A payment gateway is a service provider of eCommerce services for credit card and debit card transactions. Merchants using payment gateways are not limited to only online sales, but can include merchants with a storefront. The purpose of a payment gateway is the take transactions that normally occur in a card not present environment and send the information to the customer card issuing bank in a secure format. Payment gateways are able to achieve secure transactions by encrypting the card account information and send it through their secure servers to the appropriate payment processor.
Once a customer has decided to purchase an item online, the website will direct the customer to the shopping cart. In the shopping cart customer information, including address and credit card account information, is required by the shopping cart to complete the transaction. Once the information is complete and submitted by the customer, the information is sent through the payment gateway that is linked to the shopping cart. Information from the shopping cart is converted into an encrypted format and sent from the customers computer direct to the gateway for submission to the customer’s card issuing bank for authorization. Upon the desicion of the card issuing bank, the payment gateway will then receive a response code via the same secure path and display either an approval or denial of sale. If the transaction is approved, the customer’s bank will put the amount of the authorization on hold, thus limiting the amount of available funds for purchasing power. This process takes roughly 2-5 seconds to complete.
At the conclusion of the day, the merchant will send the authorizations, known as batching, through the gateway to their sponsoring merchant for settlement of customer funds. The following day funds are released from customer’s bank into the merchant’s acquiring bank then over to the merchant’s bank account. The total time for funds to be released from the customer’s account to settlement in the merchant’s bank account takes roughly 48 hours.
eCommerce merchants need to have a payment gateway that is not only cost effective, but safe and secure. Handling sensitive customer information requires the use of the most secure software and services. For more information on the Allied Payment Gateway, please contact one of our payment gateway professionals.