Payment gateway benefits for businesses | Stripe (2024)

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  1. Introduction
  2. What is a payment gateway?
  3. How does a payment gateway work?
  4. Benefits of using a payment gateway
  5. Benefits of Stripe’s payment gateway solution
  6. Get started with Stripe

The global e-commerce market is expected to top US$8 trillion by 2026. To take advantage of this trend, businesses that currently accept customer payments online or plan to in the future should proactively determine how to build and manage their own payments ecosystem. This begins with understanding the key components that power online payments.

A payment gateway is an important component of e-commerce payment processing that provides a flexible, secure and efficient platform for online transactions. Payment gateways offer many benefits, including improved customer experience, increased operational efficiency, bolstered security measures and even scaling and global expansion.

Whether you're an early-stage startup or an established brand in e-commerce, you can benefit from payment gateways. Here's what you need to know.

What's in this article?

  • What is a payment gateway?
  • How does a payment gateway work?
  • Benefits of using a payment gateway
  • Benefits of Stripe’s payment gateway solution

What is a payment gateway?

A payment gateway is an online tool that businesses use to securely process debit or credit card payments, digital wallets and bank transfers from customers. It's part of the network that processes payments for online transactions.

A payment gateway acts like a bridge, connecting a business's website to its payment processing provider. When a customer buys something, the payment gateway securely conveys the payment information from the customer to the payment processor, which then completes the transaction authorisation and settlement process. Payment gateways are where online transactions begin and where their conclusion is communicated to customers.

How does a payment gateway work?

A payment gateway acts as an intermediary between the business's website and the bank that issued the customer's credit card, also called the issuing bank or just issuer. This is a complex, multi-step process that ensures that the transaction is secure, accurate and efficient. Payment gateways play an important role in transferring funds and protecting sensitive customer information.

Here’s an overview of how that works:

  1. The process begins with the encryption of data. When a customer places an order on a website, they enter their credit card information, which the web browser immediately encrypts. This encrypted data is then sent to the vendor's web server. The use of SSL (Secure Socket Layer) encryption ensures that the data remains secure during this step.

  2. Once the data has been encrypted and sent, the secure order information is transmitted to the payment gateway. The payment gateway then sends this encrypted data via a secure SSL connection to the business's processor.

  3. The transaction processing stage follows. The business's payment processor forwards the transaction data to the appropriate credit card network. This network then routes the data to the bank that issued the customer's credit card.

  4. In the fourth step, the payment processor initiates an authorisation request. The issuing bank receives the authorisation request and sends the processor a response code. This code may indicate approval for the transaction or a decline, due to reasons such as insufficient funds or a lost or stolen card.

  5. The final step in the process is order fulfilment. The payment gateway receives confirmation from the customer's bank or credit card company that the payment has been approved. The payment gateway sends this response to the business's interface, usually their e-commerce platform or website. This is the moment the payment is officially considered processed. After this, the business can then proceed with fulfilling the order.

While this might seem like a lot of steps, this process occurs almost instantaneously. A payment gateway is not just about facilitating a transaction, it's also about maintaining the integrity and security of sensitive financial information. And on top of this basic functionality, modern payment gateway solutions often provide additional features, such as screening orders for potential fraud and calculating tax in real time.

Benefits of using a payment gateway

Payment gateways come with an array of benefits that can help businesses increase operational efficiency and improve customer experience. Here are the main advantages:

  • Enhanced customer experience
    Modern customers expect intuitive, flexible and hassle-free shopping experiences, and a payment gateway caters to these expectations. It allows customers to make payments anytime, anywhere and from any device. This level of convenience not only improves the customer's experience but also increases customer lifetime value (LTV), which is the total net profit that a company makes from any given customer. A positive payment experience can foster customer loyalty, leading to repeat purchases and long-term customer relationships.

  • Improved security
    Payment gateways implement stringent security measures to protect sensitive customer information. They use high-level encryption technologies and secure protocols to safeguard data such as credit card numbers, ensuring that they are safe from possible fraud and data breaches. Additionally, many payment gateways employ sophisticated fraud detection tools that screen transactions for suspicious activity. These comprehensive security measures help build customer trust and confidence in the payment process.

  • Quicker processing
    With payment gateways, automated processes handle transactions faster than manual processing. This speed provides a swift checkout experience for customers and accelerates the sales cycle for businesses, improving cash flow.

  • Global expansion
    For businesses that are expanding their reach globally, a payment gateway is an invaluable tool. Many payment gateways support multiple currencies, enabling businesses to cater to customers in various countries. This capability is particularly beneficial for businesses selling products or services internationally, as it allows them to accept payments in the local currency of their customers. This can enhance the customer's shopping experience and contribute significantly to a business's global expansion efforts.

Payment gateways not only enable online transactions but also improve overall business operations. By providing a more secure and efficient transaction process, enhancing customer experience and facilitating global reach, payment gateways are an important component of digital commerce.

Benefits of Stripe’s payment gateway solution

Stripe offers an all-in-one payment gateway and payment processing solution that caters to the varying needs of businesses, from startups to large enterprises, and is optimised for growth at every stage. Let's look at some of the key benefits in more detail:

  • Comprehensive payment systems and support
    The most notable distinction between Stripe’s solutions and traditional payment systems is its comprehensive approach. Instead of piecing together separate payment gateways and processing components from various providers, businesses using Stripe have access to a system of dynamic payment processing solutions that are engineered to work together – both on the front end and back end. This reduces startup costs, time spent on implementation and maintenance, and operational friction.

  • Easy integration
    Stripe's extensive documentation and libraries for various programming languages allow businesses to easily integrate this payment gateway into their existing systems, regardless of the technology stack they use.

  • International payments
    Stripe supports over 135 currencies and can automatically handle foreign currency conversions. This feature enables global business expansion and makes it convenient for businesses to accept international payments and receive payouts in their preferred currency.

  • Advanced security
    Stripe adheres to the stringent security standards of PCI DSS (Payment Card Industry Data Security Standard), ensuring the protection of sensitive payment data. And Stripe Radar uses machine learning for world-class fraud detection and prevention, providing an additional layer of security for businesses and their customers on every channel.

  • Customisable checkout experience
    With Stripe, businesses can customise their checkout process, creating a bespoke branded experience for customers while providing a payment gateway that is easy to set up and use.

  • Unified commerce for seamless service
    The majority of abandoned baskets are attributed to a burdensome or overly frictional checkout experience. Stripe’s payment gateway and payment processing functionality exist within a powerful suite of payment solutions that is designed to provide a unified commerce experience. This saves businesses time and resources, reduces inefficiencies and improves customer experiences across channels.

For more information about getting started with Stripe, read more here.

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Access a complete payments platform with simple, pay-as-you-go pricing, or contact us to design a custom package specifically for your business.

Payment gateway benefits for businesses | Stripe (2024)

FAQs

Payment gateway benefits for businesses | Stripe? ›

Expanded customer reach: Merchant payment gateways break down geographical barriers, allowing businesses to tap into a global customer base. With the ability to accept payments online, companies can reach customers far and wide, increasing their market reach.

Why do merchants use payment gateways? ›

Expanded customer reach: Merchant payment gateways break down geographical barriers, allowing businesses to tap into a global customer base. With the ability to accept payments online, companies can reach customers far and wide, increasing their market reach.

What are the advantages and limitation of payment gateway? ›

Payment gateways typically support multiple payment methods, including payment cards and ewallets. Payment gateways also provide fraud prevention features such as encryption as well as ensuring compliance with industry standards. In particular, they will ensure PCI compliance.

What is the impact of payment gateway? ›

Improved payment experience

Having a payment gateway means your customers can make purchases anytime and anywhere. Alongside this, customers can also choose to securely save their payment information for future purchases from a merchant via tokenisation.

Why build a payment gateway? ›

Create payment gateway pros:

Lower monthly and per-transaction fees over time. Full control over payment processing. The ability to create your own custom features. You can sell your payment gateway services to other companies for additional revenue.

What is the strategic use of payment gateway? ›

Payment gateways encrypt sensitive financial information to ensure that it is transmitted securely and cannot be intercepted by cybercriminals. Payment gateways offer a variety of features, including fraud detection, chargeback management, and recurring billing.

What is the most important factor in choosing a payment gateway? ›

The most important thing you need to consider while choosing a payment gateway is the total cost that you'll incur. The costs involved in using payment gateway comes in three types: set-up fee, monthly fee, and transaction fee.

What is the value of payment gateway? ›

Ø The payment gateway market size in India is expected at US$1.21 billion in 2024 to US$2.66 billion by 2029, growing at a CAGR of 17.16% during the forecast period (2024-2029).

What is the difference between a payment portal and a gateway? ›

A traditional gateway helps merchants to accept payments online for products and services. With a payment portal, financial information is most often: Entered when making a purchase on an eCommerce website.

What is the difference between payment platform and payment gateway? ›

A payment gateway is a network that collects, verifies and performs fraud checks on customer's credit card information before sending it to the payment processor. A payment processor is a service that routes a customer's credit card information between the customer's bank and the merchant bank.

Are payment gateways profitable? ›

The business model of a payment gateway is based on the percentage and/or fixed fee that the merchant pays from each transaction. The amount of charge depends on the transaction mode. Therefore, businesses that have ongoing transaction flow generate constant profits for the payment gateway.

What is the future of payment gateway? ›

Therefore, the future of payment gateways lies in finding algorithms and protocols that provide enhanced security and user-friendliness. Key takeaways of Security in Payment Processor: Security is of utmost importance while doing digital or e-commerce transactions.

What are the limitations of payment gateway? ›

One of the primary limitations of payment gateways is transaction speed. While advancements in technology have significantly improved transaction times, delays can still occur due to various factors, including network issues and the need for multiple verification steps.

How can I improve my payment gateway? ›

Developing the back end of a custom payment gateway, including integration APIs. Developing a customer-facing checkout page and admin interface to monitor the payment gateway performance. Implementing a secure database to store the sensitive data provided by customers.

Who is responsible for payment gateway? ›

Acquirer processor — technologic partner of the acquiring bank, usually responsible for the payment gateway and POS processing.

How long does it take to build a payment gateway? ›

Building a payment gateway is a complex task that involves several critical aspects such as security, compliance, and seamless integration with financial institutions and payment networks. A simple payment gateway with basic functionality and limited payment options can take a few months to develop and deploy.

What is the difference between a merchant and a payment gateway? ›

The merchant account verifies the payment information, processes the transaction, and transfers the funds from the customer's bank to the business's bank. The payment gateway sends a confirmation back to the business's website or point-of-sale system, allowing the customer to complete their purchase.

What is the difference between a payment gateway and a merchant? ›

In fact, the two serve totally different functions: a payment gateway facilitates online transactions and allows you to process them, while a merchant account is a holding account where those payments first land before being deposited into your regular bank account.

What is the difference between a payment gateway and a merchant account? ›

While a payment gateway is a consumer interface allowing for the collection of card data, a merchant account enables businesses to receive the funds from these card transactions. Without both, a business cannot offer card payment options to its customers.

Why do merchants prefer PayPal? ›

PayPal is an alternative way for businesses to accept credit cards without needing to get a merchant account. Essentially, individual merchants can use a subaccount of the PayPal master merchant account to accept credit cards.

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