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A payment gateway is the equivalent of a point of sale terminal found in retail stores. It can authorize payments for a myriad of businesses including online stores and businesses and brick and mortar stores. It is a service that acts as an intermediary between the shopping cart, the merchant, and the financial institutions. This would include the buyer’s credit card issuer and the seller’s acquiring bank. The transfer of information takes place over a secure connection (SSL) and the shopping cart is configured to send information in a certain format to a particular gateway.
How does the gateway work?
The payment gateway will transfer information from the payment portal to the bank or front end processor, which may be a website, a mobile phone, or an interactive voice response service. Here’s an overview of the process:
1. After entering their credit card number information, the customer will click on the “Place Order” or similar button on the website.
2. The information will be securely transmitted from the website to the merchant’s webserver through SSL encryption.
3. The information is then sent securely to the payment gateway.
4. The payment gateway forwards the information to a payment processor which is used by the merchant’s acquiring bank (the bank where the merchant account is maintained).
5. The payment processor will send the information to the appropriate card company (Visa, MasterCard, etc.) and will be sent back to the credit card issuing bank at that time. The processor serves as the issuing bank for the Discover Card and American Express.
6. A response is sent back to the payment gateway whether the transaction was rejected or accepted.
7. Forwards the response to the payment gateway website. This whole process takes only 2 to 3 seconds.
8. Once all the funds are available, money can be transferred from the merchant account to the business account.
other services
Many gateway service providers will provide tools that can detect fraud including verifying the buyer’s delivery address and geographic location. They can also calculate taxes before the request is sent for authorization. Most payment gateways provide an information screen for inputting data.
If you sell products or services online, it is one of the things you need in order to accept credit card payments. Most service providers include the ability to accept e-checks, so the customer has the option of using their checking account.
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