How Do Online Payment Gateways Work

As a business owner who accepts credit card payments online, you may have heard of a payment gateway. Online payment gateways are the way credit card payments are processed online. If you have a website that accepts cards, all of your payments will go through one of these. The payment gateway transfers the information from your payment portal, which is your website, to the payment processor or bank used to receive payment. Online payment gateways work by going through several steps in order to get the payment processed.

The first step of the process is for your customer to place an order. The information will be encrypted by the website and sent from the browser to the web server that is owned by the merchant, which is you. The encryption used is typically SSL, which is very safe and used in many ways. The information will be further encrypted as the information gets pushed from the online payment gateways to the acquiring bank you have chosen. You may also be using a payment processor instead of the merchant bank. In that case, the information will go there.

Once the payment information has hit the bank or payment processor, the needed information is then sent to the card association. This is the card brand, such as VISA or MasterCard. When the information arrives at VISA or MasterCard, the decision is made as to if the transaction will be accepted or denied.  This is based on the amount of the transaction and how much credit the customer has on their account. At this point, the process reverses.

From the VISA or MasterCard location, the information, along with the accept/decline information is sent off to the bank or payment processor. The bank adds a response code as to the fate of the payment. For instance, if the payment is accepted, it will just have an acceptance code attached. If it is declined, the bank will attach a code that gives the reason for declination. Some of these reasons may be insufficient funds or having an expired credit card.

At this point information is sent to the online payment gateways. When the online payment gateways receive the information, the response will be sent to the website used to order the good or service, in other words, your merchant site. The website will be able to automatically interpret the code and inform the consumer and merchant of the acceptance or declination.  Though this seems like a long and drawn out process, it usually only takes 2-3 seconds.

After all of this is complete, the payment will be deposited into your merchant account where you will need to send the batch yourself in order to receive your money. Depending on your payment processor, there may be a charge for this. Typically it will take 2-3 days to get the money from the online purchase. When you use online payment gateways to send and receive credit card payment electronically, you can be sure it is safe for both you and your customers.