What is a Payment Gateway? Choosing the Best Option for Accounts Receivable

What is a Payment Gateway? Choosing the Best Option for Accounts Receivable

Last updated December 2022

Running your accounts receivable business or team takes planning, organization, and the right tools. Along with the Accounts Receivable (AR) software organizations use to manage accounts, you need a payment gateway solution designed for your industry. What is a payment gateway and how do you choose the right one for accounts receivable?

Payment Gateway Definition

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 onto the acquiring bank to be processed. A secure payment gateway is essential to ensure sensitive information remains secure throughout the entire payment process.

The second half of a payment gateway’s job is to notify merchants about the status of a submitted payment. This means providing accurate reporting to your company when payments are accepted or declined.

Credit Card Authorization Process

Credit Card Authorization Process

Gateways and Merchant Service Providers (MSP)

Payment gateway providers are not interchangeable with merchant service providers or ACH providers. A payment gateway service is a digital tool that facilitates the completion of payments. They don’t provide the merchant accounts necessary to begin processing credit card payments and ACH payments.

For this, you need 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 payment processing gateway they prefer with the features they will find most useful. The best payment gateway services can work with multiple merchant service providers and give advice on what to expect during the merchant underwriting and onboarding process.

Payment Processing Software Merchant Onboarding: What to Expect

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. Take your unique business needs (regarding how you collect payments) into account when making your choice.

What is a Payment Gateway? Payment Gateway Definition

Which Payment Gateway to Use for Your Accounts Receivable Business?

After understanding the basics of what a payment gateway does, your next step is to identify your company’s specific issues and needs. Then you can shop for an online payment gateway with features designed to solve these problems.

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 puts companies operating on an accounts receivable model at a disadvantage. It is expected that customers will pay for what they are given but this doesn’t always happen in a timely manner.

  • Low consumer engagement - Consumers that don’t pay their bills on time are often difficult to engage. Fewer customers than ever are answering the phone and call blocking apps can mislabel numbers as spam/scam. Along with this, consumers simply expect digital communication and payment options. If these aren’t being offered, you’ll lose out on payments.

Gateway features for AR

What is a payment gateway provider that meets the needs of accounts receivable teams?

The best payment gateway for accounts receivable should be experienced working with similar clients and industries to your own. The company you choose should understand the difficulties your business faces 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 experience is as simple and convenient as possible.

When shopping for a credit card or ACH payment gateway, you should consider any tools that can simplify payments and eliminate the barriers that stop consumers from paying. Look for:

  • Ability to pay without extra logins/passwords - Consumers who are asked to create an account 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. Email or SMS payment links will encourage faster payments.

  • 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 get an esignature on a payment plan agreement to satisfy Regulation E compliance. The recurring payment system should be flexible enough to set up plans based on consumer needs and allow consumers to set up their own payment plans.
PDCflow Payment Gateway Recurring Payments

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 account receivable management (ARM) software or your customer relationship management (CRM) software:

  • Download CSV/upload into CRM

  • Integrate with a simple payment web page

  • Integrate with open APIs

  • Approach your ARM/CRM vendor and ask them to integrate

  • Direct integration with your own proprietary software

PDCflow's Payment Gateway

PDCflow payment processing software acts as a payment gateway and can streamline your collection process through modern digital channels. We offer:

  • Electronic signature capture for payment authorizations
  • Self-serve payment portals
  • The ability to send digital signature and/or payment requests through email and SMS
  • Recurring payment schedules (through your employee’s help or the self-service payment portal)

We also emphasize security and ease-of-use within our product design, so you can ensure payment data stays safe and your monitoring and reconciliation are as easy as possible. Here’s how:

  • Robust payment status reporting to show when a payment request was sent, opened and completed or if the payment failed
  • Credit card and ACH processing through a variety of MSP partners
  • Integrations into ARM or CRM software through one of our select vendor partnerships or directly with your current products with our open APIs

For more information on how PDCflow’s software can help you improve your payment communication workflows, speak with a PDCflow payments expert today.

Speak with a PDCflow payments expert:

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Hannah Huerta - PDCflow Marketing Specialist
Hannah Huerta, Marketing Specialist

Hannah Huerta is a Marketing Specialist at PDCflow. She creates content for the accounts receivable and payment industry.

LinkedIn - Hannah Huerta

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