The payment gateway is an important aspect of financial transaction management for businesses. A smooth, reliable payment gateway is key to maintaining customer satisfaction, revenue flow and efficient operations.

Unfortunately, though, payment gateway outages do occur, and they can lead to significant business disruptions.

Given the potential financial impact and damage to customer relationships, businesses must understand how to prepare for and manage such outages. This knowledge can help mitigate losses, maintain customer trust and ensure that services are restored quickly. Chances are, you already know how important it is to closely monitor your payments infrastructure and try to provide a seamless transaction experience for your customers. Here’s what you need to know about preparing for payment gateway outages and responding to them.

What's in this article?

• What is a payment gateway?
  
• How do payment gateways work?
  
• Why do payment systems go down?
  
• How to prevent and respond to payment system outages
  
• Payment gateway and processing outages: What to do
  

What is a payment gateway?

A payment gateway is a digital service that processes credit card or direct payments, enabling transactions for businesses ranging from e-commerce sites to traditional brick-and-mortar shops. A payment gateway functions as a bridge for the transmission of information between a payment portal, such as a website or a mobile application, and the bank or front-end processor. It assumes the role of a digital mediator between the customer’s bank and the business’s bank, ensuring the transaction’s success.

When customers input their card details to make a purchase, the payment gateway verifies these details, confirms the availability of funds and ultimately executes the transaction. This service allows businesses to accept online transactions in a secure, efficient and prompt manner.

How do payment gateways work?

A payment gateway operates as a digital intermediary in online transactions, ensuring that payments from customers are processed quickly and securely. This service enables businesses to validate customer payment details, check for available funds and facilitate the transaction. Here’s a step-by-step description of how a payment gateway works:

• Transaction initiation: The process begins when a customer makes a purchase and inputs their payment details – such as credit card, debit card, digital wallet or bank account information – on the business’s website or app.

• Encryption and communication: The payment gateway secures the customer’s data by encrypting it before transmitting the information to the business’s acquiring bank or payment processor.

• Bank’s role: The bank sends this information to the issuing bank (the institution that issued the card to the customer) via the relevant credit card network to request transaction authorisation.

• Authorisation: The issuing bank verifies the transaction details, checking whether the customer has sufficient funds or credit. If the transaction is approved, the issuing bank sends back an authorisation code through the same communication path.

• Completion: The payment gateway sends this authorisation back to the business, which means that the transaction can be finalised.

• Settlement: At the end of the business day, the issuing bank sends the batch of authorised transactions to the merchant account (or payment processor, if they’re the entity that provides merchant account functionality for the business) for settlement. The acquiring bank or payment processor transfers the funds to the business’s main business bank account.

The payment gateway plays a pivotal role in maintaining security, efficiency and transparency during online transactions.

Why do payment systems go down?

Payment systems, including payment gateways, can go down or experience interruptions for a variety of reasons. These interruptions can cause a number of problems for businesses, including loss of sales, disrupted cash flow, erosion of customer trust and elevated operational costs. So why do payment gateways and payment systems go down? Here are a few common causes:

• Technical issues
  Technical issues can occur due to hardware or software malfunctions, such as a server outage, network connectivity issues or bugs in the system’s software.

• Scheduled maintenance
  Occasionally, payment systems need to undergo planned maintenance or upgrades. These necessary interruptions can lead to temporary downtime.

• Security threats
  In the event of a cyberattack or suspected fraudulent activity, a payment system may be temporarily taken offline as a precautionary measure while the situation is investigated and resolved.

• High transaction volumes
  During peak times, like major sales events or holiday shopping seasons, the transaction volume may exceed the system’s processing capacity, leading to slowdowns or outages.

• Third-party service issues
  Payment gateways often rely on other third-party services, such as Internet service providers, hosting services or the banking network. If any of these third-party services experience problems, it can affect the payment gateway’s availability.

• Data centre problems
  A number of potential issues, ranging from hardware failures to natural disasters, can result in service disruptions at data centres.

Obviously, any downtime can have a significant impact on businesses, particularly those that operate only online. Payment providers work hard to minimise these occurrences and ensure that their systems are robust and reliable, but even with the most diligent efforts, it’s impossible to avoid downtime altogether. Businesses must take their own proactive measures to mitigate these vulnerabilities.

How to prevent and respond to payment system outages

Payment gateway outages can cause major disruptions for businesses, particularly online businesses for which seamless transactions form the crux of customer experience. When these critical services go down, businesses risk not only immediate revenue loss but also damage to their reputation and customer trust, which can have long-lasting effects. Businesses need to be proactive about minimising such outages and have a well-prepared response plan in place.

Here are some steps that businesses can take:

• Diversify payment providers
  Relying on only one payment provider could leave a business vulnerable if its sole payment gateway experiences an outage. By employing multiple payment providers, businesses can ensure that if one gateway goes down, they can reroute transactions through another. Redundancy in payments infrastructure can mitigate the risk of a complete transaction stoppage.

• Conduct regular system checks and monitoring
  Beyond diversification, regular system checks and monitoring also form a critical part of preventive maintenance. Frequent and thorough assessments of the payment system, including hardware, software and network connectivity, can detect potential issues before they evolve into fully fledged outages. Monitoring system performance and transaction success rates can help businesses spot patterns that signal an impending problem.

• Invest in fraud detection and prevention
  Put in place comprehensive cybersecurity measures to protect your business and your customers. Security breaches not only threaten customer trust and privacy but could also lead to payment gateway outages. Regular system updates and patches, consistent security audits, penetration testing and educating employees about the latest payment fraud threats and best practices can improve the system’s resilience against security threats.

• Choose a reliable payment provider
  While no provider can guarantee zero downtime, some are more reliable than others. It’s important to assess a provider’s uptime history, how they’ve managed past outages, the level of customer support they provide (especially in crisis situations) and the robustness of their infrastructure. Choosing a provider with a history of high uptime and proactive support can benefit you in the long run.

• Stay informed about the maintenance schedules of payment providers
  Providers often need to take their systems offline for planned maintenance or system updates. Being aware of such planned downtimes can allow businesses to prepare and inform their customers in advance, reducing customer frustration when maintenance occurs.

Every preventive step that you take reduces the risk and potential impact of payment gateway outages, and implementing these measures equips your business with the tools to respond effectively when outages occur. Businesses can use these potential challenges as opportunities for strengthening their systems, processes and customer relationships.

Payment gateway and processing outages: What to do

Even after implementing all possible preventive measures, a business can never entirely eliminate the risk of an outage. Having a comprehensive contingency plan is important. This plan should detail how to communicate effectively with customers during an outage and reassure them about the measures in place and expected resolution time. It should also outline the backup payment methods that could be implemented and the process for escalating issues to the payment provider to expedite the resolution. It’s helpful to regularly update this plan to incorporate lessons learned from past outages.

Here are several steps that businesses can take during downtimes:

• Communicate with customers
  Clear and proactive communication is important to minimise the damage that gateway outages can do to your customer relationships. Generally, customers understand that the tech systems that power digital payments are not perfect, and they won’t hold you responsible for occasional outages – as long as you communicate about outages in a timely and transparent way. It’s important to acknowledge the issue, apologise for the inconvenience, provide updates about the expected resolution timeline and offer alternative solutions if possible. This open dialogue should occur across all customer touchpoints, including the business website, email and social media channels.

• Stay in contact with your payment processor
  Your customers aren’t the only people that you want to connect with during outages – make sure that you regularly communicate with your payment provider as well. They can provide updates about the nature of the issue, the estimated time for resolution and any possible workarounds. Businesses can also escalate the problem if the resolution is taking longer than expected or the outage is causing significant disruptions.

• Implement backup payment methods
  Alternative payment methods can be a lifesaver during an outage. This could mean having an alternative payment gateway on standby, offering manual payment methods such as direct bank transfers or facilitating cash transactions for physical shops. Such redundancy ensures continuity and minimises revenue loss for businesses.

• Capture learnings from the experience
  Once the outage is resolved, shift the focus from immediate response to learning from the incident. Conduct a thorough review to understand what led to the outage, how it was handled and the impact on business operations. This analysis should extend to the payment provider’s performance, examining their role in the incident, their responsiveness and their proposed solutions.

Your ultimate goal during a payment processing outage is to maintain timely communication and preserve trust with your customers. By managing the situation effectively, you can reassure customers that you’re working hard to resolve the issue and minimise any inconvenience.

When payment gateway or processing outages occur, they test a business’s resilience and customer relations strategy. The approach that a business takes during such disruptions can significantly influence both the immediate impact on business operations and long-term customer trust. Managing these events successfully can strengthen business systems and improve customer relationships.