How Does A Payment Gateway Function? Every Online Business Owner Must Know This

 A payment gateway is required if you own an online company or want to take credit card payments directly from customers on your website. There is a lot of confusion among business owners about this technology, so to clear things up, here is all you need to know about payment gateways and how to get one set up for your company.




What exactly is a "payment gateway," you ask?

The technology reads payment information from a client and passes it to a merchant's bank account, which is referred to as a payment gateway. It is responsible for collecting the data, checking if sufficient funds are available, and paying the merchant.


When making a purchase online, a consumer and a retailer might be connected via the use of cloud-based software known as an online payment gateway. When a cardholder uses their card to make a payment in person, the transaction is processed by the software that is incorporated into the point-of-sale (POS) system or card reader.

The Mechanisms Behind Payment Gateways


Merchant: The firm or any individual is making the deal.


Cardholder: The transaction is being completed by your client.


Issuing Bank: The bank or other financial organization is responsible for maintaining the customer's account, whether it be a credit card account or a checking account linked to a debit card.


Card schemes: The corporations that issue credit cards are responsible for managing card accounts, such as Visa, Mastercard, and American Express.


Acquiring bank: The bank or other financial organization that manages the business owner's accounts.

Gateways for many types of payments


The following are the three basic types of payment gateways:


Redirect: When a consumer clicks on a link to make a payment, the online payment gateway will redirect them to a payment processor, such as PayPal or Stripe, to complete the transaction.


Hosted: When a consumer makes a purchase on your website or at one of your retail locations, the customer's payment information is sent to the payment provider's servers so that it may be processed. This method is called "hosted" or "off-site payment." The POS systems used by Stripe and Square function in this manner.


Self-hosted: When you choose a self-hosted solution, often known as an on-site payment solution, the transaction takes place on your servers.

Why Is It Necessary for You to Use a Payment Gateway?


Payment gateways are essential for companies that want to take payments through credit cards and online platforms like PayPal. The technology communicates several pieces of financial information to the relevant parties to approve fees and transfer funds from a consumer to a retailer.


A payment processor facilitates the transfer of information between an issuing bank and an acquiring bank so that funds can be deposited into a merchant account; however, the payment processor relies on a payment gateway to communicate with all of the other relevant parties and obtain authorization for the transaction.


Also read: Customizing the WooCommerce Checkout Page

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