payment-gatewayA payment gateway is a powerful tool that helps in inspiring visitors to your store about your trust. In essence, a payment gateway is an e-commerce service that allows merchants to accept credit card and other forms of Internet transactions securely through your website.

Payment gateways hides some of your sensitive information which should not be visible to third party, such as credit card numbers

A payment gateway facilitates the transfer of information between a payment portal (such as a website, mobile phone) and the Front End Processor or acquiring bank

When a customer orders a product from a payment gateway-enabled merchant, the payment gateway performs a variety of tasks to process the transaction:

  1. A customer places an order on a website by pressing the ‘Submit Order’ or equivalent button or perhaps enters their card details using an automatic phone answering service.
  2. If the customer orders through a website, the customer’s web browser encode the information to be sent between the browser and the merchant’s web server. This is done through SSL encryption
  3. The payment gateway may allow transaction data to be sent directly from the customer’s browser to the gateway, bypassing the merchant’s systems.
  4. The merchant then forwards all the transaction details which he received from the customer browser to the payment gateway. This is another SSL encrypted Connection.
  5. The payment gateway forwards the transaction information to the payment processor used by the Merchants Acquiring Bank
  6. The payment processor forwards the transaction information to the card association (i.e., Visa/ Master card /American Express).
  7. The credit card issuing bank receives the authorization request, verifies the credit or debit available and then sends a response back to the processor with a response code.
  8. In addition to determining the fate of the payment, (i.e., approved or declined). The response code is used to define the reason why a transaction might fail such as insufficient funds etc.,
  9. The processor forwards the response to the payment gateway
  10. The payment Gateway Receives The Response and Forwards it on to the website where it is interpreted as a relevant Response then relayed back to the cardholder and the Merchant.
  11. The entire process typically takes 2–3 seconds
  12. The Merchant submits all their approved Authorizations, in a “Batch”, to their acquiring Bank for settlement through its processor.
  13. The acquiring Bank deposits the total of the approved funds into the merchant’s nominated account.
  14. The entire process from Authorizations to Settlement to funding typically takes 2 days
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What is payment gateway and how it works ?

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