The payment gateway (also known as a payment platform) is a software that enables online payments on the merchant’s website. It acts as a mediator between clients and a merchant. Basically, it is a key component of an electronic payment processor. The main purpose of the payment gateway is collecting payments. Thanks to a payment gateway, a merchant can accept credit cards, cryptocurrency, eWallets, bank transfers, and other types of payments.
How does the payment gateway work?
A payment gateway is a system. The payment information flows through it. The information is shared between the following parties:
- A cardholder. The consumer.
- An issuing bank. The bank of a cardholder (the consumer).
- A merchant. The person who sells products/services online.
- An acquiring bank. The bank of a merchant.
Though it only takes a few seconds to process the transaction, there are nine steps of payment processing.
What happens after a client presses “Buy Now”?
Read these nine steps to see the payment gateway in action:
- A consumer makes orders online and decides to pay for it with a credit card. He presses on the “Order Now” or “Buy Now” button. The website redirects him to the payment page. He enters all the credit card details. He clicks on “Submit” and moves on to the next stage.
- Merchant’s payment gateway accepts the credit card details along with the order amount.
- Then, an authorization request from a payment gateway transfers the acquiring bank and then to the IPS (MasterCard/AmEx/Visa) and issuing bank to make sure that the payment card in question is real and valid.
- If the card is 3D Secure, the customer has to enter his password. It is to verify that he is the cardholder. Once the issuing bank verifies the password, it sends a notification to the IPS.
- Then, the IPS transfers the verification to the acquiring bank.
- Now, the payment gateway requests the acquiring bank to charge the order amount from the credit card.
- The issuing bank checks whether the customer has sufficient funds on balance. If he does, the former transfers the requested amount of money and confirms the transaction to the IPS.
- MasterCard/AmEx/ Visa sends a confirmation to the acquiring bank and payment gateway.
- Within up to 15 minutes the merchant receives the information about the transaction in case it is successful. After that, the funds are withdrawn from the cardholder’s account.