Why Payment Processing Companies are a necessity in Nigeria

We haven’t covered payment processors alone and payment processing companies. With this post, we are going to explore the reasons why payment-processing companies are needed in Nigeria.
But first, let’s start small.

What is Payment Processing?

Payment Processing is a term used to describe how transactions are automated between the customer (buyer) and merchant (seller).

Payment processing is a vital part of every successful online transaction and can be used for small businesses, startups and e-commerce stores because the basis is the same.

what is a payment processor

What is a Payment Processor?

These are the people that carry out payment processing.
Payment processors are the financial institutions or companies that work in the background providing all the payment processing services used by an online merchant or seller.

Payments processors are the bridge that connects both the merchant or seller account and payment gateway by instantaneously passing across informing back and forth between the seller’s account and payment gateway.

Payment processors also make sure that as information is instantaneously passed, such information is kept secure and airtight and everything happens and works smoothly for the end user.

payment processing process

Standard Online Transaction Process

Let’s go through a standard online transaction process together. In this example, we are going to be looking at every detail of the payment process and also tracking where the money goes, who does what and which individuals or companies are involved.

Customer/Buyer – Payment Gateway - Payment Processor - Card’s issuing bank – Payment Processor – Approval/Decline - Payment to Merchant/Seller.

Let me explain.

1. Customer/Buyer

Let’s call him Frank, he visits your e-commerce website, finds a product or service he likes, makes a purchase by providing his card information and clicks on the BUY button -waiting a few seconds to see a Transaction successful message.

In those few seconds, the following steps are occurring rapidly;

2. Payment Gateway

Frank’s transaction details are sent to the payment gateway which contains his personal and debit card information.

This information forms the transaction details which are securely sent from the payment gateway through the payment processor while referencing the merchant ID number and finally arrives in the merchant’s account.

3. Payment Processor

The payment processor also receives the transaction details and contacts the issuing bank to check if Frank has enough money to make this purchase or if his credit card details are correct or valid.

It’s at this stage that if Frank provided the wrong debit card number or made a mistake with any of his debit card details or billing address, the transaction will fail.

Also, if Frank has limited funds in his account to pay for the product or service, the transaction fails.

4. Card’s Issuing Bank

The bank Frank got his debit card from, will accept or decline his purchase due to either lack of funds, wrong card information, invalid card information, wrong billing address and so on.

The approval or decline information goes back to the payment processor.

5. Payment Processor

The payment processor sends the transaction approval message or declines message to the payment gateway.

6. Approval/Decline

If the message was approved, the sale can go on. The merchant/seller would also be informed of a successful transaction and would start preparing to ship out the items to Frank.

This is when Frank would be Transaction Complete and receives a shipping date stating when his product or service would be delivered or rendered to him.

7. Payment to Merchant/Seller

Normally payment is held from the merchant/seller until he fulfils his purpose, once he does what he needs to do, the bank that issued Frank his debit card releases funds to the merchant’s bank and after a short settlement period, the money is paid to the merchant/seller.

Why money is not given directly to the merchant is to protect the buyer, it’s called Buyer Protection because it protects the buyer from merchant fraud and makes refund faster because the money is still with the banks.

Reasons Why Payment Processing Companies are needed in Nigeria

Just how important is payment processing in Nigeria?

To make online payment transactions work

Try making an online payment without a payment processor, it won’t probably work because as illustrated above, in a typical online payment process, payment processors are used twice in the whole equation and they act as a bridge instantaneously sharing data making online payment work.
Simply put, without payment processors, there wouldn’t be online payment.

Good for Business

Payment processing services are good for all kind of business from small businesses, startups, medium-sized business, e-commerce stores, brick and mortar stores too can add online payment services as part of their payment options.

When something is good for business, it means increased cash flow, low cost of integration and reduces labour costs which makes your business more profitable.

Good for Customers

This takes into account, all the benefits online payment; payment gateway and payment processors give to a customer.
  • Fast and smooth online payment experience
  • Safe and secure environment.
  • Gift of convenience – Customers can make payment from anywhere at anytime
  • Saves money for transportation and miscellaneous.
  • Easy to use.

Technical Errors

Payment processors reduce the chances of errors in an online payment transaction drastically but adding the human element as part of the payment transaction process increases the change for errors which can cost both the buyer and seller money.

TechAdvance is a payment application development company with a strategic focus in developing and deploying niche payment companies to serve the needs of large public and private sector organisations in Nigeria.

No comments:

Post a Comment