What is a Payment Gateway?
A payment gateway is a piece of software that digitally links a customer’s bank account to a merchant’s bank account. When a cardholder uses their card to make any purchase, the transaction is processed by software integrated into a point-of-sale (POS) system or card reader.
There is no doubt that payment gateways have greatly improved the convenience of online transactions. But when making an online payment, many customers experience some level of data-related anxiety. This anxiety is because online payment requires you to share sensitive information at the time of checkout. Thus, to transact anxiety-free, it is essential to understand how a payment gateway works and what it does with your data.
With over USD 0.08 B$ in transaction volume, more than 25,000 merchants, across 2000 cities, are trusting Innoviti to help data-proof their transactions to build customer loyalty and trust. Our collaborative approach has helped us to expand and maintain our clientele. To better understand our approach, let us discuss the various aspects of a payment gateway.
Types of payment gateways
There are mainly three types of payment gateways.
Hosted payment gateway
Hosted payment gateway redirects your customers away from your website’s checkout page. The Payment Service Provider (PSP) website is visited by the client after they click the gateway link. Following the purchase process, the user fills out their payment information here before being redirected back to the product website to finish the checkout procedure.
Self-hosted payment gateways
This type of gateway collects the user’s payment information from within the merchant’s terminal. The data gathered is submitted to the payment gateway’s URL when the information is requested. While some gateways require a hash key or a hidden key, others require a specific format for the payment data.
Payment gateways hosted by API
With payment gateways hosted by APIs (application programming interfaces), customers enter their credit or debit card information directly on the merchant’s checkout page. Payments are managed using HTTPS inquiries or APIs.
What Does a Payment Gateway Do with Your Data?
A payment gateway gathers crucial payment data about a company’s customers. Such data must be protected and kept secure. Here are the key points regarding how payment gateways handle data:
A PCI-DSS-compliant encryption system
- The data is not retained in its original form by a payment gateway.
- An international group called the PCI Security Standards Council establishes compliance guidelines for handling customer data collected during online payment transactions.
- The payment gateway must adhere to PCI DSS, the current industry standard for data security, to offer the greatest degree of security.
- The data must be encrypted according to domestic data-security laws to reduce the possibility of data interception.
- Accordingly, it may be assumed that payment gateways never keep sensitive data like CVV, passwords, or pins.
- Name, card, and address-related information are needed only to complete the transaction; they are not kept on file.
Tokenization to protect data from exposure
- Payment gateways tokenize key information in the following way: You enter the interface of a payment gateway with your 16-digit card number. This 16-digit number is swapped out by a single token by the payment gateway. Your original card number is replaced by this “token,” which is a unique string of characters.
- This enables the payment to be processed without disclosing your private information.
- It is tough to deduce the actual card number from a token because they are distributed at random.
- There are two types of tokens: format-preserving and non-format-preserving. While alphanumeric numerals are used for non-format-preserving tokens, format-preserving tokens preserve the appearance of the card number.
- Ensuring that the websites are configured securely is just as crucial as ensuring PCI DSS compliance.
- Most payment gateways employ SSL certification, which encrypts data using Transport Layer Security (TLS). One can confirm such certification by glancing at the URL in the browser; If a website has the HTTPS:// protocol, it is secure.
- Ensuring user data’s integrity is vital for all businesses aspiring to be phygital.
Tools for screening fraud
- Most payment gateways provide the user with fraud screening solutions that could aid in lowering the risk of payment fraud
- The most well-known tools used for this purpose are Address Verification Service, Card Verification Value, and Card Code Value.
- Implementing these solutions may significantly reduce the danger of online payment scams.
Today’s payment APIs are advanced enough that you may create your own shopping experience and extend it to the very edge of the payment process. At the same time, the API provider maintains responsibility for PCI data by safeguarding sensitive credit card fields.
Innoviti Technologies is one such platform. Small and large enterprises can collaborate to create and deploy new, distinctive purchasing tools to draw in and convert their clients. Specialized software for each category, running on payment terminals at the merchant checkout, provides these purchase capabilities.
A collaborative commerce platform, Innoviti uses data analytics to transform straightforward payment processes into effective buying tools that encourage customers to make purchases from your business.