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Online Payment Gateways: What they Are, and How They Work

If you’re the owner of a brick-and-mortar business, you have probably adopted credit cards as one of the primary methods for your customers to make payments. For that purpose, your merchant account provider has likely installed a point-of-sale terminal on your counter.

Despite having the same payment processing needs, online traders don’t have the luxury of physical premises. So, rather than a POS terminal, these merchants use its virtual equivalent, typically called a payment gateway.

A payment gateway facilitates the exchange of information between a dealer’s website and a customer’s bank account. Payment gateways might seem complicated to the average inquirer, but they are relatively easy to take in.

The integration process

To accept credit-card payments directly through your website, you need to open a merchant account with a payment processor that caters for internet-based businesses. Once your account is up and running, integration of a payment gateway into your site follows. You may want to do it yourself, but account providers such as eMerchantBroker are always at your disposal.

For good returns with new payment gateway, ensure the fees charged by the processor are as reasonable as you want them. Your gateway should also be flexible enough to accept as many types of credit cards as possible.

Putting the gateway to work

After integrating the payment gateway to your site, customers can immediately start making purchases with their credit cards. Here’s a step-by-step breakdown of how the gateway will work.

  1. Customer will begin by browsing around your website and clicking on the items they want to buy to add them to their shopping cart. And once done, they will place a purchase order through the “buy” or equivalent button.
  1. Whether the customer makes an order via a browser or app, the credit card information will be encrypted and sent to your server. Your payment gateway will then pick up the information, which it’ll then forward to your payment processing company.
  1. The payment processor’s job is to push the transaction information to the customer’s card association, such as Visa or MasterCard, and accept a response code from the credit card company, which it then sends back to the payment gateway.
  1. The payment gateway then proceeds to interpret the response code, and relay the underlying confirmation or rejection response back to the merchant and the customer.

This entire process only takes a few seconds.

Security measures

The security of your payment gateway is of paramount importance, and although the safety precautions may vary depending on the processor you choose, measures such as data encryption, HTTPS protocol, and Virtual Payer Authentication (VPA) are fairly standard.

Payment gateways can be tricky, but it is important for an online merchant to understand what they are, and how they work.