Here at Amazon Payment Services we live online payments day in and day out, and we sometimes forget others don’t do the same. That’s why we’re going to be looking at what exactly a payment gateway is and what it does for your ecommerce business.
If your operating in the world of ecommerce you already know that using online transactions is the fastest and most convenient way to settle payments. With the reach of the internet growing every day, online transactions let just about anyone to easily buy or sell products all around the world.
But transactions online also bring potential security threats and robust payment security is required to avoid false charges. This is where payment gateways come in, they help businesses capitalize on the benefits of online transactions while protecting their customers from threats.
What is a Payment Gateway?
Payment gateways are specialized pieces of software that authorize and manage payments for customers, merchants, and banks while providing added security to all parties. When implemented correctly, it acts as a seamless connection between e-commerce applications and credit cards processing networks or banks.
A payment gateway is a middle man between merchants and customers that make sure a customer’s money is securely transferred from their account to the merchant’s. They are essentially the virtual equivalent of the terminals that are still used in brick and mortar stores.
How it works?
As we outlined above, a payment gateway is responsible for authorizing transactions between customers and merchants. Here are the basic steps on how it works:
Step 1: It all starts when a customer places an order on a website by pressing the submit order or checkout button.
Step 2: Next the merchant securely sends the details of that customers order to the payment gateway and the transaction is routed to the issuing bank to authorize the transaction.
Step 3: Once the transaction has been authenticated, the transaction is then approved or declined (depending on funds available in the customer’s account) by the customer’s issuing bank.
Step 4: Then the payment gateway relies that message to the merchant.
Step 5: The bank settles the transaction amount with the payment gateway and the payment gateway settles the money with the merchant.
As well as helping to settle money, payment gateways can provide merchants with additional features aimed at helping businesses grow. These include detailed reporting, inventory management, and optimization suggestions. Payment gateways put the control of business payment acceptance into your hands, giving you more control over your business growth.