Explained: ​​Process of Payment Gateway

An e-commerce platform's payment gateway is an online payments service that acts as a channel for sending and receiving payments.


To receive payments, the customer must enter their credit/debit card number, expiration date, and CVV code, among other information.


Afterward, the customer makes a payment, which is then transferred from the buyer's account to the seller's account (of the merchant).




What are a Payment Gateway's Duties?


Customers and merchants are the main beneficiaries of an online payment gateway.


It's a critical part of the online transaction process, allowing for the exchange of money between customers and businesses.


It aids the e-commerce platform in enhancing its existence by providing its customers with the convenience of making payments.


As a side benefit, the e-commerce platform gains a reputation for facilitating swift, safe, convenient, and profitable payments.


Banks or a third-party payment service provider authorized by a bank can offer a payment gateway.


What Is the Process of a Payment Gateway?


There is a standard procedure for online payment gateways to follow when it comes to settling payments.


This occurs when a customer orders a service or product from a merchant that accepts payments via a payment gateway.


When customers enter their credit card information, the payment gateway takes them through a series of steps.


  • The customer must enter credit/debit card information after placing an order online and completing the payment process. 

  • Secure Socket Layer (SSL) is used to encrypt the card information before it is transferred from the browser to the merchant's web server.

  • EFT Switches may understand ISO 8583 or a variation message format, which the payment gateway then sends on to the payment processor utilized by the merchant's acquiring bank.

  • Visa/MasterCard/American Express (I.e., the card association) receives the transaction information from the payment processor.

  • As soon as the bank gets the authorization request, it performs credit or debit verification, and then sends a response back to the processor with a response number (i.e., approved or denied).

  • Additionally, the response code may be used to convey the cause for a failed transaction, such as insufficient cash.

  • The online payment gateway then gets the answer from the processor and transmits it to the interface used to process the payment.

  • Merchants may then repeat this procedure in order to "Clear" the authorization by completing a transaction.

  • This process is usually only started when the merchant has completed their part of the transaction (I.e. shipped the order).

  • An auth-hold on the originating bank account is "cleared" so that they may settle with the acquiring bank.

  • In the end, the merchant sends all of their accepted authorizations to their acquiring bank through their processor for settlement.

  • If the related "Auth" has not been expressly "Cleared," this normally decreases or "Clears" it. The acquiring bank sends the credit card issuer a batch settlement request.

  • When the credit card company settles with the acquiring bank, it sends them a payment (the next day in most cases).

  • The acquiring bank then transfers the authorized monies to the merchant's designated account (the same day or the next day).


Depending on the merchant's banking habits, this might be an account with the acquiring bank or at another financial institution.


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