A payment gateway provides authorization and payment processing in regular stores and on digital platforms. The main function of the payment gateway is to create a safe and reliable mechanism for conducting financial transactions. Confidential data is encrypted and securely transferred between the client and the bank. This is a convenient way to share information that is needed to complete a transaction. Also, you can find companies catalog with payment gateway services on our website.
What is a payment gateway?
It’s an intermediary between a store and a bank/payment processor. The operation of the payment gateway takes only a few seconds. But how does payment gateway work?
Imagine that you are buying a product or service online/in a retail store. When does payment solution start working? At the moment when you enter the payment card details — the number, expiration date and CVV code. This data is processed through secure communication channels. Remember that the payment gateway is needed to guarantee security. The data from the payment card is confidential, and you do not want them to fall into unscrupulous hands. The payment gateway will take care of this. All information remains encrypted and protected from fraudsters.
Now we propose to consider how payment gateway API works step by step.
Step 1. Encrypt the data that you enter on the payment page.
These are the card number, expiration date, CVV code, cardholder's name and other data required to make a purchase.
Step 2. Payment Processor
The payment gateway sends the data to the processor. He contacts the issuing bank of the card, which checks the availability of funds in your account.
Step 3. Data Analysis
The Bank checks whether there are enough funds in the account, whether the card is not blocked, whether the terms of use have been violated. If all the conditions are met, the bank approves the payment, and your information is returned: from the bank to the payment processor, then to the payment gateway and to the seller. If the transaction is approved, you receive confirmations from the bank in the application or via email, then the seller can complete the order processing.
If for some reason the bank rejects the request (for example, there are not enough funds in the account or the card is blocked), this information is also transmitted through the payment gateway, and you receive an unpleasant notification that the payment has not been completed.
What is the difference between payment gateway and Internet acquiring?
The payment gateway mediates transactions between the buyer, seller, and various financial organizations, which is the main difference. It includes acquiring banks, international payment systems, installments, or systems for working with foreign cards. This tool acts as a link, ensuring the interaction of all participants in the transaction within a single system. The payment gateway serves not only for the transfer of payment data, but also for their protection and routing, ensuring security, stability, and high success of operations.
How does payment service provider work? It has its independence from banks, which gives certain freedoms and opportunities. The payment gateway is not linked to specific financial institutions. It allows it to avoid sanctions and restrictions that may be imposed on certain banks. Also, you can connect several banks to the payment system at once and route payments in such a way that in case of a failure in one bank, transactions can be redirected to other acquiring banks. This is especially important to ensure stability and smooth operation when failures in one bank do not affect the overall payment process.
Security
So, how payment gateways work? They add an extra layer of security to online banking systems with their own technologies for anti-fraud monitoring. Also, you can set up rules for protection against fraudulent transactions, depending on the specifics of your business. These customized security approaches help to significantly increase the percentage of successful transactions while maintaining a high level of security. For example, fraud monitoring rules can be configured to track suspicious activity while minimizing false positives, which contributes to more effective protection and high conversion.
Enhanced features and flexibility
It opens up much more opportunities for customization and integration for specific business needs. It allows you not only to use Internet acquiring, but also to connect additional financial instruments, such as multi-acquiring (working with several acquirers at the same time), as well as tools for distributing payments between different contractors. For example, you can flexibly configure the routing of payments, distributing them between different accounts and banks, depending on the specifics of the transaction or business objectives.
The payment gateway’s flexibility allows it to quickly make client-focused decisions, unlike large banks, which may be slower to adapt. They can adjust quickly to changes in a client’s business and offer customized solutions. This is especially valuable for fast-growing companies requiring responsive support.
Saving resources
One of the significant advantages of working through a payment gateway is saving both technical and managerial resources. That’s how a payment gateway works? When a business requires integration with banks, especially in international markets, it requires not only technical development and support costs, but also significant efforts to establish and maintain partnerships with banks. The payment gateway takes on all these tasks, facilitating interaction with banks and partners, which allows companies to focus on core business tasks and save resources, both financial and human.
Thanks to their extensive expertise in the field of e-commerce, payment gateways allow businesses to use more efficient payment processing methods, increasing conversion rates, reducing errors and failures, and providing the ability to flexibly manage transactions. Ultimately, this leads to better customer service and increased sales.
So, what is a payment gateway and how it works? It’s a powerful business tool that not only simplifies the process of interacting with banks and financial systems, but also provides additional opportunities for protecting, configuring and optimizing payment processes. Independence from banks, a high level of security, the ability to integrate with various payment services and flexibility in decision-making make them an important part of modern financial infrastructure. Especially for companies operating in highly competitive and rapidly changing market requirements.
Payment gateways also play a crucial role in global commerce, allowing businesses to process transactions seamlessly across borders. One of their standout advantages is the capacity to handle payments from various countries by integrating local providers into a unified platform.