How Does A Payment Gateway Work

By Author: Prashant Bhurke
Total Articles: 15
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An eCommerce and business website uses a payment gateway for collecting payments over the internet. A modern payment gateway can collect payments made by the modern tech-savvy customer through a range of payment modules.

What is a payment gateway?

A payment gateway is an eCommerce application that is provided by a payment service provider (for instance EBS) to the merchant so that it can process payments over the internet. The payment gateway authorizes the credit card payments for the online retailers, businesses, brick-and-clicks, and the brick-and-mortar stores. A payment gateway provides for credit card payment processing by facilitating the transfer of financial information between the payment portals (for example a website, interactive voice response service or mobile phone) and the acquiring bank.

An online sale process that involves a payment gateway passes through the following steps:

1. The customer places the order on the business website.

2. ...
... The web browser encrypts the information through SSL encryption. A PCI: DSS certified payment gateway may bypass the merchant system and send the data directly to the gateway. In this case, the merchant has much-reduced PCI: DSS compliance issues.

3. The information is then passed on to the acquirer bank’s payment processor.

4. The information is transferred from the processor to the card association (for instance, Visa and MasterCard among others).

5. The card association then forwards the information to the card issuing financial entity or bank.

6. The card issuing bank then sends the response in the form of ‘acceptance” or “decline” to the payment processor. Unavailability of funds and other reasons may contribute towards the decline of the request.

7. The response is forwarded to the payment gateway, which in turn forwards it to the website.

This whole process takes around 2 to 3 seconds.

The merchant at the end of the day sends his/her information to the acquirer bank for stalling the payment amount, through the processor. The card issuer bank transfers the sale amount to the acquirer bank. The acquiring bank transfers the money to the merchant account of the merchant the next day. The money from the merchant account is transferred to the bank account of the merchant in a few days.

Payment Method Support

A leading credit/debit card payment gateway can support all kinds of online payment methods. For instance, the EBS payment gateway supports credit cards, debit cards, cash cards, digital wallets, net banking (EBS allies with than 50 leading banks and financial institutions to provide the best net banking and debit card payment processing services), EMI collection and other forms of payments.

Payment Card Schemes Supported

When a payment gateway supports multiple schemas, it allows the customers to pay through a wide number of card types. Support for greater schemes offers an eCommerce access to more number of customers. The EBS payment gateway supports schemes including Master card, Visa, American Express, Maestro, JCB, Diners Club and others. Sometimes, a scheme has the same card issuer and acquirer. In this case, the charges are lesser, and all parties of a transaction can get benefitted through a more affordable transaction process (three-party scheme). At other times, the scheme is open to all, and any bank can be the part of the card scheme (four party scheme).

Security of Transaction

There are a number of ways through which a merchant can ensure that the payment gateway that it has chosen for the eCommerce/physical store is secure. A payment gateway that complies by the PCI: DSS or the Payment Card Industry Data Security Standards, is quite secure. Use of SSL technology provides for the encryption of credit card and other financial and personal information of the customer when it passes through different be servers. Apart from these measures, the leading payment gateways also use their own proprietary security software for beating frauds at all levels. For instance, the EBS payment gateway risk-prevention services have features like Device Fingerprinting, Real Time Behavioral Mapping, Cross Merchant Intelligence, Power Full Rule Set, IP Geolocation, and Industry Templates to offer exceptional security to the online transactions.