Although a lot has been said about the processes and advantages of an ecommerce payment gateway, not many understand the workings behind how it actually pulls through with a conventional online transaction. To give you a brief idea about this, here is what a day in the life of such a gateway appears to be like.

Some aspects you need to know about

To understand what we are going to talk about, you need to be aware of a few terms.

•You/Business/Merchant: The individual making or selling the product/service

•Merchant’s bank account: The ultimate destination of the customer’s payment

•Customer’s bank account: The bank that conducts the payment for the customer

•Issuing bank: The bank that offers the payment card to the customer and makes the payment to the acquiring bank for the customer

•Acquiring bank: The bank that processes payments and offers a merchant account to the merchant

These are some of the main elements you need to know about so you do not feel like a deer in headlights when understanding gateway processes.

The sequence of events that follow when making an online payment transaction

Here is how it plays out when you use a payment gateway service.

The customer buys the product

The customer clicks the ‘buy’ button after picking products they are interested in through their browser. Following this, the browser encrypts the transaction data for security purposes and sends it over to the server of the online store.

Issuing a digital certificate

Once the online store’s server receives this message, puts the transaction data and the customer’s IP address together, it puts on a digital certificate. This refers to an attachment that verifies the identity of the merchant/sender and the payment gateway provider/recipient. This neatly put together message is now known as the ‘digital order’.

Picking a payment method

After the customer chooses the best payment method from the options provided, the payment gateway sends the details either to the acquiring bank if it is a card payment method or the merchant’s bank if it is an alternative payment method. The merchant bank or acquiring bank then passes on this information to the issuing bank or the customer’s bank.

The approval or rejection of a transaction

After this, the issuing bank goes over the credit or debit limit of the customer and the validity of the payment method. Accordingly, it either accepts or rejects a transaction by offering a response code. If the payment is declined, they even offer you a reason why it has happened. This message is passed onto the payment gateway provider through the acquiring bank.

Authorization of the payment transaction

The response obtained is then delivered by the ecommerce payment gateway to the merchant and customer. This is known as authorization of a payment transaction. The issuing bank (if you are paying through card) then clears the authorization and settles the funds with the acquiring bank.  

Now that you are aware about how an ecommerce payment gateway works, you can seamlessly and uninhibitedly make use of this service for secure payment transactions.