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Payment Gateway APIs are interfaces that connect payment gateways or payment solutions with existing online platforms. Payment Gateway APIs help businesses process payments through various payment modes.
What is a Payment Gateway API?
To understand what a payment gateway API is, let’s understand what APIs are and how they work.
API stands for ‘Application Programming Interface’ and refers to the way computer programs can communicate with each other. These programs are usually requesting some information from and receiving a response from each other based on some pre-arranged protocol or code.
For example, an email application on your phone periodically sends a query to a server to request all new emails received on your account, and mentions the last time it sent such a query. The server responds with all the new emails sent after that time, and these new emails show up on the email app on your phone.
Similarly, a payment gateway API helps digital businesses accepting online payments to communicate with a payment gateway (PG). It essentially conveys the required information so that a Payment Gateway can process the digital payment for the business.
How Does a Payment Gateway API Work?
As mentioned above, payment gateway APIs allow businesses to accept digital payments via their website or application.
Payment Gateways are platforms that have built ‘payment rails’ that connect to a wide variety of banks, card networks, and financial institutions that help them take the money from the end-customer’s account and place it in the account of the business. For example, Cashfree Payments has integrations with:
- 80+ banks
- 5 of the world’s biggest card networks (Mastercard, Visa, Rupay, American Express, and Diner’s Club)
- 8 digital wallets
- Over 35 EMI and Pay Later partners
Hence, payment APIs act as a communication channel between businesses and payment processors. Payment gateway API integrations establish a connection between a business’ checkout system and the payment gateway.
When businesses operate and run their own checkouts, they collect customer payment information (such as which payment mode they are using, what is the mode’s identifier such as a card number or UPI VPA, what is the amount, etc.) and triggers the Payment Gateway’s API to create an ‘order’.
For example, it will communicate the amount to be paid, the currency it is being paid in, details about the customer, which payment mode they are using, what time the payment is being initiated, and other relevant information to enable the Payment Gateway to authorise the movement of money from the customer to the business.
Then, the payment API forwards the encrypted payment request to the associated payment processor or the payment acquiring system. After a successful transaction, the PG informs the merchant and then they confirm the order to the customers.
How to Integrate a Payment Gateway API?
The protocol or ‘code’ by which a Payment Gateway API behaves is documented in an API Specification document. By building a code-based system that follows the API specification and shares the information request (also known as an “API call”) in the requested protocol, businesses can share payment information with payment gateways to process digital payments. These API ‘calls’ (from the business to the Payment Gateway) are encrypted for secure and reliable transactions. Once the information request is received, the payment system processes the transaction and handles the authorization, authentication, and payment settlement.
For APIs to work, businesses must integrate the payment gateway API into their website or application. The integration process involves onboarding the business merchants by signing them up. Then, businesses need to configure the API settings by incorporating the necessary code and SDK (Software Development Kit).
Usually, the payment gateways provide documentation and tutorials on integration so that developers can understand and familiarise themselves. It provides details about the available endpoints, authentication methods, and other integration guidelines.
They also provide sample codes or tutorials/blogs to integrate with a specific platform.
Examples –
How to Integrate UPI Payment Gateway in Website or Mobile App?
How To Integrate Wix Payment Gateway in India: 7-Step Guide
Features and Benefits
Some of the features of Payment Gateway APIs which also provide several benefits to businesses are –
- Payment gateways help to automate the payment processes for businesses. Thus, with payment APIs, merchants have to spend less time, effort and resources on maintaining those payment systems
- Payment APIs can enable both one-time as well as recurring payments. Therefore, a subscription-model business can use them to receive regular payments by automating payments. For instance, Cashfree Payments allows merchants to receive recurring payments via eNACH and also UPI Autopay
- They are highly customisable which also makes them very scalable. During payment gateway API integration, businesses can personalise them as per their needs and brand theme. Hence, a variety of online platforms, e-commerce and other websites/applications can integrate them
- Payment gateways can enhance the overall customer experience. They provide customers with multiple payment options like credit and debit cards, postpaid or BNPL options, UPI payments, digital wallets, online banking and other alternatives. Payment APIs aim to make payments/transactions faster, easier and more transparent for customers. They can provide real-time payment details of each transaction to merchants and customers. This helps in enhancing the customers’ trust and loyalty
- Businesses should integrate with those payment gateway APIs that have robust security features. A secure payment gateway is important for any business to protect the privacy of customers’ data. It should prevent data breaching and misuse of customers’ sensitive information by fraudsters
- Payment gateways ensure that they comply with the regulations of the government or the RBI. Henceforth, payment gateway API integration offers simplified compliance and businesses need not worry about the same
- Additionally, payment gateway APIs track and maintain details of all transactions. They can provide detailed analytical reports to business merchants which they can use to understand customer behaviour. They get easy access to actionable data and can plan campaigns likewise
Factors to Consider When Choosing the Best Payment Gateway API Provider
When choosing a payment gateway for your business, there are certain factors you must consider for the best payment gateway API provider. Here is a checklist –
- Check for the payment options it offers and their success rates. Ensure that not only receiving customer payments but also disbursals like refunds, vendor payments, partner commissions, etc. are equally easy and quick
- The payment settlement cycle is important so that you have fast access to funds. Cashflow is the lifeline of businesses and therefore, instant settlements play a significant role
- Ensure that they abide by all the required norms and compliances like encryption, card tokenisation, PCI DSS, etc.
- Nowadays payment gateway APIs also enable international payments and cross-border transactions. Check if a payment gateway has this feature when you choose to integrate with them
- New-age payment APIs employ modern-day technology that provides real-time status, analytical data, and centralised control of your payments. They offer an advanced dashboard which is easy to use and monitor payments. They should be simple yet innovative
- Check for the pricing and onboarding process of the payment gateway API integration. The onboarding should be simple and fast with 24×7 support. Payment APIs should offer plugins for popular platforms and enable web, mobile and API integration. Businesses must consider the ease of use and available documents or tutorials for integration. Such documents contain the adequate information that developers often require to understand the API and its implementation
