Payment

What is Payment Gateway?

A payment gateway is an e-commerce application service provider service that authorizes payments for e-businesses, online retailers.

Payment gateways protect credit card details by encrypting sensitive information, such as credit card numbers, to ensure that information is passed securely between the customer and the merchant and also between merchant and the payment processor.

How payment gateways work

A payment gateway facilitates the transfer of information between a payment portal and the Front End Processor or acquiring bank.

Various steps of transaction

• A customer places order on website by pressing the 'Submit Order' .
• The customer's web browser encrypts the information to be sent between the browser and the merchant's webserver. This is done via SSL (Secure Socket Layer) encryption.
• The merchant then forwards the transaction details to their payment gateway. This is another SSL encrypted and connection to the payment server hosted by the payment gateway.
• The payment gateway forwards the transaction information to the payment processor used by the merchant's acquiring bank.
• The payment processor forwards the transaction information to the card association (i.e., Visa/MasterCard)
• The card association routes the transaction to the correct card issuing bank.
• The credit card issuing bank receives the authorization request and sends a response back to the processor (via the same process as the request for authorization) with a response code.
• The processor forwards the response to the payment gateway.
• The payment gateway receives the response, and forwards it on to the website where it is interpreted as a relevant response then relayed back to the cardholder and the merchant.
• The entire process typically takes 2–3 seconds
• The merchant submits all their approved authorizations, in a "batch", to their acquiring bank for settlement.
• The acquiring bank deposits the total of the approved funds in to the merchant's nominated account.
• The entire process from authorization to settlement to funding typically takes 3 days.

Many payment gateways also provide tools to automatically screen orders and detect fraud include geolocation, velocity pattern analysis, delivery address verification, computer finger printing technology, identity morphing detection, and basic AVS checks.

Most Prevalent Payment Gateway in New Zealand