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If someone tries to start an online (e-commerce) business, he or she has to learn the whole procedure and how to choose the right one so that significant financial loss does not occur. There are different kinds of payment gateways available by the service providers such as – Classic merchant account, OR the Modern payment gateway. Now the question is, what exactly does the payment gateway do?

The payment gateway enables the money transaction online, so that the consumers don’t have to literally send the cash via an outdated mode, or go to a brick-and-mortar (shop) to purchase something, if they simply need just a few clicks comfortably at home. Following are the payment gateway functions:

  1. It verifies the customers’ billing details.
  2. It checks whether the customer has enough balance to carry out the transaction.
  3. It approves the requests and allows the owner’s store to grant confirmation number.
  4. It gets the owner paid.

Let’s discuss about everything in detail so that you do not get confused while choosing one, and/or don’t regret after making a decision. Based on your commercial status and needs, this may vary and there is nothing which could be said as the best for everyone.


Types of payment gateways:

  1. Classic (merchant) payment gateway
  2. Modern payment gateway

The Classic payment gateway is the oldest method. The store owners need to apply for (special) merchant (bank) account that would allow direct receipt of all the Credit card payments that are made by the consumers. Previously, it was the only option the store owners had. In this case, a person has to find out the banks that offer this kind of transaction. It takes more time than usual, depending on the organization. Moreover, the site owner should have some level of technical knowledge. The per-transaction fees of Classic is less compared to its Modern counterpart.

The Modern payment allows the consumers and the merchants have one-to-one transaction and there is no third party involved as a mediator. These kinds of gateways can therefore draw the funds from the consumers’ accounts and transmit the same to the merchant’s account directly. PayPal, Stripe, and Simplify Commerce are some of the service providers that will help you achieve this method. Moreover, most of the gateways of this kind send the consumers off-site while doing the transaction and that may make them reluctant towards not proceeding further. Furthermore, it is way costlier than any other kind of payment method.

If you plan to add an online transaction system you will soon learn that you have to pay on a monthly and/or per transaction basis. This means either you are going to pay the payment gateway fees, monthly minimum fees (even if there is no transaction made in a particular month), statement fees, etc. OR pay based on each transaction where you don’t have to spend on a monthly basis. The latter seems more feasible than former for the newbies.

Now, in order to achieve that you may consider third-party payment processors like PayPal and Google Checkout that would allow you add Visa and MasterCard payment. This wouldn’t charge you any recurring monthly fees but just a few percentage of transaction fees. Once you gain a significant number of traffic and the purchases then you may go for the Classic (or Modern) payment gateway, because these support Credit card processing which actually rule the market. Hence, if you believe that you won’t allow this mode of payment even later then you are going to lose your potential converts.