Posted March 21, 2024 by FreedomPay

What Is A Payment Gateway And Why Do I Need One?

EVERY business needs a payment gateway. Whether you’re an e-Commerce, brick and mortar, or hybrid business, a gateway is essential for accepting any digital or electronic payments made online and in-store at the Point of Sale (POS). 

What is a payment gateway?
A payment gateway is a software program that sits between the merchant and their customer. It’s often described as ‘an electronic cash register for the virtual world’. Payment gateways offer a secure pathway that requests and manages transactions to transfer money between a customer and a merchant’s bank account. FreedomPay is the world’s largest independent payment gateway, with many additional capabilities!  

What does a payment gateway do?
A gateway has three essential roles: encryptionauthorization, and settlement.  

First, the gateway encrypts payment data through tokenization for secure transfer between the seller and the buyer. Next, it sends a payment request to the payment processor for authorization via the credit card or financial institution associated with the payment method. This allows the website or POS to move onto confirmation, receipt, or the next action in the sales journey. Finally, it settles the payment, completing the transaction and facilitating the transfer of funds between the buyer and seller. 

Some payment gateways with advanced functionality (such as FreedomPay) power order screening, tax calculation, and geolocation services to manage location-specific actions and feature dashboards for analyzing and reporting transaction status and payment performance.

How does a gateway help my business?
A gateway is great for customers. Why? It helps businesses deliver a seamless checkout experience by enabling secure acceptance within seconds

It benefits merchants, too. The right payment gateway ensures rapid, streamlined, and accurate transaction authorization. If a payment is valid, the value is exchanged. If not, the payment is declined, and your business avoids unnecessary chargeback fees!

What about PCI compliance?
The gateway provider assumes responsibility for the data traveling through the payment chain, reducing merchants’ compliance scope. Merchants never have to deal with sensitive credit card data directly with a PCI-P2PE, GDPR and PSD2-SCA compliant gateway like FreedomPay, relieving them of the associated PCI obligations and transactional security risks

Is a gateway the same thing as a processor?
There are many similarities but also some important differences. The gateway represents a system, whereas the processor is a ‘step’ in the payment chain. Processors and gateways both analyze and transmit transaction data to the relevant issuing parties, but a gateway also supports the settlement process by facilitating the transfer of funds between the buyer and seller.

Payment gateways and aggregators for online payments
To accept online payments, businesses need to have access to a payment gateway and to hold a merchant account, also known as an ‘aggregator’. Aggregators often offer access to a gateway in tandem with their merchant account (such as PayPal). A single gateway can support omnichannel payments, including online, mobile, and in-store POS transactions. A gateway must be compatible with the shopping cart to integrate with the aggregator, so you may need to set up your shopping cart and aggregator before your payment gateway. 

A powerful commerce investment
The right payment gateway is a powerful investment. FreedomPay’s cloud-based, patented secure switching easily connects to selling systems and unifies multiple channels. Its additional commerce capabilities enable at-a-glance reporting via transaction dashboards, and in-depth analysis of detailed consumer behavior insights. These can be used to streamline customer interactions and power a data-driven, personalized sales and loyalty incentivization strategy

The world’s largest independent payment gateway could take your sales operations and customer experience to the Next Level. Drive revenue, expand your legacy tech, and drive consumer satisfaction your way with an unrivalled world class, secure platform. Learn more about FreedomPay’s advanced and adaptive technology platform.