Digital Wallets Explained

Convenience at Your Fingertips

Learn all about what digital wallets are, the benefits of digital wallets for businesses and their role in the future of cashless transactions.
January 8, 2024
Gautham Gopakumaran
5 min read

Today, we live in an increasingly cashless world. With the rise of e-commerce and mobile payments, consumers now expect the ability to pay from anywhere, at any time. No longer do we need to carry wads of cash or even plastic cards. Now we can pay with just a tap or click of our mobile phones. 

This seamless, digital payment experience is made possible by digital wallets. 

Did you know in 2022, UAE digital wallet market was valued at USD 3638.21 million, and is anticipated to grow with CAGR 12.12% for next 5 years.

Chart Image
UAE Mobile Wallet Market


Digital wallets represent the future of payments and in this post, we look into why e-commerce is not the only industry that needs to be prepared for this change. 

What are Digital Wallets?

A digital wallet is a software application or digital service that allows users to store payment information and/or money digitally for transactions. Rather than using physical wallets to carry cash and cards, digital wallets allow users to pay via their mobile device or the web.

Some popular examples of digital wallets in the UAE include:

  • PayBy 
  • Payit
  • e& money by Etisalat
  • Apple Pay
  • Google Pay
  • Samsung Pay
  • PayPal
  • Careem Pay
  • AliPay+
  • CashPay

These digital wallet apps and services securely store money, payment methods like debit/credit cards, bank accounts, and gift cards. Users can easily access their stored payment methods to checkout online or tap-to-pay at contactless terminals in stores. 

Leading digital wallets utilize tokenization for added security, generating digital tokens to represent your actual payment details.

What are the benefits of digital wallets for businesses? 

Digital wallets offer several key benefits for merchants and businesses. By accepting digital wallet payments, companies can increase sales, reduce fees, and gain customer insights.

Increased Sales

The ease and convenience of paying via digital wallet encourages customers to make more purchases. Studies show that when businesses accept mobile wallet payments, average transaction values and purchase frequency increases. Customers are more likely to make impulse buys and repeat purchases when checkout is quick and seamless.

Lower Transaction Fees 

Processing digital wallet transactions is less expensive compared to traditional payment methods. Credit card processing fees average 2-3%, while digital wallet fees are around 1%. For small transaction amounts, digital wallets can be nearly fee-free. These savings quickly add up for merchants with high volume.

Improved Customer Analytics

Digital wallets provide richer customer data than credit cards or cash. They allow businesses to track accurate transaction histories and purchasing habits. Companies can use these insights to better understand customers, personalize offers, and boost engagement through loyalty programs. The enhanced analytics lead to stronger customer relationships.

What are the benefits of digital wallets for customers? 

Digital wallets provide several key benefits for customers looking to make purchases and payments on the go. Compared to cash or physical credit cards, digital wallets enhance convenience, security, rewards programs, and accessibility.


Digital wallets allow customers to check out faster, both online and in stores. Instead of fumbling for the cards in your wallet, you can pay with your smartphone in just a few taps. Digital wallets also store payment information, shipping addresses, and more to expedite the checkout process. Customers can breeze through checkout without needing to input tons of information.

Many digital wallets also support contactless payments through NFC technology. You can hold your phone near a payment terminal to pay almost instantly. This is much faster than chip/swipe payments or handling cash.


Digital wallets utilize encryption, tokenization, and other security measures to protect your data. This makes them generally more secure than physical payment methods. If your phone is lost or stolen, you can remotely disable the digital wallet to prevent unauthorized access.

Many digital wallets also support biometric login with fingerprints or facial recognition. This prevents thieves from accessing your wallet even if they steal your phone.


Digital wallets often integrate with merchant loyalty programs and credit card rewards. Customers can store their memberships and earn points, miles, and cash back through the wallet. Rewards are applied instantly when you pay with a digital wallet.


Digital wallets centralize all your payment methods in one place. Customers can easily switch between credit cards, gift cards, coupons, and debit cards as needed. Everything is available right from your smartphone for maximum convenience and flexibility.

The Future of Digital Wallets

The future looks bright for digital wallets as more people embrace contactless payments and new integrations expand functionality.

Increasing Adoption of Contactless Payments

Contactless payments are on the rise globally. Digital wallets like Apple Pay, Google Pay, and Samsung Pay have helped accelerate consumer adoption of tap-to-pay. The COVID-19 pandemic further demonstrated the appeal of touchless transactions for safety and convenience. Surveys show a majority of consumers will keep using contactless even after the pandemic, indicating it is here to stay.

Integration with IoT Devices

As the Internet of Things expands, digital wallets may integrate with connected devices like cars, appliances, and smart home systems. For example, your digital wallet could automatically pay tolls while driving or manage payments for an autonomous vehicle. Appliances could automatically reorder and pay for consumables like detergent. And smart home hubs could draw from your digital wallet to pay for services like energy use.

Cryptocurrency Support

Some digital wallets already enable storing and spending cryptocurrency like Bitcoin. As cryptocurrency gains mainstream adoption, support within digital wallets is likely to grow. This will make it easier for average consumers to use cryptocurrency for everyday transactions. And integration with digital wallets provides a more familiar user experience compared to standalone crypto wallets.

Wrapping up!

Digital wallets have completely changed the game when it comes to convenience and ease of making payments. With a digital wallet linked to your debit or credit card, you can make quick and easy payments anywhere with just a tap or scan of your phone. There's no more fumbling for cash or cards. 

The benefits of digital wallets are numerous - they save time, provide security, allow you to track spending, and work across platforms and devices. As more retailers and services adopt digital wallet payments, consumers will find paying for anything from a coffee to a cab ride is just a couple of taps away.

The future is all about streamlined, integrated digital experiences, and digital wallets fit right into that vision. Payments are frictionless yet secure. Transactions become embedded into platforms and apps rather than separate experiences. As money becomes more digital, digital wallets will continue leading the way.

For those looking for the ultimate payment convenience coupled with next-generation financial tools like digital wallets, PayBy is the solution you’re looking for. 

PayBy delivers the future of payments today. Consumers get the convenience they demand while businesses get the advanced tools they need - it's a win-win for all. 

Want to know more? Book a demo of PayBy today.

Ready to track and record transactions more efficiently?

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How to manage inventory with a POS system | PayBy

Gautham Gopakumaran
5 min read
June 12, 2024
POS, Inventory Management

Without inventory management, your supply chain will be all over the place. 

Inventory management is your guide to aligning your inventory from manufacturers to warehouses to customers. In short, it helps you strategically time demand with supply, i.e. have your product in the needed location at the right time.

Inventory discrepancies lead to either overstocking or understocking situations. Both have a direct impact on your business's revenue. 

When you are understocked, you lose sales, and when you are overstocked, you risk resources being obsolete and wasted. Besides money and time, you are also at risk of business failure. 

Low-profit margins coupled with increased overhead expenses ultimately lead to failure. How well you manage your inventory dictates your business’s success.

This is what inventory management is for. It helps a business find the right balance between demand and inventory. In fact, businesses have outdone their stock management with inventory management systems connected to sales. 

Inventory management systems are the tools for modern-day management that ease this process of ordering, storing, and using inventory. They work wonders, especially since they automate end-to-end production with sales intelligence. Businesses can reach full efficiency in operations with systems like a point-of-sale (POS) system.

This article is a walkthrough of inventory management with POS system, its significance, and how your business can make the best use of it.

Recap: What is a POS system? 

A POS system unlocks a new avenue for handling sales and inventory. How does sales tie-up with inventory help you ask? You need tools and inventory management solutions unique to your business and revenue. Feeding real-time sales data to inventory management can help you get there.

Gone are the days of manual labor or even separate software solutions for all functions. A POS system is one software solution for sales, payment processing, and inventory management altogether. This modern solution is designed to update inventory with real-time data. 

Every time a stock unit is sold, it updates the inventory level instantly. It also facilitates sales and processes payments on the same interface. 

Real-time insights on payments and inventory are the keys to optimal inventory management. Operations, sales forecasting, and decision-making are easy with access to accurate real-time data.

How does a POS system help with inventory management?

Maximize the usage of a POS system to avoid stockouts, overstocks, shrinkage, and waste. Here’s how using a POS system to manage inventory can help:

1. Real-time inventory tracking

The best part about a POS system is real-time inventory updates across all channels and devices. Instant updates help attain accuracy and visibility in stock levels. Real-time access to inventory helps with its management and sales. Sales reps get real-time access to stock levels, so they can better assist the customers. Plus, you will have complete inventory control. You’ll be able to prevent stockouts and restock on time. Instant updates on stock are the best way to meet demand levels without unnecessary storage and handling costs.

2. Automated reordering

POS system comes with automation capabilities. You can stay ahead in stock management by automating the process of reordering. You can set alerts and low-level triggers that prompt order placement. Any repetitive tasks and workflows can be automated with the POS system. Other functions that can be automated are price updates, shipment notifications, reorders, customer and supplier communications, analytics on stock performance, and more. You should look for a POS system that gives you the luxury of flexibility and means to automate what you find fit to automate, not what the software vendor dictates.

3. Minimizing stockouts and overstocking

Optimizing inventory is another powerful feature of a POS system. Using this feature you can run through your inventory data and find unique insights. Insights can help you understand market demand and how much stock you must hold to prevent both stockouts and overstocking situations. With access to metrics like inventory turnover, sell-through rate, stock cover, gross margin return on investment, and more, you can understand demand, your show-stopper products, and underperformers. These insights will help you optimize prices, promotions, and reorders. You’ll be able to expound on efficiency and strategy to maximize profitability.

4. Improved sales forecasting

With automation and insights, POS systems give you ample time and the right means to make impactful decisions. The POS system can produce reports on sales trends, inventory turnover, and customer preferences. You’ll have everything at your disposal to pick up trends, forecast sales, and time them with unique inventory and sales strategies. These data-driven insights and decisions give you enough room for product innovation and expansion as well. 

Recommended read: How does a POS help with cash management

5. Reduced manual work and errors

Manually tracking and maintaining inventory is time-consuming. Plus, there’s a high probability of errors. Even if you use spreadsheets to maintain inventory, you risk human errors borne out of manually feeding the data. The POS system is built to reduce manual work and errors. Its powerful features can not only simplify and automate multiple inventory management tasks, but they are also accurate.

How to find a POS system suitable for your business?

Multiple POS systems claim to do the job, but how do you pick the right one for your business? You need to take your time and find the right system so you can make the most of this seamless technology. Here are some factors that can help you make the right choice:

1. Integration capabilities

The first thing you must seek is whether the technology can integrate into your existing tech stack. This includes the commerce platforms, accounting software, and customer relationship management (CRM) tools you use. Without easy integration, your employees will have a hard time obtaining data efficiency in stock keeping. Integration errors lead to data blockages. So, you must ensure that you check the software’s API and integration support.

2. Room to scale

Choose a POS system that is not limited by scale. It should be able to support your business needs and aspirations when you are starting out and also when you are ready to scale your business. It must cater to your expanding product line, sales channels, and scaling operations. 

3. Great user-experience 

A complex-to-use system is as good as a manual process. So prioritize checking out the POS system’s interface and choosing the one that’s easy to use. Go for the one that requires minimal staff training. Solutions with great user interfaces make it easy for your employees to maintain inventory and for customers to make purchase payments. Ask for a demo or trial before you make the call.

4. Features and tools

Built-in features are another critical factor to weigh. You first need to pin down your expectations and needs from the POS system. This helps you find the system that can best cater to your business. Some of the features you want to look out for are real-time inventory tracking, automated reordering, sales reporting, and customer management. Some POS systems also offer features such as loyalty programs and more. Check them all out to make the right decision.

5. Pricing

The price of a POS system is not just limited to a subscription fee. It might come with upfront costs, hidden fees, and additional charges for updates or support. They collectively make a big expense for your organization, which is why you need to check out the pricing models. 

6. Customer support

It is also critical to check your software vendor’s support system. If they are not easily accessible or helpful, you must skip them. You need a vendor providing instant support and resolution, which can otherwise impact your business’s revenue because of inventory discrepancies and payment failures.

If you are ready to level up your business operations, you must start by improving inventory management with POS systems. Embracing a POS system will upgrade the way you manage inventory and introduce efficiency with minimal effort. Your employees will thank you for the support, and you will have all the data insights to make the right decisions, maximize profits, and scale up your business.

PayBy’s point-of-sale solutions are built to simplify in-person cashless payment transactions between consumers and businesses. This smart POS system is built to suit small to large merchants. 

Enjoy in-depth and real-time insights with data visualization to track transactions, number of sales, revenue, profit margin, inventory sell-through rates, cashier performance, and more with PayBy’s POS system. That’s not all. We also offer QR code payments, a smart box to receive and refund payments, the ability for merchants to check daily transactions, and so much more.

Get started with PayBy today.

What is Wage Protection System (WPS) in UAE | PayBy

Gautham Gopakumaran
5 min read
June 12, 2024
WPS, UAE Regulation

WPS or Wage Protection System has been around since the year 2009, facilitating easy and timely wage distribution in the UAE. 

Though it’s been a while since it came into force, not everyone is aware of its functionality and importance. Employers and employees alike have a hard time keeping up with this evolving salary transfer system which was built to make their lives easy.

Not only does WPS lay down employees' rights but also makes it easy for employers to build an easy salary disbursement system that’s compliant with labor laws.

Curious to know more? This guide answers all your questions about the wage protection system in the UAE.

What is the Wage Protection System (WPS)?

Simply put, the Wage Protection System, most commonly referred to as WPS is an electronic medium to transfer salaries in the UAE. The Ministry of Human Resources and Emiratisation (MOHRE) and the Central Bank of the UAE came up with this system in the year 2009 to practice timely and precise salary disbursement. 

This system aims to not only protect the interests of the employees but also help ease business practices and their legal obligations. This system ensures whatever is promised to the employees, is fulfilled, and employers can do it seamlessly. The system went on to become a crucial factor in the UAE’s labor market. 

What function does WPS serve?

UAE, the most popular choice for expats, had a grave concern - irregular salary brackets and disbursals. The need of the hour was a uniform system of salary disbursal and thus WPS came into being. This framework had just one ask - for the employers to disburse salaries electronically via authorized financial institutions. This centralized system also made it easy for the concerned authorities to monitor and control wage disbursement. 

What’s in it for the employers, you ask? Well, moving the disbursal process to an electronic medium gave employers the best of what automation had to offer. Companies started saving a lot of time, effort, and resources while also enjoying efficiency. 

Other perks of this system were slashed disputes and salary disagreements. Employers and employees had proof of legal evidence which uplifted the integrity and efficiency of the payment process. This simultaneously brought down labor conflicts and legal liabilities.

As for employees, their rights are now recognized. They are compensated appropriately and timely without having to ask for or fight for it.

How did the Wage Protection System Evolve?

The history of the Wage Protection System (WPS) goes back to July 2009. It was formed as a part of Ministerial Decree No. 788 to ensure employee wellbeing. This system was initially formed to help fight inappropriate practices employers used to escape paying wages, like having offshore accounts and other common instances such as wrong or delayed payments.

But the labor market has been evolving. To match the needs, the authorities have been fine-tuning this system to introduce new regulations or make enhancements to the current ones. 

The system saw fresh updates in Ministerial Decree No. 739 of 2016, 2019, and 2022. The new updates have massively contributed to the system, strengthening its power and adaptation to the needs of human resources. Fresh perspectives from the employers’ angles have also been introduced to help businesses. All these efforts have only made WPS more reliable, relevant, and important to employers and their employees.

What are the key components of WPS?

WPS is a huge contributor to enhanced financial stability and confidence in the UAE’s labor market. Precisely, these components were the key contributors:

1. Efficiency in payouts

As the prime objective, WPS ensures diligent observation and supervision of wage payments by employers. It ensures the incorporation of best and fair wage disbursal practices. 

As a rule of thumb, employers need to upload the required information and documents to verify the agreement terms signed with the employee. The system also scans the documents to ensure the stated terms and conditions are compliant with the labor laws and secure employees' interests. It is compulsory for all private organizations in the UAE to adopt this practice to ensure employee protection. 

2. Punctuality in disbursement

Another core objective of WPS is timely salary disbursals with no delays. With the verification of documents, information, and employees' salaries, a set of payment instructions is released to the financial institution responsible for the disbursal. 

These institutions confirm that wages are complaints and then implement the process of transferring funds to the employees’ accounts. Employees' experience boosted confidence with timely disbursals and employers enjoy the reputation of being compliant. 

3. Structure in disputes

Not only does the system lay down terms and conditions for timely and appropriate wage disbursals, but it also lays down a structure to address and resolve wage-related disputes. The framework dictates MOHRE as the decision-making authority of the initial stage. 

MOHRE helps conflicting parties negotiate and find a common ground for resolution. Otherwise, the issue can then be escalated to Labor Disputes Settlement Committees. With the power to issue binding rules, these committees further help solve the dispute. This proposed approach drives peace by preserving and enforcing employees’ rights.

4. Improvement in compliance

It is compulsory for employers to adopt WPS and be compliant. Otherwise, this system also lays down ground rules for punishment if there’s a violation. Non-compliant employers have to face severe penalties such as operational restrictions and fines. 

What are the benefits of WPS?

WPS enforces transparency for both employers and employees as a common benefit. This collectively uplifts the nation’s growth and broadens the possibility of foreign investment. Here are the other benefits:

For employees:

  • Timely payout of wages
  • Fair salary brackets and wages
  • Reduced wage-related labor disputes
  • Safeguarded rights in the private sector
  • A productive work environment for employees

For employers:

  • Better & efficient payroll management
  • Reduced administrative burdens
  • Time savings with automation
  • Compliance with labor laws
  • High reputation that attracts skilled labor

How to prepare for the Wage Protection System?

Before you kick start the process of adopting the WPS system (which is a must if you want to do business in the UAE), here’s a pre-to-do list you must complete: 

  • Have a corporate bank account registered in the UAE
  • Sign a contract with a WPS agent (a bank, exchange house, fintech, or any other financial institution)
  • Create a payroll cycle according to Ministerial Decree No 788
  • Confirm to pay 70% of all staff or 75% of wages or salaries
  • Agree to pay fees, charges, or any other WPS expenses

When you are all done with the list, follow it up with a 4 step framework to register for WPS:

  1. SIF - get started with preparing a SIF or Salary Information File. This file should provide employer and employee details like CTC, Basic Pay, perks, deductions, etc. Make sure you submit this file every time you release a payroll. 
  2. Verification - MoHRE in partnership with the central bank will now go through the file and give you a go-ahead. Make sure you adhere to all the rules, regulations, and compliance requirements.
  3. WPS agent buy-in - if approved, MoHRE and the central bank will now notify the WPS agent to go ahead with payment processing. You will be notified in case of discrepancies, but it is smart to avoid them as they may come with penalties and fees.
  4. Payment - for the last step, the WPS agent now disburses the salary from the employer’s account onto the employee’s account.

The WPS framework is the perfect win-win situation for employees and employers. As a company owner, you must register with WPS to comply with labor laws, enjoy automation support & efficiency, and uphold a high reputation.

To know more, read this guide to know the nitty-gritty of WPS.

Need help with WPS registration and compliance? PayBy can help. 

We offer digital solutions for payroll integrations and wallets. This comes with the benefit of instant salary disbursals to wallet cards that are compliant with major UAE regulations. Above all, you can enjoy digital onboarding, payroll transfers, tracking, and more.

Get started with PayBy today


What is WPS in the UAE?

WPS or Wage Protection System is a framework to secure the interests and rights of employees in the UAE. It mandates electronic wage transfer for private-sector employers. 

What is the importance of WPS Salary in the UAE?

It is mandatory for every MoHRE-registered employer to adopt WPS and practice WPS-compliant salary disbursal methods.

How to know if my company is WPS compliant?

Anyone can check the WPS status of an employer by visiting MoHRE’s official website.

Are companies with few employees required to register with WPS?

If your company has a headcount of minimum 10 employees, you must register with WPS.

How do payment gateways help with chargeback management | PayBy

Gautham Gopakumaran
5 min read
June 12, 2024
Payment Gateway, Chargeback

The digital shift is today’s reality, more vividly in the payment industry. Digital transactions are super convenient and have changed the face of payments. But it also has its share of challenges.

Some of the common challenges include safety and security issues, technical challenges, geographical limitations, payment processing downtime, and chargebacks.

While they all affect your business’s finances and cashflow, one of the most challenging ones to handle are disputes and chargebacks. If a business sells to global markets and manages records manually, they can potentially end up spending hours on the audit process and still lose the case.

In this blog, we give you a quick recap of what chargebacks are, common chargeback reason codes and how payment gateways like PayBy can help you prevent them.

What are chargebacks?

When a customer disagrees with a charge and disputes the transaction, it leads to what is called a chargeback. A successful chargeback reverses a payment and sends the amount back to the customer’s account.

But in addition to the reversal, the issuing bank or credit card issuer levies a fee on the merchant and the payment gateways.

This results in merchants experiencing revenue losses and paying additional fees, which affects their bottom line. A high chargeback rate can also lead to revoked payment processing privileges.


It is important to note that a chargeback is not similar to a refund. In a refund, the merchant voluntarily disburses funds for whatever reason. However, chargebacks are initiated by customers mostly via the issuing bank.

Here are the steps for how a chargeback is processed:

  • Dispute initiation - a customer connects with the issuing bank to dispute a transaction for a reason. The issuing bank, in partnership with the acquiring bank, lodges the dispute and processes it. Money is debited from the merchant’s account and credited back to the customer’s account. The payment gateway notifies the merchant of the transaction, following which the merchant can take action.
  • Merchant response - when notified, the merchant launches an investigation into the dispute. The merchant can choose to accept the chargeback or counter the dispute by submitting evidence to prove the request is invalid.
  • Issuer's decision - when the merchant counters the dispute to claim the request is invalid, a dispute resolution process is initiated. The issuing bank reviews all submitted documents to make a decision.
  • Potential outcomes - if the evidence is legit, the merchant wins the chargeback and the funds. Otherwise, the dispute and the chargeback are lost.

In this process, payment gateways play the role of notifying the merchants about the issuing bank initiating the chargeback. They also help with processing, managing and mitigating chargebacks in the future.

What are chargeback reason codes?

Issuing banks, while processing a chargeback transaction, issue an alphanumeric charge code. The purpose of the charge code is to inform the merchant of the reason behind the chargeback request. These reason codes are unique to card networks such as Visa, Mastercard, Botim, and more. Payment gateways may launch their own set of reason codes too.

These alphanumeric codes are carefully structured to educate the merchant about the underlying reason for the dispute. Some codes are alphabetic, like “DP”, illustrating the initials of the reason “Duplicate Processing”. While some are a combination of letters that explain the dispute group and numbers that point out the exact reason. For example - F14, where “F” is fraud and “14” is the reason.

Though the reason code system in chargeback management might differ, the categorization is more or less similar:

  • Processing errors
  • Authorization errors
  • Fraud
  • Customer disputes
  • Miscellaneous
  • Not classified

How payment gateways help manage chargebacks 

Chargebacks are not just merchant liability; they cost payment gateways a fee too. For company financials as well as better partnerships, payment gateways can help merchants with chargeback management.

Payment gateways assist merchants with better tools, features, accessibility, fraud detection, and management processes to resolve chargebacks. Some payment service providers go the extra mile to work with issuing banks for better merchant account status management. Here are some of the assistance from payment service providers:

Fraud prevention tools

Payment service providers maximize machine learning (ML) and artificial intelligence (AI) usage. These technologies have the power to detect and stop fraudulent activities. They can also pick up patterns of possible fraudulent activities and take the correct measures to cut them off.

Furthermore, the service providers deploy strict safety features such as multi-factor authentication (MFA) to authenticate users, card verification value (CVV) or card security code (CSC) to increase security, advance verification services (AVS) to compare and verify billing addresses, and more.

Dispute resolution features

Payment gateways provide guidance and support to resolve debit as well as credit card disputes. They offer an established process for dispute resolution that merchants can plug in and deploy. Besides being equipped with the process, they also provide real-time access to any data, documentation support, transaction records, communication channels, and evidence-gathering support.

They may also offer educational materials that walk merchants through best dispute resolution practices, strategies, compliance information, and more.


Some payment solutions can help merchants automate many mundane chargeback management steps. They help the company set up an automated chargeback alert to generate real-time triggers every time a customer requests a chargeback. Such prompt notifications leave enough time and room for merchants to chart a course of action in their favor.

Risk analysis

The chargeback resolution process is complex, time-consuming, and labor-intensive. It only makes sense to counter a chargeback and go through the entire resolution process when the odds are in your favor. Some payment providers can help you with just that.

They offer risk analysis based on all the data and documents. You can generate a detailed report of your winning or losing chances, or at least get a percentage win score. You can then analyze it to decide whether to fight a chargeback or accept it.

How can merchants prevent chargebacks with payment gateway assistance?

Spare yourself and your employees the hassle of chargeback resolution and strategize its prevention. Here’s what you can do:

  • Communicate clearly - practice clarity in communications. Communicate the terms and conditions of your product or service, features, pros and cons, agreements, policies, and more to your customers in an easy-to-understand manner. Eliminating misconceptions can reduce chargeback requests to a great extent.
  • Prioritize safety - choose the payment gateways that provide a high level of safety and security. You, your business, and your clients are in dire need of this. A couple of the safety measures you can follow are encrypting customer data for safe storage and following authentication practices like requesting multiple-factor authentication or CVV codes. AVS (Address Verification System) is another safety measure where billing addresses are cross-checked for verification.
  • Be thorough - have thorough steps in place to verify a transactor and the status of the transaction. Always confirm if the product was delivered, its delivery time, and receiver. As the merchant, you also need to have a thorough billing process. Display the charges and a breakdown in detail. Also, include any additional charges as and when they are levied.
  • Improve customer service - gaps in customer service often lead to chargebacks. You must provide your customer support team with everything they need to resolve customer queries proactively. You can also educate your customers to seek help from your helpline numbers before disputing a chargeback because it is faster.
  • Do follow-ups - you must monitor your chargeback rate and constantly try to improve it. You can always get started with your existing customers. Collect feedback from them to identify the shortcomings, if any, and ultimately correct your chargeback rate.
  • Keep records - maintain a database of your customers as well as chargebacks. In this way, you will have access to any documents you might need as proof, for research and analysis, and more.
  • Implement Security - you can use your payment gateway’s fraud detection tool to keep malicious activities in check. These tools not only detect and stop existing types of fraud attempts but also analyze data to find emerging patterns.

Lastly, be aware and informed at all times. Know your industry regulations, legal obligations, limitations, best practices, and more to make the best decision for your company. Build processes tailored to the unique needs of your company.

If you are on the lookout for a payment gateway that offers chargeback management assistance, PayBy can help you. We offer end-to-end chargeback management and also shield your business from false chargeback requests.

Get started today and manage chargebacks efficiently with PayBy.

Everything about payment gateway reconciliation (2024) | Payby

Gautham Gopakumaran
5 min read
June 12, 2024
Payment Gateway, Payment Reconciliation

Payment gateway reconciliation keeps financial discrepancies away at the speed of transactions happening. However, it is often overlooked and the context is mistaken to be too heavy when clearly it is not.

In this blog, learn what it is, how it works and reasons why doing it manually is not a good idea for your business.

What is payment gateway reconciliation? 

Payment gateway reconciliation involves analyzing payment gateway information and bank balances for matching and identifying any discrepancies. It ensures there are no gaps between both books and if there are it immediately provides you with all the accurate information.

How does payment gateway reconciliation work? 

Here’s are the steps payment gateway reconciliation includes: 

  • Transaction Recording: When a customer makes a payment through your website or other channels, the transaction details are recorded in your payment gateway. This includes information about the transaction amount, date, payment method, and customer details.
  • Bank Deposits: Funds from these transactions get deposited into your merchant account or bank account after the defined settlement period.
  • Reconciliation: The transactions recorded in your payment gateway are compared with the corresponding deposits in your bank account.
  • Identifying Discrepancies: These could include missing transactions, duplicate transactions, or errors in transaction amounts.
  • Resolution: This typically involves contacting the payment processor or bank to investigate further, correcting any errors in the accounting records, or taking other necessary actions to ensure accurate financial reporting.

Why is payment gateway reconciliation important? 

Here are some reasons why payment gateway reconciliation is so important for your business.

1. Accuracy in financial reporting

With payment gateway reconciliation, both internal and external processes of financing are scrutinized. It helps to ensure that all the financial transactions are accurately recorded and processed. It also helps in compliance with all banking and accounting standards and regulations.

2. Fraud detection and prevention

Reconciliation involves matching the internal records with actual transactions to identify any discrepancies including unauthorized charges, and duplicate transactions. It also helps in preventing any fraudulent activities by keeping a constant check on financial transactions.

4. Improved decision-making

Accurate tracks of financial transactions with every important detail help businesses to remain informed and make strategic decisions about budgeting, forecasting, and resource allocation. This clear understanding allows you to be more confident about your financial decisions.

5. Compliance and auditing

Payment gateway reconciliation ensures compliance and facilitates auditing processes by accurately tracking financial transactions, maintaining transparency, and adhering to regulatory standards. This helps businesses avoid legal issues and financial penalties while ensuring trust and credibility with stakeholders.

6. Customer satisfaction

When transactions are processed accurately and efficiently, customers experience fewer issues such as overcharging, double billing, or payment failures. This reliability in payment processing builds trust and loyalty among customers, enhancing their overall experience with the business.

7. Cash flow management 

By reconciling payments with bank deposits, businesses can track their cash flow more effectively. This allows them to monitor incoming funds, identify any delays or discrepancies, and make informed decisions to manage operational and growth finances.

What are the common challenges of payment reconciliation? 

Some common challenges in manual payment gateway reconciliation process are:

1. Volume of transactions and manual errors 

A high number of transactions challenges the accuracy of the manual payment reconciliation process. It is also time-consuming and there is no guarantee of human errors while transaction matching. This can result in incorrect financial entries affecting financial reporting and decision-making negatively.

2. Complexity of transactions and processes

Financial accounting includes several complex transactions such as:

  • Partial payments
  • Refunds
  • Chargebacks, or 
  • Split payments

These can be challenging for manual payment reconciliation as keeping a record and matching these transactions require careful attention to detail.

Also, the reconciliation process in itself if done manually is pretty time-consuming, and the added complexity will only make it more difficult.

3. Timing differences

When a transaction is made and actually processed in a bank account is delayed or done in different timezones, it is a challenge. The manual recordkeeper has to go to an extent to identify the reason for discrepancies happening due to timing differences.

4. Bank reconciliation

The reconciliation process requires all complex banking factors beyond simple credit and debit transactions. It needs to cover factors such as outstanding checks, deposits in transit, bank fees, and interest charges. Ensuring that the bank balance matches the book balance requires thorough examination and adjustment of discrepancies.

5. Resource constraints

Taking care of such a detailed process of book and bank balance matching and ensuring compliance requires a great deal of effort and resources. If done manually, you need to devout the right time & budget and excel in experience.

6. Regulatory compliance

Businesses need to adhere to regulations such as the Payment Card Industry Data Security Standard (PCI DSS) and the General Data Protection Regulation (GDPR). Compliance with standards laid by these regulations is important in every situation otherwise leading to severe penalties and reputational damage. Manually, it is very difficult to keep track of all their standards for every financial operation as businesses need to

  • Stay updated with the latest regulatory changes
  • Conduct regular audits
  • Implement necessary security measures

7. Legacy Systems and fraud detection

Legacy systems lack interoperability or automation capabilities, making payment reconciliation processes inefficient and error-prone. Integrating data from disparate systems and maintaining compatibility with modern tools can be challenging for businesses.

In addition to the same, most legacy systems lack fraud detection capabilities. Their inability to identify suspicious patterns or anomalies in transaction data requires continuous monitoring and analysis, which can be overwhelming to handle.

Consequences of inaccurate reconciliation 

Here are the consequences you must know you can face with inaccurate reconciliation.

1. Financial loss

One of the direct consequences of an inaccurate reconciliation is financial loss. When doing reconciliation manually, you tend to make mistakes such as missing or duplicate transactions, incorrect amounts, or unauthorized charges. It can result in the gap between actual and reported revenue leading to financial discrepancies.

2. Cash flow problems

Inaccurate financial reporting will lead to false information of balance. This may result in cash shortages or delays impacting the business's ability to operate smoothly. It will completely impact your financial planning, leading you to make bad decisions.

3. Compliance issues

Accounting integration reconciliation takes care of compliance with industry standards, and inefficient reconciliation will lead to severe penalties and reputational damage.

4. Fraud and security risks

Inaccurate financial reconciliation can leave you and your business vulnerable to fraud and security breaches. Failure to identify any fraudulent activity in the bank and book balance can lead to great financial losses.

5. Operational disruptions 

Without accurate financial data, businesses can struggle to effectively manage their resources, plan for the future, and make informed business decisions. This could impact both the resources and the skills they need to keep the business running.

6. Reputation damage 

Customers quickly lose trust in the business if they experience billing errors or discrepancies, which can lead to negative reviews, complaints, and loss of business. This can damage the business's reputation among customers, suppliers, investors, and other stakeholders that play a part in their growth.

7. Audit failures

Auditors typically rely on accurate financial records to assess the business's financial health and compliance with regulations. Inaccurate reconciliation can raise red flags and even lead to penalties.

Recommended read: A Guide to Online Payment Security For Business Owners

Why should you use automated payment reconciliation methods? 

Understand why you should use an automated payment getaway reconciliation method with reasons including

1. Time efficiency and accuracy

Automated reconciliation processes and analysis of large amounts of transactional data in no time allow businesses to reduce time and effort. It also uses algorithms and advanced technology to ensure the accuracy of the results is uncompromised.

2. Real-time insights 

Automated reconciliation tools provide you with real-time insights about your transactions. These insights help businesses to:

  • Identify trends
  • Optimize cash flow management 
  • Financial analysis and forecasting 

3. Cost-efficient and scalable

Automation reduces the need for resources required for manual efforts. It allows you to analyze and match bank and book balances with accurate insights without the need for the team. Automated reconciliation systems can also adapt to changing business needs. It is scalable enough to accommodate fluctuations in financial reporting.

4. Easy compliance and fraud detection

With automation, there is no need to keep a close eye on all rules. It helps businesses to maintain compliance in the background. It ensures compliance with all updated industry standards and regulations.

Automated error reconciliation also prevents fraud as early as possible by identifying suspicious patterns in financial transactions. This enables you to get plenty of time to act upon it and save from further damage.

Recommended read: How AI is transforming fraud detection in payments

5. Improved Customer Experience

Automated reconciliation processes can also enhance the customer experience by reducing billing errors, discrepancies, and delays in processing payments.

Customers benefit from smoother transactions and more accurate billing, leading to increased satisfaction and loyalty.

Recommended read: How to improve payment processing user experience

Simplify payment gateway reconciliation with PayBy

Payment gateway reconciliation can be a very overwhelming process to handle when done manually. This is where using a payment solution like PayBy comes into play.

PayBy enables business growth by easing cashless payments for customers with powerful payment gateway reconciliation features.

Get started to know more.