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Payment Gateway refers to an e-commerce service that
authorizes payments for e-businesses & online
retailers. It in a way represents a physical POS
(Point-of-sale) terminal located in most retail
outlets. Payment gateways encrypt sensitive
information, such as credit card numbers, to ensure
that information passes securely between the
customer and the merchant.
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Working of Payment Gateway
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Though it may sound simple but actually the entire
working of a payment gateway comprises of multiple
complex steps; a brief of which is given below: -
- Visitor places the order
on website and it is sent to the merchant∙s web
server in encrypted format. This is usually done via
SSL(Secure Socket Layer) encryption.
- The transactions details
are then forwarded to the concerned Payment Gateway.
- The transaction
information is then passed on to the merchants
acquiring bank by the Payment Gateway.
- Merchants acquiring bank
then forwards the transaction information to the
issuing bank (one that issued the credit card to the
customer).
- Then the card issuing
bank sends a response back to the Payment Gateway.
The response includes information that whether the
payment has been approved or declined. In case of
declination the reason is also send in the response.
- The response is then
forwarded by the Payment Gateway to the merchant's
server.
- At merchant's server the
response is encrypted again and is relayed back to
the customer. This allows the customer to know that
whether the order has been placed successfully or
not.
- The entire process
typically takes less than 5 seconds. At the end of
the bank day (or settlement period) the acquiring
bank(or card issuing bank) deposits the total of the
approved funds in to the merchants nominated
account.
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Why is Payment Gateway needed? |
Payment Gateway holds the essence of any ecommerce site.
One cannot think of making or receiving on-line payments
without a Payment Gateway. Payment Gateway basically
refers to an e-commerce service that authorizes payments
for e-businesses & online retailers. It in a way
represents a physical POS (Point-of-sale) terminal
located in most retail outlets. Payment gateways encrypt
sensitive information, such as credit card numbers, to
ensure that information passes securely between the
customer and the merchant.
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