The Role of Payment Gateway in the Fintech Industry 

Payment gateways play a crucial role in the fintech industry as payment facilitators. These gateways are well known as the backbone of this industry, as it might not work without them. 

With the increasing adoption of online and cashless payments by customers, fintech payment gateways have become necessary. These help facilitate a streamlined connection between the merchant and the issuing bank, along with maintaining security and privacy for the customers.  

Not just this, but these gateways help resolve several other challenges that businesses in the fintech industry face regarding payment processing. 

In this blog, we will shed light on these challenges and how payment gateways contribute to the resolution. 

Let’s delve in! 

6 Challenges Fintech Industry Faces in Payment Processing 

1. Regulatory Compliance 

The evolving nature of the fintech industry and the continuous upgrades in compliance make it a challenge for businesses to keep up with the pace. 

Repeating the process of adapting to the latest compliance, again and again, might add to the cost and disturb the system with ongoing changes. An Accenture report says that financial institutions globally spend billions annually adhering to new regulations.      

However, it is advised that businesses comply with the necessary regulations to protect the data and confidential information of their users.  

2. Data Security 

Fintech companies handle a large amount of sensitive information and data, which can affect the owner severely if uncovered by an unauthorized party. Additionally, it can cause financial loss, reputational damage, and even regulatory fines. Based on a report by Capital.com, data theft and unauthorized server access have increased by 160% and 233%, respectively. 

Therefore, it is advised to invest in strong security measures like encryption, multifactor authentication, and fraud detection systems to ensure the full protection and security of the user’s data. 

3. Scalability Challenges 

Along with the growth of a fintech firm, the volume of transactions will also grow, which the existing system might not be able to handle with ease. This might cause the system to slow down, hampering its work.

A study conducted by Juniper Research shows that the global mobile payment transaction value will reach $8.8 trillion by 2027. This highlights the need for scalable systems with modern infrastructure. 

4. Integration Challenges 

This might pose a challenge while integrating a certain payment gateway. Or, they might want to integrate multiple but don’t know how to. 

Another challenge in integration is that different systems have different APIs and data formats, which makes it difficult to process the connection.  

5. Legacy Infrastructure

Many fintech firms using traditional methods or infrastructure might face challenges in coping with the new practices and modes of payment. According to PwC, 72% of fintech businesses believe that legacy systems are a barrier to innovation. This can make it difficult to partner up with modern companies and establish their position in the market. 

6. Difficult to Expand in the Global Market

Financial regulations and payment methods vary from country to country. According to the World Bank, there are over 200 different payment methods used globally, showcasing the variation that can hinder expansion.

If a fintech company sticks to a single payment method that is preferred in one country but not in another, that might cause concern. Different customers might prefer different payment methods, and if their favourite one is not available, they might be disappointed. Also, this may make it difficult for the business to expand into new markets. 

How Does a Payment Gateway Cater for the Challenges of Fintech?

A fintech payment solution or fintech payment gateway offers a variety of features and functionalities that help cater to all the above challenges. Let’s find out how!

Follows Regulatory Compliance

Payment Gateways in the fintech industry adhere to the latest regulatory compliances and required privacy standards. Additionally, they follow industry-specific rules and make sure that the business is working under the law. 

Provides Enhanced Security

Gateways offer advanced security and encryption methods to safeguard financial information. These methods include two-factor authentication, tokenization, encryption, fraud detection, and others. With this, customers and businesses feel more secure as the risk of unlawful activity, data breaches, and fraud gets reduced to a maximum. 

Offers Scaling Capability

As the fintech business grows, so will the number of transactions. Thus, along with a payment gateway, you require a payment processor to support a large volume of transactions. 

Offers Multiple Integration Methods

Not just one, two, or three, but five different integration methods are available for you to integrate a payment gateway. 

Let’s have a look

• Native Payment Gateway Integration- Connecting your application or website to a payment gateway and then to a processor. Users can make payments directly without needing to visit a separate website or service. 
• Custom Integration- Fintech businesses might have unique requirements that can be catered to through this type of integration. 
• API (Application Processing Interface) Integration- It is a foundation for many fintech businesses, as APIs act as a messenger between different systems, allowing them to share data securely. 
• Mobile Payment Integration- This type of integration focuses on connecting mobile wallets and devices to the business’s Salesforce platform. With this, users can make payments from their smartphones, offering a fast and convenient way to transact. 
• Recurring Billing- With this integration, you can streamline your recurring payments. You can ensure timely payments as well as a streamlined revenue collection process. 

Offers Frequent Updates for Modernizing Infrastructure

Fintech payment gateways come with frequent updates, be it regarding security or new features. Thus, incorporating it into your business will contribute to modernizing your infrastructure, with the latest updates and additions made over time.  

Offers Global Expansion Capability

Payment gateways allow multiple payment methods and currencies, enabling businesses to accept payments across the world. It allows businesses to broaden their market reach and provide customers with their preferred payment option to transact. 

Customisation

The payment gateway offers customization options as well to suit their particular requirements. Businesses can modify the payment methods that they require, allowing businesses to choose from a variety of payment options. 

There are other exceptional features that a fintech payment solution offers: 

• Of course, you get streamlined transactions that lessen the friction at checkout, and customers can complete their transactions with ease. 
• You get real-time insights into transaction data, which helps in identifying patterns and areas of strength and figuring out what can be done using this data. 
• You save money by integrating a payment gateway, as it modernizes your infrastructure and eliminates the need for repetitive updates and costs. 

A Fintech Business’s Success Story After Integrating Payment Gateway: A Practical Example  

Think of a fintech business named ABC that was struggling to prosper in the competitive market because of various challenges they faced in payment processing. They were following a traditional infrastructure and approach that gave rise to multiple challenges. 

Topping the challenge list, high transaction and payment processing fees impacted the business’s profit margins. 

Slow payment processing caused delays in order fulfilment, which ultimately affected the progress of the business. At last, the business struggled with the limited number of payment options that it could offer its customers. This resulted in inconvenience to shop and transact as customers could not find the payment option they were looking for. Additionally, this also impacted the sales of the business. 

To cater to these challenges, businesses require a fintech payment solution, i.e., a payment gateway. After integrating it into their business, ABC was able to achieve the heights they dreamed of. 

With a payment gateway, their transaction fee was reduced by 15%. They got competitive transaction fees and cost-effective payment processing, with no additional cost occurrence. 

The payment processing speeded up, helping in quick order fulfilment. This increased their customer satisfaction rate by 20%. Also, it supported multiple payment methods, which offered convenience to the customer in selecting their preferred one, resulting in a 25% increase in sales.  

The implementation of the payment gateway had a positive impact on ABC‘s business operations, leading to increased sales and improved customer satisfaction. 

This success story showcases how the right payment gateway can drive growth and success for fintech businesses. 

Conclusion 

Leveraging a payment gateway into your fintech business can help you drive growth and increase revenue. With all the features and functionalities listed above, you can transform your challenges into feasible solutions. 

Do you wish to achieve the same benefits in your business? Well, to optimally use a payment gateway, you require a payment processor. 

ChargeOn is a 100% Salesforce native payment processor that helps you integrate 15 payment gateways to offer your customers a favourite payment option. Also, you get assistance with various other features it offers, including Salesforce recurring payments, tokenization security, payment link requests, multiple currency support, and a lot more!