To be competitive, small businesses are increasingly feeling the pressure to maintain an online presence and provide online purchasing options for their customers.

But doing that in a way that is both cost-effective and secure can be challenging, if not impossible . . . unless you've heard about credit card payment gateways.

Credit card payment gateways are online service providers that authorize payments for e-businesses, online retailers, and others who receive payments via the internet.

These service providers specialize in encrypting sensitive information, i.e. credit card numbers, and maintaining a safe transaction environment for online merchants and their customers.

If online sales seem like an attractive next step for your small business, here are a few things you should know about payment gateways.

How Credit Card Payment Gateways Work

When a customer places a credit card order through a website, the payment information is encrypted by the customer's web browser via SSL (Secure Socket Layer) encryption and forwarded to the merchant's web server.

Next, the merchant forwards that information to their payment gateway through another SSL encrypted connection, where it is in turn sent to the merchant's bank. The merchant's bank then requests authorization for the transaction from the customer's bank, receives a response, and transmits that information back through the chain of communication to the customer.

At the end of the business day, proceeds from the approved transactions are deposited into the merchant's payment gateway account.

Here's the truly fascinating thing about payment gateway transactions: That whole process usually takes no more than 3 or 4 seconds. The advantage of using a payment gateway rather than trying to process the transaction yourself is obvious. In addition to the high level of security the payment gateway provides, the customer's transaction is processed in a convenient and efficient manner.

What to Look For in a Payment Gateway

To begin accepting online payment for your goods and services, you need to shop around for the payment gateway that best meets the needs of your business. Here's what you're looking for:

• Payment Gateway Reputation. Your payment gateway provider is a reflection of your business. For that reason alone, you want to find a provider with a solid reputation of service, even if it costs a little more than a fly-by-night alternative. If your payment gateway fails to offer the security online customers have come to expect, your customers probably won't even consider doing business with you in the future.
• Payment Gateway Cost. Rates vary by provider, so it pays to shop around for the best price. Although cost shouldn't necessarily be your primary consideration, it is worth keeping in the mix, especially if you anticipate a high volume of online transactions.
• Credit Card Processing Terms. Make sure you thoroughly understand the terms of your contract before you agree to anything, especially how you will access the funds that accumulate in your payment gateway account.