February 1, 2010

Getting Paid with Payment Gateways


Hostway Team

By Bruce Tyson

What good is selling without a way to get paid? A payment gateway is a vital link that enables online and traditional commerce using credit and debit cards. When a customer goes through checkout at a local store, the card swipes through the reader attached to the merchant’s payment gateway, sending a request for payment to the customer’s card issuer. If authorized, the payment transfers from the card to the merchant's account. Without a payment gateway, customers must pay with cash, an option not available at an online store.


When an online merchant sells products, payment needs to be collected just as with a local store. After a customer selects items to buy, a checkout button totals the order and sends the information to the payment gateway. The payment gateway prompts the customer for payment information such as credit card number and expiration date and then notifies the card issuer of the transaction amount. If the money is available, payment authorizes and transfers to the merchant. If the money is not available, the payment gateway requests payment in a different form.

Get a Merchant Account

The first step toward setting up a payment gateway is establishing a merchant account with a payment processor. This account receives payments and pays refunds. The merchant agreement defines the terms of use and how much each transaction will cost.

The risk of online fraud usually means that Internet transactions cost more than a transaction would at a traditional store. Processors such as PayPal or Amazon have no minimum sales volume and are often chosen by small sellers even though their transaction fees are high. Large merchants use a payment processor that offers better rates based on transaction volume. The merchant can work on setting up the online interface once the payment processing account is ready.

Configure the Ecommerce Software

Configure the payment gateway with the merchant’s account information and the payment processor’s server information to enable it with the ecommerce software. The ecommerce software running on the merchant’s Web site is what displays products to the customer. Items the customer wants to purchase go into a virtual shopping cart which sends order information to the payment gateway upon checkout. With just a few settings to type in, commercially available ecommerce packages are ready for business without much effort.


To avoid problems accepting payments, verify the operation of the online store before making it available to customers. Do this by using the test server operated by the payment processor. Also called a sandbox, this server allows merchants to send test transactions for evaluation of the payment gateway before making any real sales. This helps the merchant provide for a good customer experience. After a few successful test transactions, the system is ready to go online.

The payment gateway performs the vital function of processing payments for ecommerce transactions. Without it, a customer cannot pay for a purchase and the merchant cannot collect the payment.

About the Author

Bruce Tyson operated a business-to-business ecommerce system for a nationwide wholesaler for over seven years before opening his own online store at shop2.computerpartsgreenvillesc.com. He is well versed in the setup and configuration of payment gateways for use with a variety of commercial, open source and custom-built applications.

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