A payment gateway is a framework that makes it possible for any digital organization to take payments. It may accept a range of payment procedures, including card payments, e-wallets, UPI, and others. These internet enterprises are now referred to as merchants. They might be from the e-commerce market to any Service company. Payment gateways were typically offered by financial institutions in India in the initial 1990s. However, commercial third-party firms have entered the fray since the late 1990s. To receive money from their clients, most businesses now interface with these third-party transaction processors. They can also be used to make transactions with suppliers and staff.
Payment gateways are of great importance to businesses these days. Let’s look at why payment gateways are required for online ventures to flourish –
When you connect with a payment gateway, your clients will be able to purchase goods at every hour, even if you’re not in the storefront. Allowing your consumers to purchase at their pace saves both their and your time.
You understand how difficult it is to get funded as a company owner. Instead of having to deal with the trouble of committing to pay on a specific day and then failing, many consumers would rather pay right away and be done with it. Payment gateways enable them to do so, creating a decisive victory for you as well as your clients.
Any firm that accepts digital payment must have a reliable transaction as a top priority. Clients must have faith in the process and be confident that their financial and personal data will be kept safe while purchasing online. It should guarantee that the information a consumer enters is secure. PCI compliance is required for such a service.
The Merchant Discount Rate, or MDR, is the cost that gateway providers charge to complete a payment between a consumer and a company owner. According to traditional estimates, businesses pay about a lakh rupees on MDR every month. This not-insignificant sum may now be avoided by just transitioning to a different advanced MDR that does not impose trading fees and enables you as a company operator to take the entire amount of your inventory with monthly savings of INR 97500 – INR 96600.
For instance, if you sell a product for Rs 1,000 and the payment gateway levies a standard 1.8%, you’ll only receive Rs 982 as the company owner, with the payment gateway deducting the remaining Rs 18.
Until now, giving MDR charges was thought to be a necessary component of completing internet transactions. That is true because there wasn’t any other option. However, UPI may now be used to drastically minimise this price. To entirely avoid MDR costs, simply utilise a payment gateway, which deposits the whole money into your bank without charging you one penny in fees.
While 0 percent MDR may seem appealing, here is what seals the deal. Customers who utilise the payment gateway with 0% MDR for a growing number of transactions end up saving up to 2-3% on MDR costs every time. Let’s look at how this would spare you Rs. 1 Lakh each month. Let’s assume that your company generates Rs 1 crore in monthly revenue. Payment cards, Internet banking, UPI, and Wallets account for the majority of the quantity, which is divided between credit cards, debit cards, Netbanking, UPI, and Wallets.
Based on current market practices in India and UPI’s rise as a favoured payment mechanism, we expect that UPI will account for 40% of all payments.
Let’s have a look at the costs that would have occurred if you hadn’t used the payment gateway with 0% MDR.
As you’ve seen, if 40% of your customers utilise UPI and you spend 2% MDR every purchase, you’ll wind up paying a lot greater than if you used a payment gateway, which charges 0% MDR.
After seeing the difference, any savvy businessman would know precisely what’s what. Certainly, at a time when financial caution is required in all aspects of the company, the opportunity to keep back Rs 1 Lakh is one you just cannot stand to overlook. Some payment gateway offers 0% MDR on debit cards as well, thus it’s not simply UPI.
Traders and small to midsize company owners are witnessing more momentum in digital shopping as shipping constraints ebb and buyers purchase additional things as the market wakes up after the Covid pandemic in the country lessens. Greater sales, on average, implies greater money and, as a result, more profits for a business owner. However, there is one factor that causes company owners a little anxiety every time a payment is completed, and that is MDR. However, now that you know, you have the option to change your spending habits by switching to an advanced payment gateway that does not impose MDR costs. Every month, you may easily save over Rs. 1 lakh.