What is a payment gateway?
Payments Gateway is an e-commerce structure which enables a holder’s transfer of money between banks and traders beyond personal or card information. PG is an advanced service that scans the credit card and forwards the information about the client to the seller’s acquiring financial institution for handling.
Such services can also be established on the subscription or to take the fee for the transactions one by one. Generally, PG assists traders and clients by giving the key data during the transaction. If the consumer places the order on the website, there are various assignments which are performed by the PG, such as encryption of the data, approval of the authorization by the issuing bank along with steps to process the payment.
It also screens the orders in order to get away from the potential threat or leak of the personal data. Detection instruments involve geolocation, AVS checks along with the authentication of the address.
How does the payment gateway work?
A payment gateway is the system inside of which information flow takes place. The information is shared between an issuing bank, a merchant, a cardholder, and an acquiring bank. Even though typically transactions take less than 10 seconds to complete, the information flow consists of nine steps.
What happens after you click “Purchase now.”
- A user makes an order online and decides to pay for it with a credit card. He clicks on the “Order Now” button, and the website redirects him to the payment page where he enters all the credit card details essential to complete the payment process. He clicks on “Submit” and moves on to the next stage.
- Data entered by the user is sent to the merchant who redirects it to the payment gateway along with the order amount.
- Next, an authorization request from a payment gateway is sent to the acquiring bank and then to the IPS (MasterCard/AmEx/Visa) and issuing bank to make sure that the payment card in question is real and valid.
- In case, the card is 3D Secure, the customer will be immediately redirected to a page to enter his password and verify that he is the cardholder. Once the issuing bank verifies the password, it sends a notification to the IPS.
- Then, the IPS transfers the verification to the acquiring bank.
- Finally, the payment gateway requests the acquiring bank to subtract the order amount from the payment card.
- The issuing bank proceeds to find out whether the customer has sufficient funds on balance. If he does, the former transfers the requested amount of money and confirms the transaction to the IPS.
- MasterCard/AmEx/ Visa sends a confirmation to the acquiring bank and payment gateway.
- Within up to 15 minutes the merchant gets information about the transaction in case it is successful, and right after that, funds are withdrawn from the cardholder’s account.