Payment Gateway Software Market 2022

Introduction 

A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. The term includes not only the physical card-reading devices found in brick-and-mortar retail stores but also the payment processing portals found in online stores. However, brick-and-mortar payment gateways in recent years have begun accepting phone-based payments using QR codes or Near Field Communication (NFC) technology.

A payment gateway is simply an online money operating gateway that joins customers and the merchant together through digital mode. A payment gateway authenticates the customer’s card details safely, ensures enough funds available in the bank account, and eventually enables merchants to get paid. In short, a payment gateway is an online interface for money transfers between the customer and the merchant. The online payment option is an asset to any business because the online mode ensures secure & smooth payment transactions and helps in decreasing the company’s financial losses due to late payments.

Payment Gateway essentially functions as a middleman between banks and other mobile applications and e-commerce websites where an online transaction is conducted. By encrypting sensitive data, the payment gateway authenticates online transactions. Furthermore, payment gateways ensure security by safeguarding against online fraud through the use of card verification values (CVV) and address verification systems (AVS). The market is likely to develop dramatically in the coming years, due to the growing popularity of online transactions.

The payment gateway helps businesses to perform online transactions in a more secure way. The growing demand for various smartphone-based digital payment apps is also supporting the payment gateway market growth.

Market size & Growth rate

The Global Payment Gateway Market size is expected to reach $73. 9 billion by 2027, rising at a market growth of 22. 0% CAGR during the forecast period. A payment gateway is a software and a server that shares all information relevant to an online transaction involving a certain bank account and responds to customers about the success or failure of their transaction.

Market Drivers

Rising internet penetration across the globe is boosting the payment gateway market demand. The increasing internet penetration is enabling customers to use various digital payment methods such as net banking and mobile wallets. The market growth can be attributed to the increasing demand for mobile-based payments across the globe. Rising e-commerce sales and the shift in merchant and consumer preference to digital channels for enabling online money transfers are projected to propel the growth of the market in the forthcoming years.

Technological advancements and the rapid rate of internet penetration globally have enabled financial service providers to offer novel digital services to customers. The rising popularity of mobile-based apps for making money transfers also propels internet banking demand. Governments globally are making efforts to promote internet services across rural areas.

Market Trends

The global online payment gateway market is witnessing vast revenue growth. The adoption of online payment solutions in major enterprises across industries is increasing at an even faster pace. Besides, the demand for user-friendly payment solutions in the online marketplace and purchasers is rising continually. Changing business need for increased online payment solutions and services to stay at the forefront of the market offer significant opportunities.

The market is characterized by intensified rivalry among major players and is fueled by strategic partnerships. These partnerships allow vendors and fintech companies to tap opportunities created by the globalization of e-commerce. For instance, in July 2021, Apple announced a service that will let users pay for any Apple Pay purchase in installments. Apple will use Goldman Sachs, its existing partner since 2019 for the Apple Card credit card, as the lender for the loans.

Payment gateways and processors have long played the hidden fee game. This is one area in which modern gateways like Stripe and Sezzle have made progress, by using simple, blended pricing models, but big problems still remain. Merchant processing fees generally fall into one of two categories: (1) wholesale fees, and (2) markups. Wholesale fees are the interchange rates set by issuing banks and credit card companies. They are consistent regardless of which gateway you choose, so don’t waste your time trying to shop around for lower interchange rates. Markup fees are how your processor and/or gateway make a profit from your business.

Challenges & Risks

Customers’ increased danger of online fraud serves as the payment gateway’s primary impediment. There is a great likelihood that some socially irresponsible element may misuse the account information that must be entered in order to make an online payment on the online payment gateway application. This is the primary factor impeding the market expansion for payment gateways. Also, the payment gateway market remains substantially consolidated, with the top six vendors holding over 70% of the market revenue share. PayPal, Stripe, and Square accounted for the major chunk of the industry.

Opportunities

Companies are increasingly seeking payment gateways that provide secure internet transactions and help prevent credit or debit card scams and other fraudulent activities. Because they eliminate the need for consumers to deal with the hassles of shopping from physical stores and waiting in long queues. Consumers can efficiently complete the entire transaction online, enjoying a seamless shopping experience. 

More than one in three respondents (37%) say their businesses are planning to make investments in payment processing over the next 12 months, positioning payment processing as a top four area of commerce technology investment for merchants. Savvy merchants recognize that payments are about more than cost and ultimately should enhance their organization’s agility and adaptability.

Retailers and e-commerce merchants across the globe are focusing on expanding their businesses in other regions and are partnering with payment service providers. These partnerships are allowing merchants to benefit from the opportunities generated by the globalization of the e-commerce sector. Payment gateways help merchants that manage a large volume of transactions automate the complete money transfer process with faster processing speed and error-free computations.