- American Express & Discover Card
- CISP Certification
- Discount Rates
- Electronic Checks
- Fraud Screening
- High Risk Merchant Accounts
- How Transactions are Processed
- Keyed Transactions
- Merchant Account Fees
- Offshore Merchant Account
- Payment Gateways
- Reasons for a Merchant Account
- Select a Merchant Account Provider
- Terminated Merchant File
- Third Party Processing
- Types of Merchant Accounts
- Understanding AVS
- Understanding Chargebacks
- What is a Merchant Account
Payment Gateways
A payment gateway is an application service provider for ecommerce that acts as a bridge between the shopping cart or merchant’s website and all the monetary systems which are a part of the transaction, credit card issuing bank of the customer and the merchant account for the business. The payment gateway functions as an electronic funds transfer point of sale terminal in cyberspace.
A payment gateway provides a smooth and rapid transfer of information between the merchant website or interactive voice response service and the acquiring bank or front-end processor. The sequence of tasks that are performed usually only requires 3-4 seconds of time and is invisible to the customer.
The customer places an order on the merchant’s website by clicking on “place order” or “submit order” or equivalent button. Sometimes they enter card information on an interactive voice response service. If the order is placed on a website, the customer’s web browser provides the encryption of the information which will be transmitted from the customer’s web browser and the merchant’s web server. This typically is completed by way of Secure Socket Layer encryption (SSL).
The business then sends the transaction particulars through to their payment gateway which contains the data of their merchant account transaction. Typically, this is another Secure Socket Layer encrypted link to the payment server hosted by the payment gateway.
The payment gateway receives the transaction details from the business, then sends it to merchant's acquiring bank, which in turn sends the data to the customer’s issuing bank for authorization. The bank which issued the customer’s card gets the request for authorization and submits a reply to the payment gateway by way of the acquiring bank with an attached code for response. The response code defines both the results of the request for authorization of payment—either “approved” or “denied” and the reason why the authorization was not granted.
The payment gateway receives the reply and sends it to the website or payment processing site where the interpretation and response is sent on the the website (or whatever interface was used to process the payment) where it is interpreted and a relevant response then forwarded on to the customer.
On a daily basis or at the end of the settlement period, the merchant’s bank places the total of approved monies in the merchant’s regular bank account or whichever bank is designated by the merchant.
If you purchase a shopping cart for your website separately from the merchant account and gateway, you should make sure the payment gateway package is compatible with the shopping cart. It is more common for the entire package including a merchant account and payment gateway package to be purchased at the same time and added to the shopping cart.
When choosing a payment gateway separately, you should review options such as price, compatibility, dependability and fees involved before signing any contracts. Make sure you know exactly what the total fees will be, so that you don’t receive an unpleasant surprise along with the first monthly statement. .