How a Payment Gateway Works23/09/2018 By StarkPayments
A payment gateway is an e-commerce application that processes card payments for e-commerce merchants, either via a website or mobile application. In layman’s terms, it is the virtual equivalent to a point of sale card terminal.
A payment gateway facilitates the transfer of information between a payment portal (such as a website) and the acquiring bank.
Step by step
The above diagram gives you an example of how transactional data is processed via various intermediaries in the payments eco-system. The processing time for all of the above steps, takes quite literally a second or two.
The customer or cardholders (also referred to as an online shopper), searches for and finds a product or service to for sale on a website or mobile application on the Internet. He or she would then press on ‘buy now’, ‘add to cart’ or equivalent button.
The next page is the payment gateway’s payment form page which web browser encrypts and information between the browser and the merchant’s webserver. The cardholder enters in his/her card details, 16-digit pan, expiry date, CVS, AVS for the total amount. The cardholder then presses ‘Pay’ or ‘Submit Payment’ or ‘Pay Securely’ or equivalent button.
The payment gateway forwards the transaction data to the acquirer and the card schemes and the cardholder’s card issuing bank. It checks the security and funds availability before providing an authorisation (or decline) response code response back to the payment gateway in real-time. The gateway then responds to the merchant to provide an authorisation (or decline) to the cardholder on the merchant’s website.
At the end of each night, the payment gateway batches all the ‘Auth’ transactions and sends the settlement files to the relevant acquirer, notifying the acquirer to move funds from the cardholder’s account to the merchant’s merchant account. The acquirer then deposits the total of the approved funds to the merchant’s nominated bank account, typically settlement is 2-3 days but this depends on the terms agreed between the merchant and the acquirer.
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