Digital disruption has changed the way businesses are executed these days. With multifarious payment options, there is a need to think and redesign the ways merchants are handled by competitive banks. Being able to accept payments through myriad channels from your customers is one of the most important elements of accelerating your business. Payment regulators are constantly trying to devise ways to fortify the payment process and make it safe and secure. In any online transaction, there are at least 4 parties involved viz:
- The Merchant: One who accepts the online payments via credit/debit card or other payment methods such as e-wallets, UPI, net banking, etc.
- The Customer: One who is buying a product/services using his bank account details.
- The Issuing Bank: The bank that holds the customer’s account
- The Acquiring Bank: The bank that processes the payment on behalf of the merchant account
A merchant needs to have access to services such as a payment gateway, payment processor and a merchant account, to be able to receive payments online. Their individual roles are explained as follows:
Role of a Payment Gateway:
A payment gateway is a service that enables the merchant to accept online payments via multiple payment modes apart from cash. It allows your customers to submit payment information via the digital platform over internet. It connects all kinds of merchants with payment networks. A payment gateway comes integrated with the merchant POS system as well as the online e-commerce website. This enables merchants to accept payments at the store via prepaid card as well as accept payments online using customer card details and other payment modes. It is a link between the customer’s bank or card to the merchant account so funds can be transferred between these accounts. Payment gateway solutions essentially help with the following:
- Integrates your online store and POS
- Fetches and encrypts the payment information to transmit securely
- Efficiently routes the information to and from the Acquiring Bank/Payment processor
- Responds back to the merchant with a transaction ‘approved’ or ‘declined’ message
Role Of Merchant Accounts:
To receive online payment, a merchant needs to have a separate account called the merchant account. A merchant account is a type of bank account that enables your business to accept payment in multiple forms including credit cards, debit cards, and ACH payments. Merchant accounts are provided by acquiring banks or payment processors.
Role of Payment Processors or Acquiring Banks:
Also known as a credit card bank or merchant bank, is a bank or financial institution, licensed as a member of a card association such as Visa, MasterCard or Amex, that creates and maintains the merchant’s bank account. For merchants to enable processing of a prepaid card transaction through their website, they need to sign a contract with acquiring banks, who then authorize the transactions and connects issuing banks on the merchant’s behalf. Large payment processors don’t work directly with online businesses but make reselling agreements with payment gateways to provide their services to merchants.
The need for a Merchant Management System:
The acquiring services offered by banks to its merchants require them to onboard and integrate the merchant. This also brings about an overhead for banks to manage merchant settlements and payouts. To help banks adapt and prosper in this multi-channel world, merchant management solutions are a great option. Mindgate’s merchant management & merchant acquisition system supports the essential services of online transactions such as:
- Providing payment gateway services and merchant account.
- Enabling Acquirers to enroll merchants, query transaction history, manage fees, track terminal inventory, assess risks and generate settlements.
- Providing a complete 360-degree solution for acquiring banks to manage their merchant related activities such as Merchant Onboarding, Merchant Servicing, and Reporting.
- Supporting national, international and global financial institutions.
- Providing the infrastructure to handle growing traffic and spikes.
- Supporting all payment options with the ability to link multiple stores/merchants.