Online payments have turned into an integral part of our day-to-day lives in a matter of years. We are all making transactions online through several methods such as UPI, net-banking and online wallets.
What Is a Payment Gateway?
Online payments area basic feature that almost all e-commerce platforms across the world offer. An interesting way to provide such a facility is by integrating with something called a payment gateway.
With swift and convenient services, they allow one to buy and sell anything and everything from anywhere in the world with just a decent internet connection. For the customer,it is not even mandatory to own a computer; a smartphone does the job.
How Does a Payment Gateway Work?
- The customer selects the product or service they require to buy and continues to the page for payment. Most payment gateways offer the usera variety of options for the payment page.
- Then, he has to enter the card details on the said page. These details are:
- Cardholder’s name
- Card expiry date
- CVV number (Card Verification Value)
- Hereafter, the information is safely transferred to the payment gateway, based on the integration.
- Then, it is the task of the payment gateway to encrypt the details and also perform fraud checks prior to sending the data to the bank. Post this, the acquiring bank has to send the information securely to the card schemes such as Visa, MasterCard, etc.
- The card schemes have to perform another round of fraud check and send the payment information to the bank issuing payment.
- After performing fraud screening the bank issuing payment approves the transaction. The payment message, whether approved or declined, is transferred again from the card schemes, to the acquiring bank.
- The acquirer returns the decline message before approval to the gateway, who communicates the same to the merchant. If the payment gets authorized, the acquirer receives the payment from the issuer and holds the amount into the account of the merchant.
- Then they deposit the amount into the account of the merchant, a process called the settlement.
- On the basis of this message, the merchant will either send a payment confirmation page or request the customer to submit another method of payment.
It is true that every company that fulfills the requirement of online payments or accepts cards needs a payment gateway. Out of the vast multitude of platforms, E-commerce, online reservation, booking engines, travel agents, and microcredit firms are only a few examples requiring a payment gateway.