Why choosing a secure payment gateway is important

The UK is steadily heading in the direction of cashless payments. When it comes to payments made online or at brick-and-mortar stores, the need for a secure payment gateway has never been so crucial. Merchants who run UK businesses and want to accept payments need to cater to their customers’ payment expectations to remain competitive.

However, choosing the most secure payment gateway can seem challenging. That is because numerous factors exist, including multiple payment gateway providers. Moreover, each offers a portfolio of functionalities with subtle and not-so-subtle differences.

With this in mind, merchants need to educate themselves. It means understanding why selecting the right secure payment gateway is crucial for your business’s longevity and your continued success.

That’s why this article covers what a secure payment gateway means in the context of online merchants. It also explores the different types of solutions available, why it is crucial to consider security and ways in which the necessary security features can be assured.

Keep reading to discover more.

What does a secure payment gateway mean?

Secure payment gateways enable merchants with physical stores and online ecommerce stores to accept payments from their customers. In particular, this payment acceptance refers to merchants who accept card payments.

At physical, brick-and-mortar stores, merchants can use secure payment gateways to accept different cards and payments made from digital wallets. It is done through a point of sale (POS) device that use near field communication (NFC) technology, via email or phone. It is also becoming increasingly possible to accept payments using QR codes.

On the other hand, ecommerce payment gateway solutions are specifically created with online merchants in mind, enabling them to accept online payments. These “checkout portals” are used by customers to enter their credit card information or credentials when they purchase products or services online.

It is irrespective of whether they are one-off or recurring payments or international payments made by international customers. Through secure payment gateways, often likened to an online cash register, payment information remains safe and away from the hands and eyes of malicious actors.

However, online stores that use online payment gateway solutions must focus on creating a safe and secure payment environment for their customers to:

• Prevent misuse of cardholder data;
• Ensure fraud protection;
• Minimise instances of cybersecurity-related issues;
• Reduce the challenges associated with paying a chargeback fee; 
• Other vital security factors.

With so many potential risks in accepting online payments, protecting your business as fully as possible is necessary.

How does a secure payment gateway work?

Most payment gateway solutions for ecommerce businesses operate under the same principle of collection-transfer-authorisation.

Let’s explore what each one means in the context of accepting credit card payments online:

• Collection: The first step is the collection of your customer’s card details. It is done when they are ready to buy and proceed to checkout on your website. They are then prompted to enter their credit card details, following which two scenarios are possible.
  
  On the one hand, the chosen payment gateway provider will provide a separate page. On the other hand, the checkout page will be seamlessly integrated into your site so that your customer does not need to navigate away from your ecommerce store. Once the card details have been entered, they will move on to the next stage: transfer.

• Transfer: During this step, the payment gateway service will transfer your customer’s card details to the merchant’s payment processor, also known as an acquirer, acquiring bank or merchant bank.

• Authorisation: A detailed process of “communication” begins to take place as the customer’s bank (issuer) and the card network (Visa, Mastercard, etc.) your customer’s card is associated with are contacted to determine the availability of funds for the payment.
  
  Once the fund availability is confirmed, the transaction is authorised, and a message is sent back to the payment gateway. Here, the merchant and the customer are informed that the sales transaction and payment have succeeded.

Types of secure payment solutions

There are several ways in which merchants can provide their clientele with a secure payment solution. Often, the choice is made based on each individual business’ unique needs, the availability of resources, and custom requirements.

In particular, the types of payment solutions include the following:

• On-site: In this scenario, the merchant processes payments and manages the checkout through their own website’s server. As such, it’s often called a self-hosted solution.
  
  A major advantage of this solution is that it enables business owners to seamlessly handle large volumes of payments. However, it can be highly costly and time-consuming to implement by yourself. That is why it is a solution that is well-suited to large businesses.
  
• On-site and off-site: When you use this type of combined payment processing, the checkout page appears on the merchant’s website. However, the payment is processed at the gateway’s back end. Offering a greater level of security it does decrease a merchant’s level of control over the customer journey, though.
  
• Off-site: Also known as hosted types of payment solutions, in such cases, the customer purchases on your website, and their payment information is sent to the payment provider’s servers for processing.
  
• Redirect: A redirect-gateway is a convenient option for merchants. However, they add a further step to the customer’s payment journey because they are taken to a second site, which guides the customer to a payment processor to process the transaction.
  
  Because of this additional step, some customers may be discouraged from making a purchase from your online business. On the other hand, small businesses can benefit from this gateway type by incorporating the convenience and security of a larger platform. 

Why are secure payment gateways crucial?

Offering security for your customers when they pay online is a must. It’s essential for your business’s long-term success and growth. It is also essential for building customer trust and loyalty in your brand as you strive to improve their shopping experience.

In addition to these reasons, you should also bear in mind that a secure payment gateway is crucial for the following.

1. Protecting sensitive customer data

Customer data from credit or debit cards is considered sensitive payment information because it contains access to a customer’s money held in their bank account. Such payment data must be protected to prevent and minimise instances of security breaches, fraud and compliance violations.

For example, the European Union’s (EU’s) General Data Protection Regulation (GDPR) states that a breach or theft of cardholder data can have severe penalties. These can go as high as €20 million or 4% of annual global turnover, whichever is greater.

2. Compliance with industry regulations

The right payment gateway provider will also be obsessive about their ability to ensure compliance with industry regulations. The Payment Card Industry Data Security Standard (PCI DSS) is among the most important. That is critical because the absence of PCI compliance can lead to fines for companies in breach of the standard between $5,000–$100,000 per month.

What PCI DSS aims to do is offer a standardised approach to secure and rigorous transaction processes and at the same time, create a smooth customer experience.

PCI compliance is essential to avoid these hefty penalties and improve online businesses’ reputation with payment brands. It fosters customer trust while strengthening your systems to prevent data breaches and credit card fraud.

PCI compliance is so crucial for online businesses both in the UK and abroad because it is so stringent. For example, it has 12 key requirements, each of which is broken down into 78 base requirements. Furthermore, it has 400 base procedures.

It is important to note that not all of them apply to all businesses. For example, companies of different sizes must adhere to various compliance levels, often classified on a four-level scale based on the number of transactions processed over a year.

In short, the 12 key requirements of PCI DSS compliance, according to the PCI DSS Quick Reference Guide, are:

1. Install and maintain a firewall configuration to protect cardholder data.
2. Do not use vendor-supplied defaults for system passwords and other security parameters.
3. Protect stored cardholder data.
4. Encrypt transmission of cardholder data across open, public networks.
5. Use and regularly update anti-virus software of programs.
6. Develop and maintain secure systems and applications.
7. Restrict access to cardholder data by business’ need to know.
8. Assign a unique ID to each person with computer access.
9. Restrict physical access to cardholder data.
10. Track and monitor all access to network resources and cardholder data.
11. Regularly test security systems and processes.
12. Maintain a policy that addresses information security for all personnel.

With these requirements in mind, all online merchants (irrespective of the number of transactions they process annually) must invest in a payment processor. This party should offer credit card processing services and manage transaction history and credit card data while being fully compliant with PCI DSS.

3. Reducing the risk of chargebacks and disputes

Chargebacks and disputes are a significant challenge for online merchants to navigate. They arise when a customer seeks to recover a payment made to a merchant not from the merchant themselves but from their issuing bank.

It differs from a refund. The merchant returns the funds for the purchase made directly to the customer. If there is a chargeback, the customer’s issuing bank recoups the payment from the merchant’s acquirer and restores the funds to the customer.

That necessarily comes with hefty fees for the merchant. That is why the best payment gateway will strive to offer such high security and compliance standards that chargebacks are kept to a minimum.

4. A wide range of secure payment options

Another important reason to implement the right payment processing solution is that it can allow your business to never miss a payment. You can offer different payment types, such as credit or debit card transactions, a digital wallet or a QR code. Thus, you ensure your business provides the right tools to protect cardholder information from security breaches.

By being able to quickly identify suspicious activity and offer customer support while mitigating against security threats, your business will be able to remain competitive with a solid reputation for being trustworthy. It is critical among today’s discerning customers.

5. Detailed reporting and analytics

Choosing a payment gateway is not only about cardholder safety and security when making online payments. The right payment gateway option for you should also help you run your business better. One way this can be achieved and enable you to make data-driven decisions is through dedicated dashboards that offer you access to reporting tools that can strengthen your analytics processes.

When you determine your peak and off-peak periods for sales, you can make tweaks and adjustments. It means your business can boost your customer’s experience to align with a smooth buyer journey backed by data and insights.

In turn, this leads to convenience for customers, improves the speed of purchases, enables you to reach wider markets, and creates a user-friendly experience. Ultimately, this is done with security leading the way. The ability to carry out a professional, straightforward analysis is key to business growth.

How to ensure a secure payment gateway

The best payment gateways do not only offer secure online transactions. Instead, they focus on a holistic approach to ensuring cardholder data security. In the finance space, this is achieved in the following ways.

Data encryption

Most payment gateways offer data encryption and, later, decryption to protect their customer’s card data in the online payment process. Data encryption takes plain, readable text and converts it into something called ciphertext, which essentially becomes unreadable until it is decrypted. The reason behind this is to protect the data from unauthorised access.

PCI DSS compliance

We already touched on PCI DSS compliance earlier, but its importance cannot be overstated. Its requirements for ensuring that online merchants process payments securely are the industry’s pinnacle for protecting consumers.

Tokenisation

Another way to secure cardholder data is through tokenisation. What tokenisation does is replace sensitive data with a series of randomly generated numbers. These numbers are referred to as a “token“, which hackers would have no way of decrypting, and that is why PCI DSS promotes the adoption of such tokens.

Tokens help strengthen security measures by providing one-to-one replacements for primary account numbers, which are kept outside the merchant’s server. Because the merchant is not responsible for storing sensitive data, they and their customers are protected against fraudulent activity.

Secure electronic transactions through 3D Secure 2.0

In the context of secure payments processing, 3D secure stands for a 3-domain structure. In essence, this is a payer authentication, which is a security feature that addresses issues related to fraud in online card transactions.

To put 3D Secure into context, a customer must complete an additional verification step with their card issuer at the checkout. In these cases, the three main domains are the merchant or acquiring bank, the customer’s card issuer and an “interoperability” domain.

A 3D Secure payment gateway recently underwent an iteration called 3D Secure 2. It focuses on enabling different methods of verifications, apart from passwords.

Examples of these verification methods include:

• 2-factor authentication (2FA);
• Biometric identification;
• Risk-based authentication.

3D Secure takes the process of ensuring security a step further than a 2D secure payment gateway. The latter requires that the customer enters their card verification value (CVV) after inputting their basic card details. In these cases, the payment is processed instantly.

SSL and TLS protocols

Secure Sockets Layer (SSL) and Transport Layer Security (TLS) are both protocols that work hand in hand to encrypt an online connection between a browser and a server. It creates an added layer of protection for sensitive information. In secure payment processing, these protocols assure that customer information transmitted and collected by a payment gateway is secure.

How should you choose the best payment gateway for your business needs?

Several critical factors go into choosing the most secure payment systems in terms of your online business’ unique needs.

Here’s what you should consider:

• Payment gateway fees and pricing: Whether you require the use of high-risk payment gateways or not, you will be charged fees for the service of your payment gateway provider.
  
  Some will charge a flat monthly fee, while others will charge transaction fees based on a percentage of each transaction processed. Many other payment gateways charge a combination of both transaction and monthly fees to process secure card payments.
  
  Also worth looking out for are hidden fees, which may include fees if you terminate your merchant account, chargeback and dispute fees, international fees, refund fees, etc. Payment gateway charges are a critical consideration because they will determine whether you are making a sufficient amount of income from your online sales.

• Integrations and customisations: Depending on your business needs, your payment gateway acts not only as a secure payment solution that enables you to receive payments. It should also be easy to integrate with your current online setup and should be customisable.
  
  For example, apart from integrating with your shopping cart, you may also want it to integrate with your accounting or other business software to help you automate routine but time-consuming tasks. Other customisation options include adding or changing your logo, as well as branding on your payment forms or payment page.
  
• Security: Many payment gateway providers claim to offer security, and this is something you should make sure for yourself. For example, check that they are PCI DSS compliant. Also, ensure they use the latest encryption technology. Ultimately, you want to ensure that the payment services you offer are safe from malicious actors.
  
• Payment methods: Another critical consideration related to whether your payment gateway works for you and your customers is its ability to support different payment methods. Other payments you may wish to offer besides credit cards include those made through a digital wallet.
  
• General features: General features offered by your payment gateway should also cover reporting dashboards, invoicing, data exports, etc.
  
• Support: If you need an urgent solution to a payment problem, getting the right support on time is key. That’s why you should consider a provider that offers 24/7 support via live chat, phone, and email.
  
• Ease of use: The best payment gateway works for you and your customers. This means it not only enables you to process payments efficiently but also makes it easy to use and intuitive without a steep learning curve.

Conclusion

Running an online business absolutely requires that you offer your customers security for trusting you with their card information. The alternative could be hefty fines, loss of business reputation, and loss of customer trust in your online business.

Choosing the right secure payment gateway can also seem like a daunting process. However, with the right research and information, you can make the right decision for your online store.

Ultimately, the right payment gateway should be PCI DSS compliant and offer other layers of security. Examples include data encryption, tokenisation, an SSL certificate and 3D Secure. This will ensure your customers trust you and your business won’t fall afoul of industry regulations and standards.

Running an online business may seem like a quick way to make money, but it also entails a large responsibility. As an online merchant, you must provide the necessary assurances to your clientele and ensure the longevity and success of your business in the future.

Frequently Asked Questions

What is the difference between a payment gateway and a payment processor?

When processing payment and transaction information, a payment processor “communicates” important information between the issuing and acquiring banks that ultimately enable the customer to pay into your merchant’s bank account. A payment processor needs a payment gateway to initiate the communication process and authorise the transaction.

What security features should I look for in a payment gateway?

A few essential security features you should look for in a payment gateway service.

They include:

• Data encryption;
• PCI-DSS compliance;
• Tokenisation;
• SSL and TLS protocols;
• 3D Secure and others.