Payment Gateways: The future of e-commerce

June 18, 2021

With the internet, the way we shop changed. Now there are stores online from where we can purchase anything we want, let it be a product or a service (like our software development services, for example) by just doing click.

This “new” tendency of shopping and buying online is known as e-commerce, and it is, a huge way, possible thangs to custom software development solutions that companies like us provide to business or companies owners.

We have talked about the benefits of custom software development before, here. A blog we recommend you check out before you continue with this reading, since we will be talking specifically about payments gateways, an online service that can be done through custom software development.

How Payment Gateways changed the e-commerce world

The whole essence of e-commerce is being able to purchase something from the internet, doing everything directly from your computer or mobile device. From picking what you want to paying for it, everything is done through an online site.

Payment gateways are the way business owners allow regular customers to pay for their products or services. It is the service that makes online purchase possible in the first place.

Without custom software development, ecommerce owners wouldn’t be able to get a software solution such as a payment gateway that suits their business and what they are aiming for.

Not only can you implement a payment gateway service, but you can but you can request any ecommerce development services you might need in order to set up your online business the best way possible.

What are payment Gateways exactly?

The term “payment gateway” is extremely common in the e-commerce world, as it is a service that helps to make online shopping even possible, just like we previously mentioned.

A Payment Gateway is a merchant service that is usually provided by an e-commerce platform or application that allows payment processes to successfully go through at any moment, whenever a client wants to purchase something.

It is this service the one that facilitates a payment transaction by the transfer of information between a payment portal (such as a website, mobile phone or interactive voice response service) and the front end processor or acquiring bank.

In other words, a payment gateway is an e-commerce service that acts like a breach between your business and the financial platform, a breach that allows customers to perform a complex transaction, even if they cannot see it themselves.

How do payment gateways work?

The way payment gateways work is actually simple. Payment gateways perform three main task: They deliver the information, wait for a response from the bank, and deliver the response to the customer or buyer. All within just a couple of seconds, and without the customer noticing the operation that is happening.

Let’s put this process into context for a moment, shall we?

Imagine you are a customer buying for a pair of shoes on an online store. You liked one particular pair, you put it on your shopping cart, go to checkout and select a payment method. Once you do select a payment method, the platform instantly asks you for your credit card information (assuming you chose this method, of course). Once you enter this information is when the payment gateway’s job actually begins.

You see, the system takes away your information and encrypts this data, sending it directly to the acquiring bank, performing so the very first step to begin the transaction.

Once this is done, the financial platform on the other side, meaning your bank, will take the transaction request and run authorization required to release the money.

Once the bank has determined whether or not the transaction can go through, the getaway will once again take over the whole process, get the reply from the bank and deliver it to the customer so they can know their payment was successful.

What are payments gateways for?

According to a study made by statista, 42% of global online shoppers prefer paying with credit cards, meanwhile an outstanding 39% would rather pay via electronic payment, such as PayPal, for example.

When you look at the numbers, and realize over 2,5 billion people in the world are not currently using formal banking platforms to process their payments, you realize the importance of payment gateways, since it offers an online solutions to everyone of them.

Basically, payments gateways are used as the breach to make online payments possible. Whether it is through a self hosted gateway, through API’s or through an external payment gateway, the main point of this e-commerce service is to set up a payment method that works both for the e-commerce owner and the client on the other side of the screen.

To wrap this up, payment gateways are one of the most (if not the most) important services an ecommerce solution should offer, and as anything regarding your online business, you should look for a custom software development solution that can help you implement the type of gateway you need.

If you want to continue learning about this particular topic, we recommend you reading our case study about Payment Gateways, where we give you even more useful information about this service and compare the top payment gateways on the market.