Payment Gateways for E-Commerce Websites

When a customer buys a product or service from an e-commerce website, the transfer of funds is enabled through what is called a 'payment gateway'. In this edition of the Brickweb blog, we will be looking in more detail at what a payment gateway actually is and how it works.

To start with, let's define some key terms.

• Merchant. This is the owner/operator of the e-commerce website who provides the products or service.
• Customer. This is the person or organisation who wishes to purchase the products or services and who initiates the transaction. 
• Issuing Bank. This is the customer's bank which has issued the debit or credit card used to make the payment.
• Acquiring Bank. This is the merchant's bank which passes the transaction to the issuing bank in order for the payment to be received. 

In simple terms, a payment gateway captures payment data from the customer and then transfers it from customer to the acquiring bank. In the process, it securely validates card details, ensures that the customer has available funds and finally transfers the payment to the merchant. The payment gateway is thus an interface between the merchant and its acquiring bank.

Payment gateways are essential in preventing online fraud. As a 'card not present' transaction, the risk of such fraud is much higher and a payment gateway helps to verify the customer's details. The payment gateway thus acts as a 'gatekeeper', using secure data encryption that protects both the customer and the merchant. The gateway also protects the merchant from such issues as insufficient funds, exceeded credit limits and expired payment methods.

How do Payment Gateways Work?

• After the customer has selected the products or services they wish to purchase, they are directed to a payment page where they enter their payment details: name on card, card number, expiration date and CVV number.
• The information given passes to the payment gateway, which encrypts the details.
• After fraud checks are performed, the data is sent securely to the acquiring bank, which in turn sends the information to the relevant card scheme (such as Visa or MasterCard).
• The card scheme then performs more fraud checks before sending the encrypted data to the issuing bank. 
• If the issuing bank authorises the transaction, an 'approved' message is transferred to the acquiring bank, which then sends the approval back to the payment gateway. 
• From there, the message is sent to the merchant and the acquiring bank can then collect the payment and deposit it into the merchant's account. This final part of the process is referred to as the 'settlement'.

E-commerce websites designed and managed by Brickweb support a comprehensive array of payment gateways, including WorldPay, PayPal, SagePay, Google Checkout, VoicePay, Stripe, AxcessMS, GlobalIris, SecureTrading, Barclays ePDQ and many more.

To find out more about payment gateways and other e-commerce solutions from Brickweb, please browse our website. For more details information and advice, please do not hesitate to contact our dedicated customer service team directly.