How does the payment gateway work? A step by step guide

A payment gateway is a tech that captures and transmits payment details from the buying side to those who take this payment and then reports the receipt or refusal. It is a online payment service that acts as a channel to make and get payments. The functioning of an online payment gateway obeys a procedure for determining the payment every time. Payment gateway documents required for some cases and this happen when customer orders service/product from a payment gateway-enabled merchant. From filling card details to payment finally flowing into merchant's account and settling, the payment gateway passes through a variety of steps-


How does the payment gateway work? A step by step guide



Step 1: Once the customer places the order online and proceeds to make payment, they need to enter credit/debit card details. Payment gateway documents required to process further steps.


Step 2: The card details are encrypted insecurely and sent between the browser and merchant's web server. A payment gateway rejects a merchant's Payment Card Industry Data Security Standard (PCI DSS) compliance responsibilities without diverting customers away from the website.


Step 3: Further, the merchant forwards transaction details to their payment gateway, an SSL encrypted link to the payment server hosted by a payment gateway.


Step 4: The payment gateway transforms the message and then forwards the transaction details to the payment processor used by the merchant's receiving bank.


Step 5: The payment processor forwards the details of the transaction to the card association.


Step 6: Following, the credit card issuing bank receives the approval proposal, confirms the credit or debit available, and then transmits a response back to the processor (via the process same as for the authorization) with a response code is approved or denied. The reply code also helps to communicate the reason for the case of a failed transaction, for example, insufficient funds, and so on.


Step 7: The processor then forwards the approval response to the payment gateway, and the payment gateway obtains the response and forwards it to the interface used to process the payment. This process is termed Authorization, and this completely takes around 3-4 seconds in general.


Step 8: The merchant then meets the order, and the above process can be replicated, but this time to remove the authorization by consummating the transaction.


Step 9: The merchant accepts all their approved authorizations, in batch, to their acquiring bank for settlement via its processor.


Step 10: The collecting bank makes the batch settlement demand of the credit card issuer.


Step 11: The credit card issuer completes a settlement payment to the acquiring bank.


Step 12: The acquiring bank afterward deposits the approved funds' total into the merchant's nominated account.


Bottom Line:


You all know how important the payment gateway is. So you can follow the above steps to know how the payment gateway works in reality.
 

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