A payment gateway helps you to facilitates the payment transaction by the transfer of information between a payment portal and the end processor or acquiring bank. It approves charge card or direct installments preparing for e-organization, online retailers, blocks and clicks, customary blocks, etc. While choosing a payment gateway in India there are many things you need to keep in mind. Such as security, fees, commissions, support, and many more which will be explained in this article. By reading this article you will know everything about how to select a payment gateway for small businesses in India. Such as advantages and disadvantages, types, and the working process of the payment gateway. And additionally, you will get proper knowledge about tips to select the best payment gateway and what are the requirements to open a payment gateway.
What is the Payment Gateway?
A payment gateway is a software application for small and big business, that payment service providers use to process payments for online purchases originating on merchant websites. It acts as an interface between the merchant websites and payment processing bank known as acquiring bank. In simple words, if you want to receive payment from customers through debit card, credit card, net banking, UPI, etc. You require a payment gateway. So the payment gateway is payment solution service provider companies, which provide these services to you. For example, Paytm is the payment solution service provider company.
Working Process of Payment Gateway
A payment gateway is an eCommerce service that’s used to approve and process credit card and debit payments for online business. Mention below points are step by step working of the payment gateway and will help you to choose a payment gateway India.
- When a customer buys a product and makes the payment.
- E-Commerce platform securely passes the sensitive information to the payment gateway.
- The payment gateway encrypts the sensitive details of the customer.
- The merchant acquiring bank receives the information securely.
- The processor sends an approved or declined response to the payment gateway.
- The payment gateway will again send the response to the e-commerce websites.
- Microsoft dynamics receive and apply payment information.
- And then the e-commerce website will tell the customer that the transaction is successful.
Merchant Account
What is Merchant Account
A dealer account is a certain type of deposit account. It provides a connection between the merchant, payment provider, and the acquiring bank. The acquiring bank receives a request with each patch through a payment gateway. Then the acquiring bank sends the request through the relevant card scheme, back to the issuing bank for authorization. When authorized the merchant can deliver. This is a very important factor to choose a payment gateway in India.
Why do need a Merchant Account?
Before selecting payment gateway you need a merchant account because it enables you to legally accept and process an online payment, through all online methods. It provides a safe payment option to the customers, protects sensitive data. And additionally, prevent fraudulent transactions and chargebacks.
Advantages and Disadvantages of Payment Gateway
Mention below the advantages and disadvantages of payment gateway will help you to understand various points. Such as, how to select a payment gateway for small business in India and tips to choose payment gateway in India for small business.
Advantages
- A payment gateway is the most common way for the merchant to connect to the payment system.
- Gateway transaction fees are very small compare to the advantages there are for, in helping the merchant. Such as connect to the acquirer, manage their business, and control the risk associated with accepting online payment.
- A good payment gateway will provide a customer with many additional features mention below.
Disadvantages
- Fear to lose access to sensitive information. As, the payment gateway get access to the customer details such as credit or debit card details, bank account number, and passwords.
- As the payment gateway is basically a software. Many technical issues can occur such as customers are unable to do online payment or the merchant can lose access to the payment gateway etc.
- It can take months to solve the above technical issue.
- Fear of facing fraud while doing online payment.
Types of Payment Gateway
Hosted Payment Gateway
The merchant provides the payment service provider link on its website checkout page in the hosted payment gateway. So, when the user clicks on the given link, he/she will be redirected to the online payment page. So, the hosted payment gateway takes the customer off of your website to complete the payment transaction. After completing the transaction the customer gets redirected back to the merchant website. Therefore this type of payment gateway is ok for the beginners. Because the customer has to go to another website to complete the transaction. Due to which the customers feel insecure about your website. So, if you have a business on a large scale, then prefer a self-hosted payment gateway.
Self Hosted Payment Gateway
So, the hosted payment takes the customer off of your site to complete the transaction. However, in a self-hosted, the customer stays on your website the entire time. So the customer does not redirect to the other website, they stay on your website to complete the transaction. It is more professional than the hosted payment gateway. As the customer doesn’t get redirected to another website to complete the transaction. In this payment gateway, you will host everything on your website.
API Hosted Payment Gateway
This type of payment gateway is similar to the self-hosted payment gateway. But in this type of payment gateway customers can only pay with a credit card or debit card. The customer can directly pay, by putting their card details on the merchant checkout page. And the payment is prepared using API.
Local Bank Integration
In this type of payment gateway, the merchant will provide the acquiring bank link on its checkout page. When the customer will click on the given link, they get redirected to the bank payment gateway website. There the customer will fill the required payment details. And after the transaction is completed the customer will again be redirected back to the merchant website.
Tips to Choose Payment Gateway
Undoubtedly, choosing the proper payment gateway is not at all easy. One has to check for so many aspects regarding, especially when there are so many great options available. So the questions arise that how to decide which one is the right option? Well, here we are going to list out the points one can consider for choosing the payment gateway in India.
Types of Cards Allowed
Some most commonly used cards like Visa, MasterCard, and Rupay. Check whether all of these card types are accepted by your payment gateway. However, if you are a business owner and your customers usually pay you using other card types, such as a debit card, you must check that your payment gateway support that card.
Holding Time Taken
Usually, payments approved almost immediately, but the money may be held for a few days before it is settled to your account especially while you are using an online payment processor. And the holding time can vary from 1-7 days depending on the payment service provider. So check for the holding time of the payment gateway before choosing so at least you can be aware.
Security
Since you are storing sensitive financial information, the security factor is high. Remember that different payment gateway adheres to different security standards. Make sure that the selected payment gateway encrypts sensitive customer details, to ensure the information is securely passed between the merchant, customer, and acquiring bank.
Multiple Payments Options
Check whether the payment gateway is giving multiple payment options or not. Some most commonly used options like a credit card, debit card, UPI, net banking. Make sure that the customers can process the online payment with the multiple options mention above.
Setup Fees or Transaction Charge
The payment gateway will take charges from you in two ways. Some payment gateway will charge you the setup fees which is nearly around 5000 Rs or 90 USD. Which is generally charge each year. But the transaction charges are less in this type of payment gateway which is around 1% to 2%.
Some payments will not charge any setup fees from you. But the transaction fees will be a little higher, which is around 5% to 4%. As you are starting your new business you may not like to pay initial setup fees. So this option will be good for you.
Simple and Short Payment Process
While taking a payment gateway check the whole payment process at your end. Check the number of steps taken to complete the whole online transaction process. If you are asking for too much information about customers while online transactions, it is possible that the customer will leave your website or cancel the order.
Additional Features
A good payment gateway will always provides some additional features such as
- Multiple Language options – Customers can do online transactions with their native language.
- Fast Payments – Customers can click a link given by the merchant, within their invoice and be redirected straight to the payment site.
- Invoice Facility – Customers will visit a website, enter their invoice code, and pay their invoice online.
- Business Analysis – Some payment gateway will also provide business analysis options. In which they analyze your number of sales, and give you insight on how to grow your business.
Customers Support
Check the customer service before selecting the payment gateway. Additionally, take the opinion of the person who is already using the payment gateway about customer service. If any technical glitches occur o your website, in how many days they will resolve the issue.
Multiple Currency Options
If your business has foreign clients. It is advisable to open a payment gateway that will allow the foreign currency transaction. This will help you to grow your business in foreign and make your foreign transaction easy and fast.
Documents Require to Open Payment Gateway
- PAN card copy of either the individual, firm or company, proprietor
- Proper relevant certificates like service tax, tin or MSME
- You also required legal agreement on terms and condition
- Additionally, cancel cheque or bank details
FAQ Regarding Tips to Choose Payment Gateway
Companies like CC Avenue, Instamojo, Citrus, Paytm, Mobikwik, Razorpay, and Payumoney are the best payment gateway companies in India.
Mostly setup fees are null. But, they charge transaction fees on your every transaction. Which is around 1.5% to 2%?
If you don’t know to code, either you can use the payment button or you can pay via invoice, SMS, or Email.
You can also pay via direct links or their store links.
Additionally, you can also integrate their API on your checkout page.
Editor’s Note | Tips to Choose Payment Gateway
As you know that every sector in the world is affected by the COVID-19 pandemic. So, let’s talk about the effect of COVID-19 on payment gateway in India and tips to choose payment gateway in India. Due to social distancing, lockdown and less physical contact more and more consumers are shifting towards online shopping to buy products. Many consumer were buying online products for the first time. Due to all these reasons, the importance of payment gateway in e-commerce websites will increase. Therefore, the merchant must be prepared to constantly adjust the fraud control. Additionally, one problem of the merchant will be sourcing supplies, given the widespread factory closing in china. Where many online retailers buy their merchandise.
