eCommerce Payment Gateways

Online Payment Gateway resources and references

Member Login
User Name:

History & Information

What is Electronic commerce or e-commerce?

Electronic commerce also known as e-commerce is the purchase or sale of goods and services over electronic media which include the web and computer networks. E-commerce generally involves exchange of information regarding payment details and that is where payment gateways come in as a platform where the buyers can enter their payment details and thus be credited the amount in the payment details. Payment gateways have made e-commerce be more secure and it have been integrated in all the major e-commerce websites such as PayPal, EBay. [image ref = 5]

eCommerce 1.jpg

Brief History

In 1990, the first World Wide Web server and browser was created by Tim Berners-Lee. It was opened for commercial use in 1991. In 1994 other advances took place, such as online banking and the opening of an online pizza shop by Pizza Hut. During that same year, Netscape introduced SSL encryption of data transferred online, which has become essential for secure online shopping. Also in 1994 the German company Intershop introduced its first online shopping system. In 1995 Amazon launched its online shopping site, and in 1996 eBay appeared on the World Wide Web.

How Payment Gateways Work

In our day lives we perform lots of online transactions and often use credit cards, debit cards, or any other online payment form for our online payments. A question may arise that is how it comes to pass, which takes us to what a payment gateway is. A payment gateway is an e-commerce application service provider that connects a Web site with the bank. This terminal assembles, encrypts and transmits the data to the desired merchant’s account. The gateway executes a series of tasks to process a transaction upon receiving a customer’s request to buy a product from a payment gateway-enabled merchant. The payment gateways provider offers a similar type of service between a merchant and customers.

How It Works

Here are some few steps to show how a payment gateway works. Amazingly, it takes only a few seconds!

  1. A customer provides credit card (or any other acceptable form of payment) details on a Web site or clicks on the “Submit Order” button to place an order.
  2. Details about the purchase are encrypted and securely forwarded to the merchant’s browser which then directs them to the payment gateway. The payment gateway hosts this whole SSL (Secure Socket Layer) encrypted connection to the payment
  3. The gateway then processes or rejects the transaction (verification process). This is achieved through forwarding of transaction information to the acquiring bank’s payment processor which in turn relays the same to the card association.
  4. An acceptance or rejection message is sent to the shopping cart. The message may be directly from the card association or the issuing bank.
  5. The money is then transferred to the merchant’s bank (the time it takes here varies with different banks and merchants’ terms) [image ref = 6]

payment gateway work process 1.jpg

Thus a payment gateway simplifies the transfer of information from a payment portal (such as anIVR service, website, or a mobile phone) to the acquiring bankorFront End Processor.

The credit card issuing bank receives the authorization request. It is expected that the bank sends a feedback to the processor. This is the crosschecked fraud, debit or credit checks on the request. Typically, the response is sent through the same process as the authorization one. A response code for either denial or approval is thus used. Well, additional details as to why the authorization failed are provided. The code gives such details. The reasons for failure could be lack of enough funds or unavailability of bank links. The credit card issuer holds an authorization related to that of the merchant. The issuer should relate to the merchant for the approved amount. This can impact the consumer's ability to spend. This is because the holder can put a hold on the debit amount as well as extending his or her line of credit. The authorization feedback is sent to the payment gateway through the processor now.

The gateway is therefore responsible for forwarding the response to the website. This does not necessarily mean it is only through the website that the payments can be processed; any other interface with capabilities could receive the response. The cardholder as well as the merchant gets a timely response. This is after some interpretations are done. This is termed as the Authorization or simply “Auth”. The whole process will consume about 2-3 seconds of the client.

A repeat is done once more but only after the merchant has fulfilled the order. This time it is intended to clear the authorization through transaction consumption. The merchant acquiring bank is prepared to settle with the merchant. Here, the cleared auth is acknowledged by use of a ‘clearing’ the auth by the bank. The merchant is expected to show up a batch of approved authorizations to the acquiring through its processor. The batch is known as the settlement request from the credit card issuer.

The settlement payments are done to the acquiring bank the following day. The merchant’s nominated account is thus credited with the total amount that has been approved. The account could be from the acquiring bank or any other bank where the merchant banks from. Basically, the entire process will take around 3 days; from authorization to settlement until funding.

Before sending authorization request to the processor, tax calculations are necessary. The payment gateways should be able to check for frauds in real time. These gateways thus have automated tools for these functions. Among the various tools available include: velocity pattern analysis, ‘black-list’ lookups, OFAC list lookups, geolocation computer finger printing technology, basic AVS checks, delivery address verification as well as identity morphing detection.

Security for payment gateways is guaranteed for most sites but a rule of the thumb is that you should check if the website is secure. If you are not tech guru, no worries, just check the website URL and make sure that it is has a suffix of s after the http such as https. The s in tech terms means secure. Security is a very important parameter when it comes to payment gateways as you want to ensure the safety of your money.

[image ref = 7]

website security.png

A quick summary of the payment gateway it is mainly an important portion of a website, where you can enter your payment details. Based on the amount entered the payment platform will link you with a merchant account. The merchant account is a form of an online account. The merchant account will link with your business account in the bank. The business account contains the bank account details that link the credit card number. You will eventually get that your account has been credited with the said amount subject to the approval time of the bank.

The whole transaction takes a short period of time but it maybe longer depending on the bank. When thinking of using a payment gateway make sure that the business account processes transactions very fast. Failure to which there will be a bottleneck.