Thanks to the technology of payment gateways merchants are able to accept credit or debit cards when their customers need to pay for purchased goods or services. This term includes both card reading devices in regular stores and online shops as well. Physical stores use terminals to collect payments made by cards or phones. Online stores have payment gateways as “checkout” portals where customers enter their credentials and credit card details.
The process of payment
For the electronic payment system, the payment gateways are absolutely crucial. Its key role lays in being the front-end technology that sends customer information to the merchant acquiring bank, which is the place where transactions are processed.
The evolution of payment gateway technologies is not slowing down. We have seen the relatively quick development line: magnetic strips on the cards, signatures to confirm the payment, chips installed into cards, and now contactless payments with cards, mobile phones, or watches.
Definitely, the payment gateway architecture depends on whether we talk about a physical store or an online payment portal. In order for online payment gateways to function, they require application programming interfaces (APIs) – the communication channel with the payment processing network. The whole system of electronic payments where a physical terminal is not needed is called internet acquiring.
Internet acquiring
The internet acquiring system contains multiple stages. Let’s imagine the case when a client uses a bank card and does not own an electronic wallet. Then, the process is the following:
- The customer enters their details to make a purchase in an online store;
- The store sends the details to the payment aggregator (a collection of payment gateways);
- The aggregator sends them to the acquiring bank;
- The acquiring bank makes a request for authorization to the international payment system that issued the card (VISA, MasterCard, or others).
The goal of all these stages is to ensure that the online payment is being performed by a real customer and not a fraudulent entity. The stages are set to run quickly and smoothly. If no fraud was discovered, the issuing bank and the IPS give positive responses to the acquiring bank after which a certain amount of finance is withdrawn from the client’s account. The transaction is finished.
To sum up, there are four key players in this equation:
- The merchant;
- The customer;
- The issuing bank;
- The acquiring bank.
In this system a payment gateway happens to play a vital role – it captures and transfers payment data from the customer to the acquirer and the reply back to the customer: a decline or an acceptance of the payment. Basically, the payment gateway is between the merchant and the customer: it makes sure that each transaction is processed in a secure and prompt way.
Digital payments not only revolutionized the world of commerce but still continue to propose new models such as subscription-based payments. Overall, internet acquiring removes numerous barriers between merchants and customers.
Does your business need internet acquiring solutions? COREDO offers several service types to guarantee instant and secure transferring of money from your clients.