Different people may have different images or ideas of what a gateway would be when it comes to processing credit cards for online sales. In reality, a payment gateway is a service that provides a way for the merchant’s website and credit card system to exchange the necessary information with the acquiring bank to make the transaction. It is also used for credit cards or debit cards that are swiped and entered into the system in an in-personal sale or a sale by phone.
The Process
Think of a credit card payment gateway as the intermediary or the way that the secure information goes from your checkout system on your website, or credit card processing system, to the bank for approval of the transaction. This is done through a variety of different systems depending on the type of gateway and the type of web server in use.
There are several steps that the different credit card payment gateway providers can use. This may depend on the card as well as the type of transaction from an actual swipe of the card to an online sale.
The basics are the same, however, and they include:
* The customer entering information about their card, billing address (for verification) and the hitting the place order button at your website checkout page.
* This information is automatically encrypted to protect the transmission of the information, and it is sent from the website through the browser to the merchant’s system.
* The merchant’s system then sends this information through to the credit card payment gateway they use, and as before, the information is encrypted to industry standards.
* The gateway then forwards this information to an acquiring bank, which has a payment processor. The acquiring bank may or may not be the bank issuing the credit card or debit card. With American Express and Discover the acquiring bank and the issuing bank for the card are the same, but not with Visa, MasterCard and most other types of credit cards.
* The payment processor then checks in with the credit card company for approval. With Discover or American Express the credit card company gives an approval or a denial, but other cards sent the request to the issuing bank for approval or denial.
At this point, everything works in reverse, with the information relayed back through the system to the customer waiting to see if the transaction was approved.
Finally, once the merchant fills the order, this repeats, skipping the customer component, which lets the issuing bank release the funds and settle the batch. Amazingly, the entire process to get approval typically takes just seconds, and payment is in the merchants account once it has been cleared, in just a few days.
