By Blake Ng — 17 Feb 2021
Imagine you were selling a car. Someone offers you $10,000, leaves you a note, and says that if you bring it to the bank, they’ll put the money in your account in 2 days. The buyer then drives off with the car. How secure would you feel about the whole transaction?
Now imagine you had a middleman, who takes the note to the bank, checks that the buyer has enough money in their account, and confirms with the bank that the money will be in your account before allowing the buyer to drive off with the car. The middleman is also a security expert who prevents people from stealing or forging the note on the way to the bank, keeping both you and the buyer’s funds safe.
That’s what a payment gateway does for your business online. It captures your customer’s payment details, encrypts the data so no one can steal it, verifies with the bank to get the all-clear then transfers the funds into your account. And this is all done in 1-2 seconds.
In short, it enables fast and safe payments online.
For this example, we’re going to take a look at how Sally books a kayaking tour with Bob’s Kayaking Tours.
1) The Authorization (Approving the sale)
This process takes 1-2 seconds.
The Settlement (Payment)
This process takes a few days.
Without a payment gateway, you’re likely to get more customers disputing transactions. In most cases, this comes in the form of fraud where:
Imagine a customer’s card details are stolen while they’re transacting with you or a customer is falsely charged because you unknowingly processed a transaction with a stolen card. All of which damages a future customer’s trust in your business.
As internet security continues to grow as a concern and customers are becoming more wary of entering their payment details online, they’ll be less likely to go through and confirm their booking if you don’t have a secure way for them to pay.
Now that you know how payment gateways work and why you need one, see what you need to look out for when comparing fees.