Payment Gateways are secured internet facilitators that allow an online merchant to accept payments from customers, and process those payments securely online via SSL technology through banking internet connections to credit card companies. In turn, the merchants then receive payments from credit card companies through their own bank into their accounts. The entire transaction through acceptance of the customer’s credit or debit card only takes two to three seconds. Payment of funds into the merchant’s bank occurs after shipment of the purchase is completed, and then it is two to three days for the merchant’s account to be credited with payment. The gateway is like a retail outlet payment station.
The payment gateways allow for use of the internet to process payments quickly and securely, assisting both the merchant and the customer. An SSL (Secure Socket Layer) connection encrypts the information to provide security, and there are options for recurring payments to be scheduled, as you might find on a store payment webpage for automatic monthly payment approvals. There also is fraud protection, and tax calculation options. It takes a few days for the transaction to appear on and be deducted from the customer’s bank account, although a hold on the funds occurs immediately.
Briefly, the almost instantaneous transaction starts with the customer entering their credit card information into a payment webpage form (payment portal) or phone answering service. Secure pages are indicated by a small gold lock icon and the SSL statement, that assures the customer that information provided will be protected from theft. The customer can pay for an item using a payment gateway such as Visa, MasterCard, Discover, PayPal, or other gateway payment processors. They will have pre-applied to use these payment processors securely in order to have designated funds deducted directly from their bank account, and then all they have to do is select the gateway icon on the merchant pay page, and enter the requested information and payment amount.
After the icon (submit payment) is clicked, the transaction is electronically delivered, also through SSL encryption, to the merchant’s payment server. The transaction is forwarded to a processor used by that merchant’s bank. This processor again forwards the information to the credit card interchange sponsoring the card (like Visa). The credit card association forwards the information to the credit card company for approvals.
Now the transaction approval or denial, with reasons, is returned to the merchant via the same path in reverse. The processor returns information to the gateway, and then it goes back to the merchant website. Again, it only takes seconds to complete the entire process. At the end of the day, after completing the sale by shipment, the merchant submits an entire batch of approvals to their bank where the bank then deposits the funds into the merchant’s bank account. This may take a couple days to complete.
Encryption technology allows the gateways to provide this service securely between merchants and customers. Without it, transactions would be subject to theft and identity theft. The payment gateways themselves are an integral part of worldwide website e-commerce.
