A payment gateway is an e-commerce service that processes credit card payments for online and traditional brick and mortar stores. Payment gateways facilitate these transactions by transferring key information between payment portals such as web-enabled mobile devices/websites and the front end processor/bank.
Online payment solution fulfills a vital role in the e-commerce transaction process, authorizing the payment between merchant and customer. Popular payment gateways include PayPal/Braintree, Stripe, and Square.
How payment gateways work
When a customer places an order from an online store, the payment gateway performs several tasks to finalize the transaction:
- Encryption: The web browser encrypts the data to be sent between it and the vendor’s web server. The gateway then sends the transaction data to the payment processor utilized by the vendor’s acquiring bank.
- Authorization Request: The payment processor sends the transaction data to a card association. The credit card’s issuing bank views the authorization request and “approves” or “denies.”
- Filling the Order: The processor then forwards an authorization pertaining to the merchant and consumer to the payment gateway. Once the gateway obtains this response, it transmits it to the website/interface to process the payment. Here, it is interpreted and an appropriate response is generated. This seemingly complicated and lengthy process typically takes only a few seconds at most. At this point, the merchant fills the order.
The steps outlined above are repeated in an effort to “clear” the authorization via a consummation of the transaction. However, the clearing is only triggered once the merchant has actually completed the transaction (shipping the order). The issuing bank changes the “auth-hold” to a debit, allowing a “settlement” with the vendor’s acquiring bank. The processor is then relied upon to settle all of the vendor’s approved authorizations with the acquiring bank at the end of the day. Visit- small business loan.
Other Payment Gateway Functions
Payment gateways also screen orders with a myriad of helpful tools. This screening process filters out as much fraud as possible. Examples of gateway fraud detection tools include:
Delivery address verification
Computer fingerprinting technology,
Velocity pattern analysis
Identity morphing detection
Payment gateways even calculate tax amounts to authorize requests transmitted to the processor.
Generally, there are 3 types of Payment Gateway Service Providers: Distributors, Collectors, and Aggregators.
They all help you to easily accept payments online, however, they differ when it comes to payout, fees, and contracts.
- A Distributor delivers one single interface to one or more online payment methods. Online payment solution Mumbai
- You need to contact the bank or financial institution and negotiate commission rates, fees, and payout terms.
- A Collector delivers one single interface to one or more payment methods, does collect payouts on your behalf but does not set commission rates or fees.
- They enable you to streamline payout for different payment methods (cards, bank transfers, wallets).Short-term business loan Mumbai.
- An Aggregator delivers one single interface to one or more payment methods, collects the payouts and contracts with banks or financial institution.
- You only would need to contract with the Aggregator. They set your transaction fees.
- Did we miss out anything? We would like you to share your personal experiences with Indian Payment Gateway Service providers. Let us know which one is the best according to you.
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