From Black and White to Full Colour – The revolution of e-Commerce Payment Gateways

Thursday August 17, 2017

The 90’s saw the first access for businesses to communicate via email rather than sending a fax, telegram or making a phone call. That’s compared to the technology available today, before the internet went live on August 6th, 1991. But how did e-Commerce websites become so widespread today?

Manual payment processing

A long time ago before the internet era, businesses marketed their products and services through catalogues, t.v advertising and over the phone.

Mail order transactions were usually a cheque in the post, in addition to long periods of clearing time, or, a long process of credit or debit card details being passed through many exchanges before clearing.

In-store, retail was transacted by cash, cheque, or card, and non-retail clients were dependent on long hand credit and debit card transactions.

With MasterCard and Visa, card details would be collected through a manual point of sale machine and processed through the merchant bank before at some point finally being deducted from the card holders bank account, a process that could take days. This meant that although the customer had their goods, the funds had not yet been approved or delivered to the vendor.

This was the same principle for cheques, although the consumer could leave with their items, effectively the transaction hadn’t yet taken place and businesses were left without the guarantee of funds being available when the cheque finally arrived at the merchant bank.

As retailers began pushing for a more reliable payment processing solutions, in 1996, Jeff Knowles an engineer at WordPerfect at the time had the idea to create a PC based online processing service.

In 1995 only 16 million people (0.4%) of the worldwide population, were using the internet as a means of communication.

During this period the most progressive payment applications were from services providers like Worldpay who from 1989 provided payment processing services offering an all-combined package price for the manual mail order market, as well as point of sale transactions to businesses.

And so, a processing service was created, and the term ‘payment gateway’ was coined as Jeff Knowles became the inventor of the first payment gateway system, Authorize.Net and this shaped the way that we do business today as we know it.

The First e-Commerce Website,

Authorize.Net was first available in April 1997, and offered gateway services by collecting transaction details from merchants via email or fax communication and then processing it through a PC based third party software on their behalf.

Prior to this consumers had to go to a bank and complete the paperwork for a merchant account, but as
Authorize.Net developed later versions of the system which today include, processing of ACH payments for small and medium sized merchants, the company has rapidly grown and changed ownership.

Authorize.Net is now a virtual terminal and its invoice features can process manual payment, major credit cards, PayPal, Apple Pay, and Visa Checkout, and it can also integrate with Quickbooks.

Other earlier integrations of payment gateways were Paypal.

Paypal Bridge the e-Commerce gap

In 1999, Paypal was released to consumers for the first time and allowed users to send money via the Paypal platform and the funds would be immediately be credited and available for withdrawal from a bank account.

During the early 2000’s PayPal connected eBay shoppers to the world of e-commerce and the Paypal service allowed accessibility to what is now a primary method to pay for goods on the marketplace.

Prior to this, most payments between buyers and sellers on eBay were done by mailing cheques or other payment arrangements made directly between the buyer and seller.

This process was highly time-consuming because sellers had to wait to receive the cheque and then wait for the cheque to clear, which between countries would take weeks.

With eBay, Paypal rapidly grew its customer base some years later and eBay acquired Paypal.

Paypal’s product and user base continue to grow steadily, and today, more than 70% of all eBay sellers accept PayPal payments.

Payment Gateway Efficiency

Today, Payment Gateways play an integral role in facilitating e-commerce and is an essential tool for your customers payment experience.

Payment gateways are crucial in order for any business to provide an immediate, safe and reliable service transaction to any business transacting on or offline.

Today, the advantages seen by implementing a payment gateway for your business include streamlined payment efficiency, multi currency transactions, online banking transfers, and automated billing, to name a few.

Without the creation of payment gateways, a secure method for moving payment data immediately, the ability to conduct virtual commerce could not have happened. 

Written By Daniella Smithson




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