What is Payment Gateway and Its Role in the E-Commerce World

Read this article and discover what a payment gateway is exactly and its most important role in the e-commerce world! Get all information here!

About Payment Gateway – What is a Payment Gateway?

A payment gateway refers to an e-commerce system that maintains and processes credit card payments for traditional or brick and mortar stores and online shops. Payment gateway assists the progress of these transactions by assigning the most important information between the front end banks or processors and the payment portals such as web-enabled mobile websites or mobile devices.

The payment gateways accomplish a crucial role in the online or e-commerce transaction process. It authorizes the transaction or the payment between the customer and the merchant. Some of the most popular payment gateways that are worth mentioning are PayPal, Square, and Stripe.

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What is the Difference between a Payment Gateway and a Payment Processor?

A lot of people would like to know what the difference is between a payment gateway and a payment processor:

The payment processor transmits and analyzes the transaction data at the same time while the payment gateway authorizes the transaction of funds between the sellers and buyers.

How the Payment Gateways Work Exactly?

In order to understand payment gateways better, we are going to present you how they work exactly.

So, when the customer places the order from the e-commerce website, the payment gateways completes a few tasks in order to wrap up the transaction. These tasks are:

  • Encryption – The browser encrypts the transaction data sent between the seller’s web server and the browser. The payment gateway sends the data to the payment processor used by the seller’s bank.
  • Authorization Request – This is where the payment processor sends the data to the card association and wait for the authorization request to be denied or approved.
  • Filling the Order – The payment processor forwards the authorization connected to the customer and the seller to the payment gateway. When the gateway receives the response, it sends to the website to complete the payment. This is where the response is interpreted and generated. Even though this may seem like a long and complicated process to you, we can ensure you that it only takes a few seconds for the order to be filled.

We hope that this article was helpful to you and now you understand payment gateway and its role in e-commerce.

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