How Does a Payment Platform Work and Why Your Business Needs One

In an age where the tap of a smartphone can finalise a transaction or a click on a laptop can seal a deal, it’s clear that technology has revolutionised how we manage money. This isn’t just about convenience. It’s about an entire shift in our financial landscape, driven by generations who’ve grown up in a digital world. Today, understanding the nuts and bolts of a digital payment platform isn’t just a tech-savvy move – it’s a business imperative. Whether you’re a startup or an established enterprise, grasping how these platforms function is crucial in tapping into the market shaped by modern spending habits. Explore our latest blog to understand how payment platforms work and how this knowledge can power your business’ growth and success in the digital economy.

What is a payment platform?

A payment platform is the digital linchpin of financial transactions, especially in e-commerce and other online businesses. It’s a complex system that does more than just handle payments—it ensures transactions are secure, compliant, and efficient. Let’s explore its key components with some examples:

Payment gateway

Imagine you’re indulging in online shopping, perhaps buying a book. You’re prompted to enter your credit card details when you reach the payment stage. This is where a payment gateway comes into play. But what exactly is a payment gateway? It’s a fundamental element in digital transactions, bridging your bank account and the merchant’s payment system.

You interact with a payment gateway when you use services like PayPal at checkout. This platform is about more than just collecting payment information. It’s about ensuring that every transaction is authorised and secure. The technology connects your payment method – whether it’s a credit card, debit card, net banking, UPI, or an online wallet – to the merchant’s portal.

The payment gateway plays a crucial role as a third party that safely manages the transfer of your funds from your bank account to the merchant’s account. Think of it as a digital cashier that takes your payment and validates it. This process involves encrypting your sensitive payment information to protect it from potential cyber threats and ensuring the funds are available for the transaction. 

Payment processor

This is the behind-the-scenes player. Using our book purchase example, the payment processor steps in once your payment details are collected. It acts as a middleman, communicating between the bookstore’s bank and your bank. It’s responsible for ensuring your payment is valid, and funds are available. Processors perform this role, validating transactions and facilitating the exchange of funds.

Security measures

These are crucial for protecting your data during the transaction. When you input your credit card information, encryption technologies keep this data safe from hackers. Following standards like PCI DSS ensures that the payment platform meets the highest security protocols. This is similar to having a secure lock on your front door – it’s essential for keeping your personal information safe.

Payment gateway vs payment processor

In online transactions, two pivotal technologies stand out for their roles in facilitating digital payments: the payment gateway and the payment processor. Although they often work in tandem, it’s essential to understand that their functions in electronic payments are distinctly different yet equally important.

Payment gateway: the secure data conduit

A payment gateway acts as a secure conduit in online transactions. When customers input their credit card information on a website, the payment gateway collects, verifies, and performs necessary fraud checks on this data. It’s akin to a digital bridge that connects the merchant’s website to the financial world. Its primary role is to encrypt and transmit this sensitive payment data for authorisation, ensuring that the information remains secure and intact during its journey from the customer to the payment processor.

Payment processor: the transaction manager

On the flip side, the payment processor is the service that manages the detailed operations of a transaction. It takes over once the payment gateway has securely transmitted the customer’s payment data. The processor acts as an intermediary between the customer’s bank (the issuing bank) and the merchant’s bank (the acquiring bank). Its job is to verify the payment details, ensure the availability of funds, and ultimately facilitate the transfer of money from the customer’s account to the merchant’s account.

Synergy for secure electronic payments

While their roles are distinct, a payment gateway and a payment processor are essential for executing electronic payments. The payment gateway focuses on secure data transmission, ensuring the payment details are safely passed on for processing. In contrast, the payment processor handles the transaction’s more technical and financial aspects, including verification and fund transfer. Together, they create a seamless, secure process for electronic payments, ensuring that online transactions are convenient and safe for both customers and merchants.

How online payment gateway works

The process of an online payment gateway is a crucial piece in the puzzle of digital transactions. It’s a sophisticated yet user-friendly journey that begins with your click and ends with a successful payment. Let’s take a closer look:

1. Initiation: starting your online transaction. The journey starts when you enter your payment details on a website for that online purchase. At this moment, the payment gateway springs to life, ready to handle your transaction securely.
2. Encryption: safeguarding your information. Once you input your details, the gateway encrypts this data. Consider it as converting sensitive information into a secure code, ensuring it travels safely across the internet. This encryption is vital for protecting your data from any prying eyes.
3. Authorisation: the crucial verification step. The encrypted information is sent to the payment processor. A critical check occurs here – the processor verifies the transaction with the banks. It confirms that your payment details are correct and sufficient funds are available. This step is essential for ensuring the legitimacy of the transaction.
4. Completion: finalising the transaction. Upon receiving approval from the banks, the payment processor completes the transaction. The funds are then transferred to the merchant’s account. Both you and the merchant are notified that the payment has been successfully processed, marking the end of the transaction journey.

Full payment platform: simplifying global transactions

But how about a scenario where, instead of managing multiple integrations, dealing with a variety of vendors, facing the challenges of reconciliation, and incurring the costs associated with each separate payment gateway and processor for international transactions, you opt for a fully integrated, end-to-end payment solution like Unlimit. This approach defines the concept of an end-to-end payment ecosystem,  revolutionising and simplifying how businesses manage global payments. 

What exactly is a full payment platform?

Think of a full payment platform as your all-in-one payment solution. It replaces the puzzle of managing different gateways, processors, and contracts with a single API solution. With just one integration, you get a unified contract and account, making accepting payments worldwide significantly simpler and more efficient.

A full payment platform isn’t just about consolidating payment processes. It’s about empowering your business in the global market. Here’s what it brings to the table:

Global conversion optimisation

It tailors the checkout experience to suit customers at a local level, with multiple local payment methods,  enhancing user experience and boosting conversion rates.

Instant access to new payment methods

One step ahead of the innovation curve, fintechs keep abreast of changes in purchasing habits so businesses can offer the most relevant and popular payment methods. 

Streamlined reporting and reconciliation

Say goodbye to the headaches of reconciling reports from different sources. A full payment platform provides one comprehensive report, making your financial management smoother and more accurate.

Integrated fraud protection

Built-in security measures offer a robust defence against fraudulent activity, offering peace of mind and safer transactions.

Why it’s a game-changer for global businesses

A full payment platform is the way to go for those operating internationally or looking to stay ahead in the payments game. It’s not just a payment processor. It’s a strategic tool for growth, giving businesses the agility and efficiency they need.

Staying a step ahead is vital for your business to thrive. But let’s face it: not every company has the bandwidth to chase after the latest payment technologies, security measures and regulatory needs. That’s precisely where Unlimit shines. Our full payment platform solution simplifies your business’ expansion with our all-in-one API integration. It’s designed to streamline transactions, enhance security, and improve customer experience, adapting effortlessly to diverse consumer needs. Unlimit is more than just a payment service. It’s a growth partner ensuring that your business connects effectively with your audience, no matter their shopping habits or preferences. By choosing Unlimit as your payment service provider, you can access an integrated payment gateway with streamlined online payment processing and competitive transaction fees, enhancing efficiency and cost-effectiveness in managing global transactions. Ready to elevate your payment process? Contact us and discover how Unlimit can transform your financial operations.