Published on June 12th, 2019 | by Bibhuranjan

Understanding How A Payment Gateway Works

A payment gateway authorizes payment for online stores and it is a vital part necessary for e-commerce. It is used in traditional brick-and-mortar stores as well. A payment gateway enables you to accept payments securely from the customer so that it can then be processed. It enables communication of information from the origin of the payment and the processor.

How A Payment Gateway Works

The following steps are involved in the transfer of payments through a payment gateway.

The customer places an order through their phone, laptop or desktop. In this step, they choose the item that they wish to purchase and then enter the necessary payment information required to complete the transaction and make the payment. Depending on the mode of payment, they enter particular financial information. Then they click on ‘Submit’ or ‘Place order’ depending on which website they are placing their order.

When the customer pays via an online website, the information entered is encrypted by the web browser in order to protect it and keep it secure. The encryption is done using the Secure Socket Layer (SSL) encryption. This enables the payment information entered on the website by the customer to be sent to the server of the merchant.

The merchant server receives the information and then sends the details relating to the payment transaction to the payment gateway. This connection has SSL encryption as well to keep the payment related communication secure. Once this is successful the payment gateway forwards the transaction details to the payment processor that is used by the acquiring bank of the merchant. In the next step, the information from the payment processor is transferred to the card company such as MasterCard.

The issuing bank of the credit card then receives the request for payment authorization. It then sends a response via the response code back to the payment processor. In case, the transaction cannot be completed due to no funds in the account, then the response code is used to relay that message as well. Otherwise, once the payment processor receives the code, it then forwards the response to the payment gateway. The payment gateway then forwards it to the website whereby it is interpreted and then a response is shown to the merchant and the customer.

Note that it is different in the case of the Discover card or the American Express card. The payment processor takes on the role of the issuing bank instead of further sending the information forward. It provides a reply depending on whether the payment was successful, or failed back, to the payment gateway.

The seller then sends the authorizations that have been approved to the acquiring bank. The merchant usually does this by sending the authorizations in batches. This is to enable the settlement to occur. The acquiring bank then settles the amount by depositing the funds to the merchant’s account. This entire process generally takes up to 2 days.

Why Shopify Is An Excellent Option?

For any online business, it is important to choose the best payment gateway. Shopify is a great option to choose when you want to ensure that all transactions take place safely. Shopify is a Level 1 PCI DSS compliant. When you use the Shopify platform to start your business, your store automatically becomes PCI DSS compliant as well. You don’t have to break a sweat as the certification applies to the hosting aspect, the store, and the shopping cart. This makes Shopify one of the best payment gateway providers you can choose from.

You have a large range of integrations to choose from when you choose Shopify. There are more than 100 of them available! This enables your customers to use the method that they can choose to pay. You can use Shopify Payments which saves you on the service fee. Else, you can use any of the third-party payment providers. The benefit of using Shopify is that it provides a quick and convenient method for customers to pay.

Shopify provides over 100 integrations for you to choose from.

Shopify empowers you to know about your transactions in real time. You can simply log into your Shopify account and then view all the information relating to money. This makes it easy for you to track and know what is exactly occurring at real-time. This enables you to manage your store easily as you can get financial information in a few clicks only. Shopify makes it easy for you to know everything about the payout schedule. Thus you are fully aware of when the funds will reach your account.

Tags: business, online payments, payment gateway, Shopify

About the Author

Bibhuranjan Editorial Officer, technofaq.org I'm an avid tech enthusiast at heart. I like to mug up on new and exciting developments on science and tech and have a deep love for PC gaming. Other hobbies include writing blog posts, music and DIY projects.