What is payment gateway? And how it works
In today's world, everywhere everyone seems to be talking about e-commerce. An increase in the amount of online stores, the internet is more accessible and folks are encouraged to online shopping more. In the meantime, the role of online payment is additionally highlighted. Because sellers and also the buyers for trouble less are more likely to possess this sort of payment.
Growing coronavirus crisis is having a dramatic impact on our lives and businesses. The epidemic’s disparate impact on poor or rich, village or city, is a reality that the world is confronting in a rapid way. Payment gateway is an electronic secured payment method that connects buyers and sellers. Payment gateways encrypt empathetic information, like master card numbers, to confirm that information passes securely between the customer and the merchant. The Payment gateway acts as an encrypted channel, which securely passes transaction details from the buyers to banks for the authorisation and approval.
Payment gateways are repeated contact point between service institutions like banks and their customers that institutions can use this chance to draw in new customers or increase royal customers. One of the main features of e-commerce is that the convenience of consumers in transacting, and that we find one solution to facilitate consumers to transact that is, with a payment gateway, consumers can make payments without having to face the customer, and transactions are often done anywhere and safely.
How it works
Steps Involved in a Payment Gateway Transaction:
Step 1 - Customer visits a shopping website and selects the goods or services and clicks on the buy button. A message is sent to the website regarding the customer’s desire to buy and make payment.
Step 2 - The Web store’s server, after receiving the message from the buyer, receives a message called a digital order and also includes the consumer’s IP address and transaction amount. This order is now sent to the payment gateway over a secure network.
Step 3 - Based on the order, the payment gateway authenticates the web store.
Step 4 - The payment gateway offers various payment options to the buyer.
Step 5 - Buyer chooses the desired payment option for the transaction, which is transmitted via the secure link to the payment gateway.
Step 6 - The payment gateway sends the payment details to the bank.
Step 7 - The bank sends the information to the buyer’s issuing bank or buyer’s bank over a secure link.
Step 8 - Based on the credit limit, the issuing bank either accepts or rejects the transaction. The confirmation/rejection message is transmitted to the payment gateway through the bank.
Step 9 - The payment gateway then transmits digital transactional receipts to the shopping site and the buyer.
Step 10– The web store now can ship the goods or services to the buyer.
Whenever a customer buys something from a shopping website, the payment gateway comes within the picture for the subsequent functions:
Authorising – Verifying the buyer’s credit/debit card details.
Clearing – Transferring the transaction to merchant’s bank.
Reporting – Recording all transactions.
It is difficult for banks and other financial institutions to develop a payment gateway on their own with limited cost expenditure budgets. It makes more sense for them to appear towards third-party providers. Therefore, a payment gateway goes to be the proper solution for them, with government ownership. Through a payment gateway, one bank can connect with another, making it easier to effect national and international transactions.