Internet Payment Gateway

HOW AN INTERNET PAYMENT GATEWAY WORKS

An internet credit card payment gateway is necessary for online credit card transactions. Credit card transactions are processed in real time which means the card holder will know, in a matter of seconds, whether the transaction is a success or not. Before the payment gateway gears into action, a shopping cart is needed. In your web site, the customer places products he has picked in your shopping cart. When the customer finishes "shopping", the amount to be paid is totaled and the customer's billing information is asked for.

The payment gateway performs a number of tasks that begin when the credit card information is entered by the customer until the merchant web site receive a report of the transaction. Here is the outline of the steps executed by the payment gateway:

1. Encryption – The moment the customer types his credit card information and submits his or her transaction for processing, the payment gateway encrypts that information through a secure socket layer (commonly referred to as SSL or https).
2. Routing to the Credit Card Processor – The encrypted information is sent by the payment gateway to the credit card processor. The processor will then pass on the information to the acquiring bank to determine if the information provided is correct and if funds are available to make the purchase.
3. Authorization – The bank will determine if the purchase is to be accepted or denied. Once it makes a decision, it sends a reply back to the processor.
4. Confirmation – From the processor, the reply is sent again to the internet payment gateway and the merchant as well as the customer receives the bank's reply.
5. NOTE: The above steps occur in a matter of seconds.
6. Settling – The internet payment gateway groups all of the merchant’s transactions together during the day and sends the information to the merchant's bank. The bank, upon receiving the information, will start the process of depositing the total sales into your account. Normally, you will be able to receive the funds in your bank account within 1-3 business days.
7. Reporting – Using the internet payment gateway facility, the merchant will be able to view a list of their transactions and the report of funds deposited into their account.

An internet payment gateway is a useful facility because it reduces the risk of fraud and automates an otherwise tedious and error prone transaction. By eliminating a manual credit card entry on the end of the merchant, the customer receives instant notification if there was trouble with the card. Rather than having to start a communication (with an offline transaction), the customer is notified instantly and is able to complete the payment on his or her order.

Anti-fraud tools such as address verification (AVS) and card code value verification are just some of the payment gateway tools that ensure legitimate transactions. Furthermore, the credit card information is stored in the payment gateway so you don’t have to retain the credit card information on your web site. That reduces online fraud and your exposure to hacking or fraud, as the credit card information cannot be easily accessed from your website.