A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payment processes for e-commerce, online retailers, brick-and-clicks, or traditional brick-and-mortar. Payment gateways have a long in-depth history since their conception in the 2000s compared to Nepal where it was only widely adopted since 2019 with fonepay having the leading market share. With this new form of payment many merchants using it have questions regarding the good and the bad that comes with their financial transactions.
Firstly, the good. With payment gateways, the payment process from request to authorizations to receipt and conformations, the whole procedure is simplified. With payment gateways using payment APIs (Application programming interfaces), there are active enhanced security and fraud prevention features ensuring that attacks will have a hard time accessing sensitive information and protecting transaction data. Another feature that is available with many payment APIs (although not all) is the ability to store transactions offline to be processed once reconnected to the internet allowing merchants to store their transaction information safely and reliably. One of the most important features of payment gateways is that all payment transactions are heavily encrypted to ensure the data is protected and generally, the payment gateways check the availability of funds right now customers enter their banking information. The request either gets approved or declined in its initial phase only. Therefore, no need to run after customers to remake their failed transactions.
Although at first glance it seems that payment gateways have no flaws thanks to their state-of-the-art technology there are a few risks that pose a proper threat, especially to ones in a developing country such as Nepal. Security breaches are a huge threat, and even though there is a security measures to prevent this, hackers are resilient and are always coming up with new ways to breach the system. One such way they can do this is with unencrypted data to access sensitive data. Attackers can use information like names, addresses, phone numbers, etc. Another tool of hackers is DDoS (Distributed Denial-of-Service) attacks, where these types of campaigns flood a computer with a lot of data. By doing so, the hacker exhausts the computer’s resources so that it starts performing poorly affecting the time it takes to complete transactions. With the threat of hackers, often payment gateway companies are so busy trying to have the upper hand against them, they often fail to follow governing laws, rules, or regulations required hence may cause future roadblocks for merchants. Not only that high transaction fees or hours of downtime without receiving payment can have a major impact on all aspects of a business and on the organization in long term lastly payment gateways can have credit risks, this occurs when a payment gateway is unvetted, unsuitable, and unable to meet the terms of the contract with either the merchant or the acquiring bank, reducing the number of merchants who want to use it or alienating users.
Payment gateways offer a convenient and secure way for merchants and their customers to complete transactions fortunately with payment gateways being a service of the tech industry, there are always new ways to combat the risks and threats, but hackers are always trying to find new ways to breach the system and in developing countries, most laws do not help payment gateways.