on your payment processing company’s server i.e. financial institution.

Housing the payment gateway on your site requires you to have appropriate security measures in place to encrypt and protect customer information. If you implement a payment gateway separate from the rest of your shopping cart solution, all the components will require configuration to ensure they work properly together, which can require high level technical capabilities. The advantage of housing your own gateway is that customer information can be collected in your database, enabling you to better manage your customers and site.

If a payment processing company houses your payment gateway, then customer information will not be at your easy disposal. As well, since you do not gain access to customers’ credit card information, it is more difficult to track charge backs.

However, since the gateway is out of your hands, problems that occur are the responsibility of the payment gateway provider.