What Is Payment Gateway And How Does It Work?

Performing online transaction is a far more easy and comfortable way to make payments and these online transactions have become a small part of our day to day life in a very short span of time. The worldwide spread internet service has made it easy to buy and sell objects across borders. The online transactions nowadays are not only limited to debit or Credit Card Processing but also have expanded to payments methods like UPI, net banking, wallets, etc.

This online transaction service is a necessary part of every business. The Merchant of a business applies for a merchant account integrating with a payment gateway.

What is Payment Gateway?

A connecting tunnel between a customer’s bank account and a merchant’s bank account is the payment gateway. It is actually a software that authorizes the online transactions through various payment methods mentioned earlier. A payment gateway acts as a third party or an agent that safely transacts the amount from the source to the designated payment portal. A PG also provides data security on the card details provided by the consumer.

How does Payment Gateway work?

Following are the basic steps that will help us understand how a Payment Gateway works.

1. From any particular website the customer places an order for an object by clicking on the checkout or buy button.

2. The order information is safely sent by the merchant to the payment gateway. The costumer selects the payment method of choice which is further directed to the customer’s bank for the authentication process.

3. After the authentication process is done the transaction is either successful or it is declined by the customer’s bank for relative reasons.

4. A relative message is sent to the merchant by the payment gateway if the money is received or not.

5. The issuing bank resolves the payment with the PG and the PG further resolves the payment with the merchant.