A payment gateway is an infrastructure that authorizes a seller to accept credit or debit cards or other types of electronic payments. It represents an electronic version of the traditional point of sale such as a cash register.
Encryption of debit and credit card payments ensures that data sent through a gateway is secure. Gateways are widely used but few people understand these systems and how they work.
Below, we offer a more in-depth look at how the UK payment gateway operates.
The Payment Gateway for Transactions
To explain how a payment gateway works, we will use the scenario of a customer who places an order online and uses a credit card to pay for it:
• The customer selects the items and enters card payment details. The Web browser encrypts the card number and transmits it to the browser used by the merchant.
• The merchant submits this encrypted data to the payment gateway.
• Upon receiving the encrypted data, the gateway forwards it to the payment processor used by the seller’s bank.
• The transaction is then forwarded to the customer’s credit card company.
• The credit card company approves or rejects the payment and relays this message to the gateway.
• The gateway conveys the message to the website so the customer knows whether or not the transaction was successful.
The entire process above takes place in approximately three seconds!
How Does a Seller Receive Its Money?
A seller batches its approved sales and submits each batch to its bank, usually on a daily basis. The bank deposits the appropriate funds into the account held by the seller, which usually takes between three and five working days. Once the payment has cleared, the seller sees the transactions on the bank statement.
How Does A Payment Gateway Work Video
Is This Process Secure?
Since the information transmitted through the payment gateway is encrypted, it is considered secure. A 3D secure protocol was introduced in recent years to increase the level of security in this process. This requires the customer to enter specific digits from a password unique to the debit or credit card being used for payment. If the customer cannot do this, details regarding the card are not submitted to the gateway and the order is not completed.
A gateway plays a vital role in processing electronic payments online and via telephone. It serves as a link between the credit card company or bank of the buyer and the bank of the seller. Information being transmitted is encrypted at each stage of the process, ensuring that it remains secure.
This process is very quick, taking place in mere seconds. Money transfers to sellers may take up to five working days but are usually made much more quickly.
Payment gateways have become important to daily life by ensuring that the banking information of the buyer and seller remain secure. Online shopping continues to become more popular so this system is expected to continue its fast pace of growth.