PayPal Payment Gateway

Until recently, making online payments was an incredibly tedious and lengthy process that involved retailers manually verifying customer details with their bank or credit card provider. Then, payment gateways came along and took charge of the verification process. Since then, online payments have become faster and more secure.

 

PayPal is one of the most reliable payment gateways available, thanks to its user-friendly interface, robust end-to-end encryption, and lightning-fast transaction capabilities. It operates in over 200 markets and can process payments in 25 currencies, making it an excellent tool for international sellers and shoppers.

 

This guide explores the mechanics and functionalities of the PayPal payment gateway. We'll cover everything from data encryption and tokenization to advanced fraud management, explaining why many e-commerce platforms, sellers, and buyers prefer PayPal over other payment gateways. Additionally, we'll examine the differences between payment gateways and payment processors and clarify which category PayPal falls into.   

 

How does a payment gateway work?

 

Think of a payment gateway as a gatekeeper for your online transactions. It intercepts and blocks suspicious or invalid payment attempts and encrypts your customers' data during credit card payments or bank-to-bank transfers. In short, it provides a layer of protection for you, your customers, and the banks or card providers.

 

Here's how a payment gateway functions in a transaction process:

 

Step 1: Your customer enters their payment details, including credit card or other payment methods, on your website via a checkout form.

Step 2: The payment gateway encrypts this data to protect against unauthorized access.

Step 3: The encrypted data is sent to the payment processor associated with the merchant's bank.

Step 4: The payment processor relays this data to the card association (e.g., Visa or MasterCard), which forwards it to the issuing bank.

Step 5: The issuing bank checks the transaction for fraud and verifies whether the customer has sufficient funds or credit.

Step 6: The issuing bank sends a response back to the payment processor—either approving or declining the transaction.

Step 7: This response is sent back to the payment gateway.

Step 8: The payment gateway forwards the response to the merchant's website.

Step 9: Finally, the funds are transferred from the customer's bank to the merchant's bank account, typically within a few days.

 

How does it differ from a payment processor?

 

A payment gateway approves transactions, while a payment processor manages the actual processing between the merchant and the banks. The processor receives approved transactions from the gateway and handles the transfer of funds between the customer's and the merchant's banks.

 

Payment processors manage the technical aspects of transactions, including the final settlement of funds into the merchant's account. They often provide additional services such as fraud protection and transaction dispute resolution.

 

So, is PayPal a payment gateway or a payment processor?

 

PayPal is not just a payment gateway or processor but a payment aggregator. A payment aggregator allows businesses to accept payments without individual merchant accounts with banks or payment processors. It uses one merchant account to manage transactions for multiple companies.

 

This arrangement simplifies and speeds up the process for small businesses and startups to accept various electronic payments. Payment aggregators handle the distribution of funds, compliance, security, and fraud detection for their clients.

 

PayPal offers a comprehensive service that includes some functions of both gateways and processors. It primarily enables merchants to accept payments through a unified system, eliminating the need for separate merchant accounts. This approach significantly reduces regulatory and financial burdens.

 

What is Payflow?

 

As a payment aggregator, PayPal operates its own payment gateway known as Payflow. The Payflow Payment Gateway bridges a merchant's website and their payment processing network, facilitating secure credit card transactions and connections to various payment processors.

 

Through its Virtual Terminal feature, payflow enables businesses to accept various payment types, including credit cards, PayPal, and PayPal Credit, as well as offline payments via phone, fax, and mail. It is available in two versions:

 

• Payflow Link: This basic version is ideal for businesses seeking a straightforward, hosted payment gateway. It features a customizable pre-built checkout page tailored to the merchant's website, ensuring a seamless user experience.
• Payflow Pro: This more robust solution offers complete customization, allowing merchants to host their own checkout pages and manage the entire user experience. It is especially suitable for larger businesses that need greater flexibility and control.

 

One factor contributing to Payflow's popularity among merchants is its compliance with the Payment Card Industry Data Security Standard (PCI DSS), ensuring secure transaction processing. It also offers features like fraud protection services to help detect and prevent fraudulent transactions.

 

Payflow is easily integrated with shopping cart software and can connect to nearly any merchant account, payment processor, or eCommerce platform. Its flexibility makes it a versatile choice for businesses aiming to manage their payment processing through a gateway compatible with various systems.

 

Additionally, Payflow includes comprehensive reporting tools that enable effective transaction tracking and management and provide insights into sales trends and payment activities.

 

How to Integrate Payflow Payment Gateway into Your Online Store

 

 

To use Payflow, you must set it up to process payments on your e-commerce website. In this tutorial, we'll focus on integrating Payflow into a Shopify store, one of the most popular e-commerce platforms.

 

We will use Payflow Pro rather than Payflow Link because it offers complete customization and control over the checkout process. Like Shopify, Payflow Pro is also widely used. Now, let's go through the step-by-step instructions.

 

Step 1: Deactivate any existing payment provider.

 

Log into your Shopify account, go to "Settings," and select "Payments." Here, you'll see the payment options enabled on your website. If PayPal is enabled and you don't remember setting up one that includes Payflow, you must deactivate it.

 

Important: Payflow will not work if the standalone PayPal gateway option remains active. Since PayPal Payments is bundled with Payflow, you will need to reactivate it later within the Payflow settings.

 

Step 2: Deactivate Shopify Payments.

 

You must deactivate Shopify Payments for Payflow to work. There's no need to go back to the Settings page. Simply click "Manage" in the top right corner of the same page, scroll down, and click the red "Deactivate Shopify Payments" button.

 

Tip: Deactivating Shopify Payments will stop your shop from receiving payments until you set up a new payment gateway. To prevent this interruption, open the Settings in a new tab to configure Payflow.

 

Step 3: Activate PayPal Payflow Pro.

 

In the newly opened page, scroll to the bottom and click "Switch to a third-party provider." A popup will appear stating, "Shopify Payments will be deactivated when you switch to a third-party provider." However, this action will only take you to a page where you can select your new payment gateway without deactivating Shopify Payments.

 

Click "Switch to a third-party provider" and search for Payflow Pro. Select it, as it should be the only option, and fill in the required information. Next, return to the first tab and deactivate Shopify Payments. Then, go back to the second tab and click "Activate PayPal Payflow Pro."

 

It's time to integrate PayPal Payment Gateway into Your Online Business

 

Payflow provides a robust and flexible payment solution for businesses of all sizes. You can choose either the simple Payflow Link or the highly customizable Payflow Pro, both offering a secure, PCI DSS-compliant platform that integrates smoothly with various e-commerce systems. This gateway supports multiple payment options and features such as fraud protection and detailed reporting, enhancing security and business insights.

 

Integrating Payflow into your online store is straightforward, but it requires careful deactivation of other payment options and correct settings configuration to ensure smooth operation. By following the outlined steps, you can effectively set up Payflow to provide your customers with a secure, efficient, and tailored payment experience. Its flexibility, robust security, and support for various payment methods make Payflow an excellent choice for enhancing the efficiency and security of your online transactions.

Which Payment Gateway Will Give You The Edge: PayPal, Stripe, Square,or a Rising Alternative?