Payment gateways, a cornerstone of online transactions, have revolutionized the digital landscape with technological prowess. These gateways include point-of-sale (POS) terminals that capture credit card information via card or smartphone. They are instrumental in both physical and online establishments.
What’s the meaning of a Payment Gateway?
A payment gateway is a secure technology that facilitates retailers to manage payments effectively. The concept of payment gateway is inspired from the concept of a point-of-sale (POS) terminal in physical stores. They play a crucial role in ensuring the secure transmission and accurate processing of the payment details you provide when making a digital purchase via a website or app, reassuring both the buyer and the seller.
A “payment gateway” is more than just a technological function to clients, it represents ease and trustworthiness. Linking a customer’s payment method to a retailer’s savings account straightforward frees consumers from concern over the security of their credit card information when making purchases. Users should feel more at rest knowing that their financial transactions are safe and simple thanks to this ease of access.
Payment gateways are online retailers’ “checkout” portals where customers enter credit card numbers or service login credentials. Payment processing platforms use cutting-edge security techniques to safeguard cardholder information and curb forgery throughout transactions. These safeguards, including fraud identification and encryption, protect the seller and the buyer, ensuring a secure and trustworthy transaction process.
How does Payment Gateway Works?
It’s crucial to understand the difference between payment gateways and payment processors, who use customer data to handle payments on behalf of the merchant.
Payment gateways are technological innovation that are designed to serve as an intermediary in digital exchanges landscapes.
The Initial Step
The initial steps in adding a payment gateway to your website or mobile app are crucial. They involve selecting a suitable payment gateway service provider, which includes evaluating factors such as transaction fees, security features, and compatibility with your platform. The technology is then integrated into your website’s checkout process. This guidance ensures a smooth and informed process for your business, making you feel confident in your decisions.
The Intermediary
After the payment gateway encrypts and sends the transaction data, the acquiring bank serves as an intermediary between the merchant and the customer’s bank. The customers bank passes this data along to the appropriate payment system or the customer’s issuing bank. The issuing bank or payment processor then checks the transaction details, such as the account balance and the validity of the payment method, before either approving or declining the transaction. Finally, the payment gateway communicates this decision back to the merchant.
The Merchant Account
A merchant account is a separate bank account businesses use for their receivables. During a transaction, a customer’s payment is initially transferred to the merchant account, where it stays until one move it to your business’ regular bank account. You need a payment gateway and a merchant account to accept online payments.
The Next Step
You are integrating a payment gateway as soon as your online store is operational, and a security measure is necessary. The integration of a payment gateway with your online store guarantees the safety and security of all transactions. This emphasis on security should reassure both the end user and the merchant, ensuring they fully understand the transaction process and are protected.
Entering Details
Once customers choose to make an order, they are directed to the checkout screen to finish the entire transaction. They input their payment data, such as their card number or UPI ID, on the payment gateway screen.
Along with securely encrypting credit card data and doing thorough fraudulent inspections the payment gateway transmits the financial transaction details to the acquiring bank. The privacy of the entire payment procedure is ensured by these verification procedures, which are essential in stopping illegal transactions. The bank receiving the payment transfers the information to the card issuer (Visa, Mastercard, Rupay, etc.) and subsequently to the bank that issued the card in order to gain authorization.
Secure Transactions
Encrypted data and secure order information are transferred to the payment gateway. which employs a secure SSL connection to transfer this encrypted data to the company’s processor.
The next step is transaction processing. The transaction data is forwarded to the relevant credit card network by the company’s payment processor. This network subsequently forwards the data to the bank that issued the credit card to the client.
In the fourth phase, the payment processor initiates an authorization request. Upon receiving this request, the issuing bank gives the processor an acknowledgment code. This code signifies whether the transaction has been approved or denied based on insufficient funds or a reported stolen or lost card.
Conclusion
The customer trusts each payment gateway based on its reputation and track record. This trust is built on the gateway’s ability to securely handle transactions and protect sensitive financial information, ensuring a positive and secure experience for the customer. Payment Gateways have revolutionised the concept of fintechs and neobanks while changing the dynamics of digital era making the user experience seamless and reliable.
