Payment Gateway process

Question

I have to integrate a payment gateway in my web app. I am negotiating with PGs to get most suitable offer. Most of them have:

1. Setup Fees
2. Annual/Monthly Fees.
3. Per Transaction Fees (1%-5%)
4. Rule of thumb is- Higher the setup fees, lower Transaction Fees.

My question here is "Are payment gateways compulsory?" I have used several sites like ebay, flipkart, amazon etc which take credit card info directly on their portal, authorizing it directly from bank, bypassing 3rd party payment gateways. (This is how it seems.)

• What happens behind the scenes here? What is the process to directly accept payments and authorize it from bank?
• What tentative transaction volume is needed to make the above scenario profitable?

Answer 1

I used to work for bluesnap (previously called Plimus) which is an on-line payment-processing company. A payment-processing company - is a company that authorizes and charges the credit-card against the processing gateways.

Many people confuse payment-processing companies with processing gateways. As a small business you can either use one of the payment-processing companies or use self-service such as Authorize.net, Paypal etc.

There are plenty of resources over the web that explain about payment-processing but I don't think that it will be very interesting to read, unless you decide to build your own gateway...

In order to work directly against one of the gateways you need to process millions of transactions per day - which I don't believe you have the capacity.