What is a Payment Gateway?
What is a payment gateway and how does it work? A payment gateway is the facilitator of a payment. The gateway works to make payments possible by encrypting, tokenizing and transferring consumer data on to the acquiring bank to be processed. A reputable gateway is essential to ensure the sensitive information consumers entrust to you while paying remains secure throughout the entire payment process.
The second half of a payment gateway’s job is to then notify you, the merchant, on the status of the payment that was submitted. This means providing accurate reporting to your company when payments are accepted or declined.
Gateways and MSPs
Payment gateway providers are not interchangeable with merchant service providers or ACH providers. A payment gateway is the digital tool that facilitates the completion of payments, but they don’t provide the accounts necessary to begin processing those payments.
For this, you require a merchant account, which can be secured through a merchant service provider (MSP) or ACH provider.
Merchants who need help choosing an MSP or getting underwritten should first choose the gateway they prefer with the features they will find most useful. The best payment gateway services can work with multiple service providers, or give advice on what to expect during the process.
How do payment gateways differ?
Not all payment gateways are the same. Each gateway is designed with features to support different types of businesses.
- Ecommerce - ecommerce merchants that sell products online are most likely interested in a shopping cart feature in the gateway they choose.
- Brick and mortar - physical stores will need a gateway that supports point of sale (POS) transactions.
- Manufacturers and suppliers - those making or supplying goods are likely to require electronic invoicing capabilities.
There are many other examples of payment gateway providers and what they may offer based on industry. It’s important to take into account the needs your business has regarding how you collect payments.
Payment Gateway Services for Your Accounts Receivable Business
Typical accounts receivable business pain points
Pain points are the root causes of low revenue, inefficient business processes and other internal issues your company may be facing. Once you are honest about the realities of your pain points, you can begin to look for solutions. Common accounts receivable business pain points include:
- Goods and services before payment - Healthcare, manufacturing and many other business types offer goods or services before collecting payment. This fact puts those operating on an accounts receivable model at a disadvantage. It is expected that customers will pay for what they given, but this doesn’t always happen in a timely manner.
- Low consumer engagement - Consumers that don’t pay their bills on time are also often difficult to engage. Fewer customers than ever are answering the phone and call blocking apps often mislabeled numbers as spam/scam. Along with this, consumers now more than ever expect digital communication and payment options. If these aren’t being offered, you may be losing out on payments.
Gateway features for AR
What is a payment gateway that meets the needs of AR? The best payment gateway for accounts receivable is one with experience with similar clients and industries. The company you choose should understand the difficulties you’re facing and provide tools to solve them.
Paying for a medical procedure or dealing with a forgotten bill that has ended up in collections doesn’t create a strong desire for consumers to pay. It is your responsibility to make sure their payment process is as simple and convenient as possible.
When shopping for a gateway, you should consider any tools that can simplify payments and eliminate the barriers stopping consumers from paying. Look for:
- Ability to pay without extra logins/passwords - Consumers who are asked to create an account with you just to pay a bill are more likely to abandon payment.
- Digital communication features - Offering payment reminders, authorizations and other communication through text and email will engage consumers at much higher rates than phone calls or paper letters. Providing payment links through these channels boosts the likelihood of quick payment even higher.
- Text message, email and chat payments - More consumers than ever are paying bills electronically. Any time you can meet the consumer where they are, you are increasing the chances of a settled bill.
- Recurring payment module - Consumers with larger balances to pay will need the ability to set up recurring payment plans. The gateway should provide AR businesses that option with the ability to quickly and easily get an eSignature on a payment plan agreement in order to satisfy Regulation E. The recurring payment system should be flexible enough to set up a variety of plans based on consumer needs.
Payment Gateway Integration Process
Gateways should also be flexible enough to integrate in a variety of ways – from very simple to complex. Here are some ways you can use a gateway with your ARM/CRM:
- Download CSV/upload into CRM
- Integrate with a simple payment web page (Portal API) integration
- Integrate with transaction API
- Approach your ARM/CRM and ask them to integrate
- Direct integration with your own proprietary software
For more information about PDCflow integration and payment gateway security download our Credit Card Processing and Security Guide.