How does a Payment Gateway work?

In order to accept payments online via both credit card and debit card through your website, you need to have both an internet merchant account as well as an online payment gateway account.

Payment gateway is a service which sends the credit card transaction details to credit card payment networks for processing. While accepting the credit card to perform a specific transaction, a payment gateway gets selected for routing the payment to card network.

Step-by-step process of how a online payment gateway works:

  • A buyer makes a purchase of an item and enters card number
  • Details of the purchase are sent to payment gateway for processing
  • The payment gateway then forwards the information of transaction to the merchant’s bank
  • Merchant’s bank again forwards information to buyer’s bank to authorize the transaction
  • Then the buyer’s bank either approves or denies the information and sends back to merchant’s bank
  • If approved, the bank will deposit the amount in merchant’s account in specific period to time
  • The transaction details and buyer’s details are then saved in merchant’s server and payment gateway’s server

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