How payment gateways work?

[kiberlain]

A payment gateway facilitates the transfer of information between a payment portal (such as a website ) and the Front End Processor or acquiring bank.

When a customer orders a product from a payment gateway enabled merchant, the payment gateway performs a variety of tasks to process the transaction:

* A customer places order on website by pressing the 'Submit Order' or equivalent button, or perhaps enters their card details using an automatic phone answering service.
* If the order is via a website, the customer's web browser encrypts the information to be sent between the browser and the merchant's web server. This is done via SSL (Secure Socket Layer) encryption.
* The merchant then forwards the transaction details to their payment gateway. This is another SSL encrypted connection to the payment server hosted by the payment gateway.
* The payment gateway forwards the transaction information to the processor used by the merchant's acquiring bank.
* The processor forwards the transaction information to the card association (i.e., Visa/MasterCard)
* If an American Express or Discover Card was used, then the processor acts as the acquiring bank and directly provides a response of approved or declined to the payment gateway.
* The card association routes the transaction to the correct card issuing bank.
* The credit card issuing bank receives the authorization request and sends a response back to the processor (via the same process as the request for authorization) with a response code. In addition to determining the fate of the payment, (i.e. approved or declined) the response code is used to define the reason why the transaction failed (such as insufficient funds, or bank link not available)
* The processor forwards the response to the payment gateway.
* The payment gateway receives the response, and forwards it on to the website (or whatever interface was used to process the payment) where it is interpreted and a relevant response then relayed back to the card holder and the merchant.
* The entire process typically takes 2-3 seconds
* The merchant must then ship the product prior to being allowed to request to settle the transaction.
* The merchant submits all their approved authorizations, in a "batch", to their acquiring bank for settlement.
* The acquiring bank deposits the total of the approved funds in to the merchant's nominated account. This could be an account with the acquiring bank if the merchant does their banking with the same bank, or an account with another bank.
* The entire process from authorization to settlement to funding typically takes 3 days.

Many payment gateways also provide tools to automatically screen orders for fraud and calculate tax in real time prior to the authorization request being sent to the processor. Tools to detect fraud include geolocation, velocity pattern analysis, delivery address verification, computer finger printing technology, identity morphing detection, and basic AVS checks.

[MartinP]

If you are setting up a website to accept payments for your business, make sure you look into a merchant account. Unfortunately, e-commerce merchant accounts are considered higher risk by many processors. Any time a card is collected over the phone, internet or by mail, it is considered to be riskier simply because it is harder to prove that the person ordering from you is the actual cardholder.

Make sure to look into an account while you are in the process of setting up your site because the last thing you want to do is have this perfect website put together and then have to wait while you find someone to process your transactions for you.

[~ServerPoint~]

Be sure with the marchant account you are in the response for the all data of your customers.
That is very very high responsibility

[footylad]

Yes make sure you are careful and that you only have admin access as well or limit other admins access as your details can be shown! Id use paypal merchant account as its done via there website and not yours for more security!

Footylad

[merryandlovely]

A payment gateway is an e-commerce application service provider service that authorizes payments for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. It is the equivalent of a physical point of sale terminal located in most retail outlets. Payment gateway protects credit cards details encrypting sensitive information, such as credit card numbers, to ensure that information passes securely between the customer and the merchant and also between merchant and payment processor.

[frdsmth9]

Thanks for sharing such valuable information on the working procedure of payment gateways. This is very informative post and I am looking forward for more such useful information on how the payment gateways work in an ecommerce site.

[rickygips]

These information and advices are really useful and helpful especially for someone who has plans in going into online business.

[clint999]

These information and advices are really useful and helpful especially for someone who has plans in going into online business.

[~ServerPoint~]

Thanks and that is closed thread now

[sam40]

There is a new payment gateway called globill.net with a groovy API. I have asked them to help create a module for virtuemart. Shout if you are interested.