Setting up a payment gateway is essential to sell online courses successfully. You need to setup a solution so that you can receive payments from across the globe. The bottomline to the success of your online video course is your ability to monetize your content. From our conversations with E-Learning video course creators, it is this process of setting up a payment gateway that counts as one of the most stressful aspects of selling online courses.
In this blog we lay out how a payment gateway works, what options to consider when opting for a payment gateway to your site, and what how to actually apply for it.
The Parties to a Financial Transaction
There are essentially four parties to an online financial transaction:
- The merchant
- The customer
- The acquiring bank whose services the merchant uses
- The issuing bank whose credit card the customer uses
The workflow in the payment process works like this:
- Payment Gateway receives the card details securely from the customer
- Payment Gateway forwards the transaction information to the card agency
- Card agency then forwards the request to the Issuing bank
- Issuing bank verifies validity of transaction for credit/ debit card (checking card details, balance, expiry dates), and responds with approve/ deny response
- The approve/deny response is forwarded by the payment gateway to the merchant website
- The merchant then fulfills the order. The issuing bank clears the order only when the transaction is fulfilled
- Acquiring bank communicates with the credit card issuer to settle accounts
- Credit card issuer makes payment to acquiring bank
- Acquiring bank deposits funds to merchant’s approved account
Integrating a Payment Gateway to your Page: Options
- Hosting payment process on your site: To make the customer experience smoother the merchant hosts the credit card details on their own servers, and transfers it to the payment gateway/ processor which communicates with the relevant financial institutions. You would need to implement security mechanisms to ensure that card details are secure.
- iFrame of Payment Gateway on Website – In this method of integration a frame of the payment gateway is included on your website, through which you can then integrate a payment gateway directly to the website. The customer remains on your website, but the data is added to the payment gateway directly, minimizing your data liabilities.
- Payment form on another site – This is the simplest process, in which the user is directed to the payment gateway site to enter the card details. The customer is redirected to the merchant’s website after the transaction is completed.
- Hosted Tokenization – The customer adds card data on the merchant’s website, but this data is sent directly to the servers of the payment gateways. The merchant website only records a unique token of the transaction, so that merchant website is not liable to possessing the confidential data.
Difference between Payment Gateway, Payment Processor and Merchant Account
A payment gateway acts as intermediary between your website and the payment processor, helping to securely transfer information. Payment gateways have to be compliant to PCI-DSS standards (Payment Card Industry Data Security Standard), to ensure that details of your financial transactions are secure.
The payment gateway’s main role is to securely transfer transaction details to the payment processor. Whereas payment gateway’s responsibility is to provide a user interface and communication channel between customer and merchant, it is the payment processor which deals with the various financial institutions to validate the transactions.
Payment Processors and Merchant Accounts
The boundary lines between payment gateway and payment processor are often blurred, and most vendors function as both. Payment Gateways in India combine with banks to provide the payment processor and merchant account services. It is the payment processor which handles transaction data, and communicates with the banks. The bank handles the merchant account activities.
The stage of merchant account creation requires a lot of paperwork efforts. Banks are averse to accept merchants with high-risk business models. For this reason they will ask you for explanations of your business model. The requirements for a merchant account are:
- Functional website
- Company identity proof
- Promoter’s identity proof
- Company address proof
- Business model presentation
For an example of merchant requirements, online payment processor ZaakPay provides the details for availing their ZaakPay merchant services.
International Payment Processors
PayPal, Stripe, Authorize.Net and Payline are the most popular international payment processors. WooCommerce offers integration with all of these payment processors. Their unique offerings are
- PayPal is one of the most widely trusted payment processors. PayPal charges a monthly fees for Pro and Advanced Users. Its ease-of-use and customer support and service sets it apart from competition.
- Stripe offers an international payment gateway plus processor service similar to PayPal. Through its APIs developers can integrate the payment gateway to their website for free. Its rates are also overall cheaper than PayPal.
Merchant Maverick here gives a very detailed explanation on how to choose a payment processor.
Indian Payment Gateways
The most popular indian payment gateways are:
- PayUBiz – Offers variety of customizations for medium-to-large businesses. One of the mosted trusted brands, their merchant on-boarding process is fast, and the user experience is their highest priority
- EBS – The first Indian Payment gateway to be PCI-DSS compliant
- CCAvenue – CCAvenue is one of the longest-serving payment gateways, and is widely trusted and considered reliable. Customer trust is a very important quality in the payment processor industry.
- InstaMojo – Instamojo offers the cheapest option amongst payment gateway. There are no installation costs, and it is recommended mostly for small-to-medium businesses offering physical goods. Their transaction discount rate is 1.9% for physical goods sale and 5% for digital goods. Their integrations leave much to be desired however, as the service does not offer support for retail payment processors.
- RazorPay – This option offers netbanking, all cards, and wallets. This is one of the fastest growing payment gateway services.