How Does A Payment Gateway Work For Small Businesses?

Payment gateway plays an intermediary role in online payments and transactions.


Finding a payment gateway for your business, especially if you are a small business, depends on several factors, including money consolidation, currency support and proactive customer support. However, the right gateway is the one that makes it easy for your customers to pay for the services/products in a hassle-free manner. However, most businesses find it challenging to decide which gateway to use for their business.

So let’s start with understanding the payment gateway.

What Is A Payment Gateway?

A payment gateway is a trade service offered by a fintech payments application provider that enables the processing of credit for e-commerce businesses, online merchants, bricks and mortar stores, credit cards, etc. Banks also provide the payment gateways to their customers and offer it as a payment service provider for specific financial services. The payment gateway facilitates payment transactions through different channels (for example, a website or a mobile phone) and a front-end market processor or bank.

Why Does A Business Need A Payment Gateway?

While many people wonder why a payment gateway is necessary if it only plays an intermediary role, it is essential to note that online payments are undertaken without the seller actually present to ensure a secure transaction. In e-transactions, the customer’s debit or credit card cannot be physically carried to the seller’s point of sale terminal, as is usually the case when paying at a physical store. Therefore, the business owner can only trust the customer’s card details on behalf of the online gateway. That’s where payment gateways come in.

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Finding a payment gateway for your business, especially if you are a small business, depends on several factors, including money consolidation, currency support and proactive customer support.

Security – A Fintech Priority

Payment gateways ensure that the card used by the customer for payment is actually theirs and valid. With online transactions, the risk of fraud is significantly higher, and this is where the it serves the purpose. When payment gateways aren’t being used, scammers have easy access to processed card information, exposing a business to fraud and billing cancellations. Additionally, scammers can find other ways to initiate illegal transactions, expose a business owner to even greater fraud, and damage brand reputation.

The payment gateways are the administrator of the customer’s payment information. For online merchants, a payment gateway provides information on other merchants, recipients, and issuing banks that use data encryption to prevent unwanted threats from sensitive card data. In addition to managing fraud, a payment gateway also protects merchants from expired cards, insufficient credit, closed accounts, or exceeded credit limits.

Payment Gateways Available In India

RazorPay: It is a payment solution that allows businesses to accept, process, and issue payments. This unicorn fintech has clients such as Nykaa, Hotstar, Grofers, Zoho, Udacity, Mercedes-Benz and others.

PayU Money: It is the largest payment gateway in India guaranteeing lower prices for gateway services. The company does not charge any installation or maintenance costs.

MobiKwik: MobiKwik has gained immense fame in India due to its versatility as it offers solutions for individual users and small businesses in a secured environment.

Stripe: Stripe is a technology company that builds economic infrastructure for the internet. Businesses of every size—from new startups to public companies—use their software to accept payments and manage their businesses online.

Aakash Sharma
Aakash Sharma
Aakash writes on Startup Ecosystem, Policies, Legal and Regulatory aspects of business planning. An alumnus of Delhi University, he is assistant editor at Dutch Uncles.

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