Payments gateways have been at the heart of the commercialisation of the web, and therefore a huge factor in the exponential growth and success of the Internet since its inception in 1993/4.
Itomic works in partnership with a wide range of payment gateway service providers in order to be able to match the most appropriate service to each of our client’s needs and budgets.
The two main components of a payment gateway are:
- Security. Financial/sensitive information must be transmitted in an encrypted format such that, in the unlikely event that the information is intercepted, the chances of it being successfully deciphered are miniscule.
- Validation/verification. The payment gateway is responsible for accepting or rejecting a requested transaction based on a variety of factors, most obviously
- The information being supplied is in an acceptable format (e.g. correct amount of digits in the credit card number being supplied)
- The account is active, as opposed to cancelled (e.g. due to fraudulent activity)
- Sufficient funds are available
Debatably, a payment gateway is still a payment gateway even if it doesn’t process transactions in “real time”.
A real time transaction is one where, once a customer commits to making an online payment, the two main components above (1+2) take place while the customer waits, typically lasting a few seconds.
The alternative to a real time transaction is commonly referred to as an “offline” transaction. What this means is that 1 + 2a (above) are carried out in real time, but parts 2b and 2c are not. Instead, the transaction information is supplied to the merchant (the company or person selling the goods and/or services) in a secure (encrypted) fashion for them to process later, e.g. once the order is ready for shipping.
There are pros and cons of real time and offline payment gateway processing. Some business models favour one method other business models lend themselves to the other.
So who are the *actual* providers of these payment gateway services? These are:
- Third party companies who have established and trusting working relationships with one or many financial institutions (e.g. banks and credit card companies)
- The financial institutions themselves (e.g. your bank). Sometimes the payment gateway service of a bank is actually a rebranded or “white label” offering of one of the 3rd party companies.
- “Pseudo” financial institutions like Paypal who can hold funds for you (indefinitely, if you like) and/or transfer them into nominated financial accounts elsewhere on demand.