What Singaporean businesses need to know about payment gateways

The very first step of a payment flow, the payment gateway is a service that helps businesses accept payments both through digital and in-person channels, including in apps, on websites, and in store. In this article, we’re primarily focusing on online transactions. 

During the few seconds that an online payment takes to complete, a number of complex steps are happening behind the scenes. 

1. When a customer makes a purchase, the business sends the customer's payment data to the payment gateway.​​

2. Then, the payment gateway sends the data to the payment processor, which in turn sends it to the card scheme.

3. The card scheme shares it with the card issuer, which performs checks to determine if the transaction should be authorized or declined.

4. The decision regarding the transaction flows back through the card scheme, payment processor, and gateway, to both the business and customer.

5. If the payment is approved, the funds move from the customer's bank to the acquirer and then to the business's bank account.

Below you can see the whole online transaction flow. Remember, this flow begins with the payment gateway.

Online payment gateways differ in terms of the types of value-added features they offer. For example, a subscription business needs a gateway that supports recurring payments, but SaaS businesses or marketplaces might require one that can offer embedded payments. High-risk industries, such as airlines or gambling, may need a payment gateway with a different risk threshold to other businesses.

To obtain the maximum benefits from a payment gateway, you need to choose one that is suitable for your business needs.

There are several factors to take into consideration when choosing a suitable payment gateway, such as payment options, pricing, and security. You can either choose a payment gateway that is provided by a bank, or one from a provider that connects to one or more payment processors. 

Accepting relevant international payments 

As Singapore is a relatively small market, many Singaporean businesses sell internationally, or intend to. However, before accepting international payments, your business must ensure that your payment gateway supports it. There are different ways of accepting international payments, like local acquiring or cross-border transactions. 

Offering your customer's preferred payment methods is also important. The payment gateway that you choose should support a range of payment methods, not only for Singapore, but also for the international markets you do business in, so you don't end up with disappointed customers.

Differences in regulations between countries are also relevant. While Australia has specific rules on authentication, in Japan, new 3DS regulations will be implemented by 2025. The payment gateway of your choice should comply with local regulations where you plan to accept payments.

A suitable pricing model

There are several pricing models in the payment gateway market. Saving costs is often a priority for many businesses. However, this needs to be balanced out by the quality of the solution and the features it has. Choosing a gateway with a pricing model that suits your business needs is a very important step.

Some payment providers charge a percentage-based transaction fee and others charge a fixed fee per transaction. If your business has a high Average Transaction Value (ATV), a fixed fee could be more cost-effective. 

It is also important to remember that some gateways will charge one-off costs, like setup or integration fees. They might also offer services like 3D Secure, risk management, or authorization optimization, which may affect the cost but add value to your business.

Security and compliance

Keeping your customers and their information safe should be a priority to your business. Payment gateways hold specific certificates and conform to measures that protect payment information. The ones you should expect are:

• Payment Card Industry Data Security Standard (PCI): This is crucial for businesses that accept credit card payments. Businesses must adhere to 12 security standards when handling credit card data, including accepting, transmitting, processing, and storing it.

• Compliance with applicable privacy laws. 

For businesses that accept payments in Europe, it’s important to follow these regulations too:

• Payment Services Directive 3 (PSD3): This regulation pertains to payment authentication. However, it hasn't been implemented yet, which means that Payment Services Directive 2 (PSD2) and Strong Customer Authentication (SCA) still apply.

• General Data Protection Regulation (GDPR): This regulation ensures that personal data is only used for purposes for which the customer has consented. 

‘Payment processor’ and ‘payment gateway’ are two players of this ecosystem that often get confused with each other.

At this point, you hopefully understand what a payment gateway does: It helps businesses initiate payments.

A payment processor, in turn, processes payments on behalf of a business’s bank. It operates in the background, making sure processed payments comply with local rules and standards.

After receiving information from a payment gateway, the payment processor communicates directly to the payment network and authorizes, clears, and captures the transaction.

Do you recall the payment flow we shared earlier in this article? The first step is done by the payment gateway, by gathering data and passing it forward. The payment processor is the player that receives this data in the next step, then contacts the card schemes and business's bank to approve that payment.

A payment gateway and payment processor can be two separate systems. However, having both on a single platform can increase the efficiency and reliability of the payment process.

Where does Adyen fit in?

Adyen offers various solutions for businesses in Singapore to enhance payments.

We’re a payment gateway, processor, and acquirer in one single platform. This means we offer the same functionalities as a payment gateway, allowing our customers to initiate payments, without the need to manage several suppliers. 

We also provide payments solutions such as authentication, risk management, and authorization optimization. We can gather data from all processes and make more informed decisions since we have everything in one platform, leading to improved performance such as higher conversion rates and higher authorization rates.

You can drive more value for your business and reduce complexity by using a provider that is more than just a gateway. With a single-platform setup, you can create effortless payments, resulting in higher authorization rates and increased revenue for your business.