Payment Gateway is the service that automates the payment transaction between the customer and the merchant. It is usually a third-party service that process, verify, and accept or decline credit card, debit card and net banking transactions on behalf of the merchant through secure Internet connections. Payment gateways fulfill a vital role in the eCommerce transaction process, authorizing the payment between merchant and customer.
When a customer places an order from an online store, the payment gateway performs several tasks to finalize the transaction:
- Encryption: The web browser encrypts the data to be sent between it and the merchant’s web server. The Payment Gateway then sends the transaction data to the payment processor.
- Authorization Request: The payment processor sends the transaction data to a card association. The card’s issuing bank views the authorization request and “approves” or “denies.”
- Confirming the Order: The processor then forwards an authorization to the payment gateway. Once the gateway obtains this response, it transmits it. The interpreted and an appropriate response is generated. This process typically takes only a few seconds at most. At this point, the merchant confirms the order.
There are integration APIs which all payment gateways offer. These APIs help the merchant(website) to integrate payment gateway within their website. Merchant has to integrate the API provided by the payment gateway and at the time of payment, the customer will land at the page hosted at the payment gateways’ end. All the payment related information like card details, selection of banks, etc. is on that page itself.