How Do Payment Gateways Work?

By Author: Kirthy Shetty
Total Articles: 598
Comment this article

When shopping online, how do you pay for your purchases or services? Before the money gets delivered to the bank, the customer is connected to a secure payment application. This application makes financial transactions like payments easy and fast as well as reliable. And safe.

We call these e-commerce solutions as payment gateways. They are used in authorizing payments for e-commerce sites, online retailers and other kinds of online services. It is like having your cashier on the website. It normally requires credit and debit cards to complete a transaction but you can also include other third party options offered by notable companies online. The information that comes from the card or third party services are accessed using the payment processor and the customer is charged for the payment or service. It is a very intuitive system that makes online businesses possible, more secure and more official. So how do they exactly work?

This is a secure form of information transfer. There is a payment portal that normally corresponds to the website as well as the bank that will acquire the information. First, the client ...
... submits an order for a product or service. There are two ways to do it. One is online and the other one is via phone depending on the retailer or company who owns the website. Normally, online payments are done. The customer encodes the credit card details and some personal information. The data is encrypted before being sent to the receiving end. SSL or secure socket layer is the most popular encryption option.

The merchant will not deliver the details to the payment gateway and is kept encrypted and then to the payment processor from the bank. Depending on the card or service used, it could either connect to the credit card association, bank or the third party e-wallet service. For credit cards, the payments can either be declined or approved. The credit card association will send a response code that will determine the fate of the transaction. Normally, in ideal circumstances, the payment will be allowed. All these things actually happened in just a couple of seconds once you checked out.

There are tools that are included in this system to ensure that the payments are secure and not fraudulent. Geo location is present to detect where the transaction was taking place. There are also tools like address verification and other useful tools to ensure that the transaction was being done by the actual user of the account and not some other person. Once the whole process is done, the money if delivered and your item is prepared for shipping.

Kirthy Shetty, Ezine Articles Expert Author.For more information: Online Payment Gateways
Get more information: Home Loan Rates India