Payment GatewaysPayment gateways are a vital portion of the online payment process. While not a term the layperson is familiar with, if you own an online business or one who takes orders over the Internet, chances are good you probably have heard the term before. In fact, you really need to have a payment gateway in place in order to accept online payments. It allows you to accept payments over the internet and initiates the process of authorizing online purchases. Considering how popular online shopping has become in the last few years, it’s no wonder so many new businesses (and even well established companies) have shifted their focus to developing a thriving online business. Everyone loves shopping online. With old stand-by’s like Ebay and other similar online shopping platforms having, in a way, started the revolution in online shopping, it’s not hard to see why the Internet has become such a powerful resource for potentially successful online businesses.
During the holidays, the obvious convenience factors of online shopping as opposed to conventional in-store shopping make it a no brainer to sell your goods and services online.The crowds, the elbow to elbow digging through endless racks and shelves, the never ending wait in line at the cash out desk… those days are going out the window. Who needs to deal with this mess? A lot more people these days are turning to the ease of online shopping instead of dealing with the crowds. Personally, I would rather sit right where I am (preferably at an amazingly cozy coffee shop next to a toasty fireplace) and get my Christmas shopping done right there. It’s so much easier to be able to peruse merchandise right where I am without having to contend with other people searching for the same things. Many sites allow the shopper to narrow their search to the specific items on your Christmas wish-lists. Once the shopper has chosen all of their items, they add them to their virtual shopping cart by clicking on an “add to cart” button. When they are done with their virtual shopping, they go to their shopping cart and examine all of the items. Once they reach this point in the transaction, they can add any additional items they might have missed, input their address and credit or debit card information and click “buy now”. This is the point at which the payment gateway steps in to perform its function. There are several steps which happen within the first few moments after the customer clicks “buy”. Here’s a basic breakdown of the process.
- Once the customer adds all of their goods they wish to purchase to their virtual shopping cart, they enter all of their pertinent information (address, credit/debit card info, etc.) and they hit the “buy now” button.
- Their sensitive information is encrypted by their web browser for safe transfer to the online merchant’s web server for processing. One of the more common forms of encryption is called SSL encryption, which stands for “Secure Socket Layer”. There are some gateways which may pass the shopper’s sensitive information directly to the gateway from their web browser. By doing this, it is essentially bypassing the merchant’s web server completely. This can potentially help you reduce your PCI/DSS compliance obligations because it keeps the shopper “present” without having to redirect them away from your site.
- After this step is complete, the merchant’s web server forwards the customer’s payment information to their gateway. The same SSL encryption is used for the connection to protect the payment information.
- The card association will then receive the information from the gateway and process either an approval or denial of the credit or debit (or gift card) payment. For American Express and Discover cards, the actual credit card association acts as the “issuing bank” and will respond with the approved/denied notification back to the payment gateway. For other credit/debit/gift cards (Visa or Mastercard), the customer’s information is sent directly the bank who issued the card for an approval.
- After this step is completed, the association the credit card company or bank responds with a message either approving or denying the payment.
- This message is then transferred by the gateway to your website and informs the customer if the transaction went through or if it was denied.
- After this process is complete and all of the merchant’s payments are fully consummated for a certain period, the merchant can then submit in “batch” form all of their approved transactions to their bank through its processor.
- The bank then issues a “batch” settlement request to the card issuer.
- Usually within a day, the credit card issuer will send a settlement payment to whichever is the acquiring bank.
- The final step is for the bank to deposit the funds into your merchant account. This usually happens the day after.