Understanding the Ins and Outs of Payment Gateways

September 24, 2016

Understanding the Ins and Outs of Payment Gateways

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Payment gateways can be a tricky beast to overcome for people who are new to the whole thing, but in reality, all it takes is some time to research everything and practice. By practice, we mean that you should go over the information multiple times so you understand it fully. However, there’s a lot of information to cover, and we’ll try our best to bring it as close to you as possible so you don’t have a hard time understanding how it works.

To tell you the truth, it’s pretty impressive once you get the gist of it. It’s also often used on the Internet, almost in every possible Internet shop, website, etc. So it might be a good idea to study everything thoroughly. Let’s get right into it!


What are Payment Gateways and How do They Work?

A payment gateway is a service which is provided by application service providers that revolve around e-commerce, mainly designed for merchants. They enable the authorization of direct payments or credit card payments for retailers, businesses, etc. There are specific companies which provide online payment services, merchant services, and payment processing to merchants, but banks can also provide certain services such as these. It’s all a matter of who has the most solutions for the best cost.

These payment gateway providers can be very helpful when it comes to dealing with issues and explaining what exactly you’re getting – so if there’s anything you don’t understand, it is a good idea to ask the company you have chosen to be your payment gateway provider.

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payment-gateway-image

Source: Bluechip Infoway

The transaction happens between a portal which is dedicated to payments and a front-end processor or a bank. E-payment gateways are the same as regular payment gateways.

An interesting fact is that there are around nine hundred (900) payment processors and service providers all around the world.

How Does the Entire Process Work?

The entire process may seem long and complicated, but it can be learned with some time and dedication.

  1. The customer places an order on a website of his/her choice and proceeds to click the ‘Submit’ or ‘Purchase’ button, or any equivalent. They will need to enter their credit card details to get their order processed.
  2. If the order has been made on a website, the browser sends the data (which is encrypted) to the merchant’s web server.
  3. The information and details about the transaction get forwarded by the merchant to the payment gateway.
  4. The payment gateway transfers the information to the payment processor which has been acquired from the merchant’s bank.
  5. The processor then transfers this information to the respective card association (American Express, Visa, and MasterCard)
  6. The bank receives the request for the authorization of payment, checks whether the customer has any funds on their debit or credit cards and checks if the cards are available. After the check, it sends information back with a specific response code that can be either ‘Approved’ or ‘Denied’. If it sends back ‘Denied’, a reason for the denial is also sent.
  7. The processor sends the received information back to the payment gateway.
  8. The Gateway forwards the information to the website.
  9. Interesting Fact: This whole process lasts only around 3 seconds!
  10. The merchant proceeds to approve of the transaction and ‘consume’ the transaction.
  11. All orders that are approved by the merchant are submitted as a ‘batch’ to their bank.
  12. The bank makes a request based on the batch it received, to the credit card provider.
  13. The credit card provider makes a payment to the bank.
  14. The bank forwards the funds to the merchant’s account.
  15. The process from authorization to payment lasts around three days.

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As you can see, the process doesn’t take a lot of time to complete and even though it seems complicated, it’s not.

payment-gateway-pic

Source

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How to Make it All Work?

You have to make sure that everything works correctly. If a certain step in this process goes wrong, the entire process is stopped and most likely – reset. So, check the availability of everything! If you aren’t sure how to do this, contact the company or payment gateway provider so they can explain further.

The servers and payment gateways need to be available at all times except when they’re down for maintenance. Also, keep in mind that sometimes customers will have issues which are specific only to them, so you’ll need a team which will be available to help these customers.

In the end, the process should be left to professionals but with you having the biggest role in choosing which features you want. Just be sure you know exactly what you need and how it works so you don’t make a mistake of choosing a company or provider which isn’t skilled, professional, or, in the worst case scenario, a scam.

Conclusion

The amount of information which is given in this article is enough to get you started on the whole deal of payment gateways. The specifics can vary from website to website so you’ll need to dig a bit deeper, but you’ll be able to know what to dig for. Overall, payment gateways are a necessary part of our lives because they offer unprecedented flexibility when it comes to buying things.

All you have to do is choose the things you want to buy, and click your mouse button and voila! You just bought the thing you wanted! It’s easy on the surface and a bit more complicated under the bonnet, but it’s an integral part of the Internet and it can’t be overlooked.

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