A step by step guide on how a payment gateway works

A chain of actions takes place when we complete an online transaction using a payment gateway. Yes, the recent growth of the e-commerce industry has a lot to do with the ease of transactions that the customers enjoy. Several payment gateways work behind this successful system to ensure safe trade on both ends. Although these gateways differ from one another on the grounds of user-interface, speed, ownership, etc., the practical system is almost the same. 

The architecture of a payment terminal depends upon many software components that work in coordination to help us make online purchases in a few minutes. Let us understand how it works to get a clear picture! 

Step-By-Step Guide On Payment Gateway Working Process 

Both customers and merchants must know the working process of payment gateways as they are the two meeting ends of it. The payment processor and the merchant account are the two major components of this process. The former is the seller’s bank account that receives the online payment, while the latter is a system that sanctions customers’ card specifications. 

Step 1: Tie-up With A Payment Gateway 

The online payments market is not a monopoly, and there are several options available for a merchant to provide its authorisation. Once a company ties up with a payment gateway, it gives all the bank details and required information to the service provider. The latter uses this information to create a secure portal for the business where all the online payments will go. 

Step 2: Customers’ Card Authentication Process 

The transaction process brings the gateways into action! When a customer makes an online purchase and chooses the available payment gateway, he has to enter his card details. One needs to enter his card number, CVV (Card Verification Value) and the expiry date of the card. Some portals may also demand the name of the cardholder. Once he clicks submit, the software communicates the information to verify if the card is valid or not. 

Step 3: Information Sent To The Payment Gateways 

The payment gateways capture the information, send the same to the bank to generate the OTP (One-Time Password) or verification code to the customer. The user-interface changes to that of the bank for the verification process. Nowadays, most of the leading platforms offer auto-identification of the OTP that detects the verification process as soon as it enters the mobile. 

Step 4: Payer Authentication Request Is Verified 

Once the portal accepts the OTP, the payment authentication process is verified by the banks. If the bank conveys any irregularity in the customers’ card details or event of low balance, the transaction gets cancelled. The ACS (Access Control Server) takes care of the verification process and performs all the necessary actions. The payment aggregator receives the information, and if the verification process is successful, he sends the details to the bank. 

Step 5: Transaction Capture 

The transaction capture is the last step of this process, wherein the amount is deducted from customers’ accounts. However, the merchant does not receive it at a lightning speed! The payment solutions communicate with the authorised banks to verify the transaction. Once done, the payment solutions take a predefined time to transfer the funds to the merchant. The tentative period is around 1-4 days for debit card settlements and 4-28 days for credit cards. 

The online payment gateways constitute a vast group of networking systems that complement one another to offer fast transactions. Customers are at the receiving end of this service which allows them to sustain their online acquisitions. And now that we know how it works, there is nothing that barriers the transparency between customers and service providers. With so many exciting features and offers of the payment gateways, not using them is an irresistible choice!