Mechanism of Payment Gateway Process

A payment gateway offers the information from payment portal to the dedicated bank and the portal may be a website or IVR service and may be a mobile phone.

When a person orders for a product from a payment mechanism enabled merchant, the payment gateway undergoes a sequence of tasks and those will be explained in this article. At first, a customer place their order through website by entering the credit card details, the web browser encrypt the card details using secure socket layer encryption and pass them in to merchant’s web server.

The merchant pass the transaction details to their payment gateway and here this also happening under SSL encryption. At this point, the payment gateway passes the details to the payment processor.

The payment processor sends those information towards card association which may be Visa/Master cards. Here the processor acts as issuing bank and pass the response to payment gateway. The card issuer gets the request and sends back to the response to the processor that contains the status of transaction as approved/denied. Then, the processor responds to the payment gateway with the response back. The payment gateway here gets the response and passes it in to web portal and also the merchant bank. The same response will also send to the cardholder as Authorization.

The processes that are explained above just take 10 seconds. Then the issuing bank will clear the authorization and the settlement also happening here with the merchant bank. All the approved authorization will be submitted by the merchant bank.

The card issuer receives the batch settlement request from the acquiring bank. And by the next day the card issuer makes the payment to the bank and the bank deposits the total funds to the merchant’s account. The entire order confirmation and payment process takes typically 4 days.

Ease of payment mechanism is available in India with higher speed of transaction with higher speed of shipping products. And With the advent of payment gateway, India has become a higher market to the retailers. And those multiple payment systems pave the way for Indian merchants to grow their business.