What is a Payment Gateway?

A Payment gateway is an electronic way to process payments between two parties, it can be between businesses, organizations, banks , customers, individuals, virtually anyone who wants to send money through the web, can do it via the payment gateway application. Basically it is a way to transfer money online for whatever reason. Payment gateway is a secure and easy way to transfer money, usually it involved an encryption of personal data and payment data and a tool to authorize payments.So how does it work in practice?

Let’s say that you are a customer and you want to buy a t-shirt online.

  1. You make the purchase via the website which sells the t-shirt.
  2. Your details are registered in the website which you are buying from and then via SSL tool encrypts the details to prevent fraud.
  3. The website now transfers your details to the payment gateway application.
  4. The transaction details are transferred from the payment gateway to the bank for processing.
  5. The bank is processing the payment by checking the balance on your credit card, once the bank checks that there are sufficient funds in your card balance , the bank sends an authorization code.
  6. The authorization code is now sent to the payment gateway.
  7. The payment gateway then sends the code on to the business.
  8. Transaction is complete.

Using a payment gateway, by now, it the most popular way to transfer money online and process purchases.
From the business owner point of view, this means processing payments on auto-pilot and not having to deal with multiple calls and verifications with the various card providers. At the end of the day the business owner only needs to send all authorization codes from the business day and send them on to his bank where they process all incoming payments.


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