What Is Payment Gateway

Payment gateways are service providers to processing electronic transactions. Payment gateways provide tools to process payments between three main entities. First are the customers who serf the web looking for services or products and have a mean of electronic payment. Second are online businesses providers who supply online services and products. Finally are banks and credit/debit card provides. The payment gateway simply handles the businesses providers request to draw money from customer payment card from his bank account in return to a product or service.

How Does A payment Gateway Work

The customer makes a purchase via an e-commerce enabled website. The e-commerce websites are equipped with Secure Socket Layer (SSL) encryption to allow the customer internet browser to uses a secure the information being sent. The business website takes the details and forwards them to the payment gateway. Then the payment gateway takes the information and sends the details to the bank used. The bank sends the request to the card association such as American Express, Discover, MasterCard or Visa. In the case of Visa or MasterCard, the card association forwards the information to the bank that issued the card which is the customer's bank. Then customer's bank assesses whether or not there are sufficient funds to cover the transaction then it sends back an authorization code. This code will tell the payment processor card association whether or not to allow the transaction to go through. The payment processor then sends the authorization code to the payment gateway. Finally the payment gateway then sends the code on to the business.