Getting Started: Payments

Payment gateways are online services that authorize and process transactions between customers and online merchants. By integrating a payment gateway with Kaptio, you can streamline the payment process and make it easier for customers to make payments online.

Before starting the integration process, you need to choose a suitable payment gateway. Different gateways may offer different features, rates, and compatibility options. Therefore, it's important to research and select the one that best suits your business needs.

Kaptio’s preferred payment gateway partner is Braintree, a PayPal company. More onboarding information related to our standardized Braintree is available here: Implementing Braintree/PayPal

Understanding The Payment Ecosystem

A payment gateway is an online service provider that connects an electronic shopping cart or virtual terminal/POS to an electronic payment processor. It is your gateway to the rest of the payments infrastructure and allows you to accept electronic forms of payment.

The main function of a gateway is to pass authorization, payments, and settlement data securely to and from the merchant’s website and the merchant’s processor. The merchant's processor in turn connects to the card association (or “network”), which connects to the card issuing bank.

The Payments Value Chain

The payments ecosystem is very fragmented, due to a high degree of specialization, and any given payment transaction typically passes through at least five or six different parties, which we will call the payments value chain. When a customer swipes their credit card to make a payment for a purchase, it usually takes just a couple of seconds for the point of sale system to prompt for a signature or a PIN, and another few seconds to complete the transaction and print out a receipt. It is testament to the robustness of the electronic payments system that the end user is typically completely unaware of the complexity of the underlying plumbing that makes electronic payments possible.

A typical payments value chain may comprise:

Payment gateways
Merchant account providers (or merchant acquirers)
Processors
Networks (card networks)
Issuers

The following sections will explain, briefly, the role of each of these parties and some of their key functions.

Payment Gateways

The term payment gateway is often used loosely to describe a variety of payment service providers, or PSPs, that a merchant deals with in order to accept electronic payment methods. However, in the strictest sense, a gateway is an intermediary that sits between a merchant’s virtual POS (point of sale) or online shopping cart, and serves as the first interface between the merchant and the rest of the payments value chain.

The gateway essentially ferries messages between the merchant and the payments system, and these messages can be card authorizations, capture (or settlement) transactions, voids, or refunds. In all these cases, messages travel to and from the merchant and the card issuing institution (typically a bank or credit union).

There are two type of gateway:

Independent Gateway Providers

These are gateways that can connect to 3rd party merchant account providers or processors. Examples include Authorize.net, SagePay, Paypal Payflow and Stripe (some of the most popular gateways). The advantage of dealing with an independent gateway provider is that you are not bound to a particular merchant account provider, and could easily switch if offered a better price or superior services.

Full Service Payment Providers

These are owned by merchant acquirers or processors, and connect only to the processors that are affiliated with that merchant account provider. Often the advantage of using a full service payment provider (those that provide a gateway, processing services, and/or merchant acquiring services) is that you get better processing fees and cheaper (often free) gateway services. The other advantage is that they are a one-stop shop, offering a single customer contact for both the gateway, processor, and acquiring bank (for example, Chase Paymentech). Since the gateway and processor come pre-integrated, the time and effort to connect the gateway and processor is negligible. Examples of Full Service Payment Providers with a gateway or processor that can be integrated into Kaptio are Orbital by Chase Paymentech, Merchant eSolutions, Litle & Co., Ingenico ePayments, Quick Gateway by Qvalent and Website Payments Pro by PayPal.

It is important to consider the pros and cons of each type of gateway before selecting one.