What is a Payment Gateway & How it Works?




What is a Payment Gateway?

A payment gateway is a way to collect digital or online payments from their website or app of merchants, e-businesses, shops. A payment gateway allows you to manage an online transaction through different payment modes.

Online payments have become a part of our everyday lives in no time. We’re transacting online not only through debit or credit cards but through numerous other modes like UPI, net banking, and wallets as well.

A payment gateway is a third-party between merchants and buyers that securely take the payment from buyers and send it to the merchant's’ bank account. A payment gateway is a virtual equivalent of a physical point-of-sale terminal located in most retail outlets.

 How does it work?

Step 1: Once the customer has placed their order then they have to press the submit button on the app or website
 
Step 2: After pressing the submit button, customers on the app or website will be re-directed to the payment gateway, where they can enter all the required details about their bank or card with which the customer is planning to pay
 
Step 3: Once the customer has received the approval of the payment gateway for the transaction, the bank checks if the customer has sufficient balance to make this transaction
 
Step 4: The merchants will receive a message from the payment gateway according to the previous step. If the customer doesn’t have enough balance the bank replies NO for the transaction, then the merchant conveys this issue to the customer, telling them about the issue with either card or the bank account. If the bank portal responds to transactions as YES, then the merchant seeks the transaction from the bank
 
Step 5: The bank settles the money with the payment gateway, which in turn settles the money with the merchant.

Once this process is finished, the buyer gets a confirmation message.



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