The key players in online payments

Before we delve deeper into the definition of a payment gateway, we need to identify the key players in online payments. When a customer clicks on the “Pay” button on your website, these are the key players involved in the payment process:

• The merchant: this is you, i.e an online business operating in any vertical (travel, retail, eCommerce, gaming, Forex, etc), offering a product or service to customers.
• The customer: the customer, also called a cardholder, who wants to access the products or services that the merchant is selling, and initiates the transaction.
• The issuing bank: the issuing bank is the customer’s bank that issues the cardholder’s credit or debit card on behalf of the card schemes (Visa, Mastercard).
• The acquirer: also known as the acquiring bank, the acquirer is the financial institution that maintains the merchant’s bank account (known as the merchant's account). The acquiring bank passes the merchant's transactions to the issuing bank to receive payment.

Why do we need a payment gateway?

You may be thinking, why do you need a payment gateway if it’s only a middleman? Before we answer this question, we'll take a step back and highlight that online payment is processed as a card-not-present transaction. The customer's card cannot be physically swiped on a POS terminal, as you would normally do if you processed the payment in a brick-and-mortar shop.

Therefore, you can only rely on the card information that the customer is entering on the payment page. But, how can you be sure that the card the customer is using is their card? In card-not-present transactions, the fraud risk is significantly higher, and this is where a payment gateway does its magic.

What would happen if you take the payment gateway out of the online payment flow? Fraudsters would have easier access to card data you process, exposing your business to fraud and chargebacks. On top of that, fraudsters would also find additional ways to initiate illegitimate transactions, leaving you even more exposed to fraud and damaging your brand reputation.

A payment gateway is the gatekeeper of your customer’s payment data. For online merchants, a payment gateway relays the information from you, the merchant, to the acquirer and the issuing bank using data encryption to keep unwanted threats away from the sensitive card data.

Aside from fraud management, a payment gateway also protects merchants from expired cards, insufficient funds, closed accounts or exceeding credit limits.

How can we help?

Goliveweb has very strong co-operations with card processing companies with very strong anti-fraud methodologies, to which we can introduce you and help you with the paperwork and the onboarding process.