Introduction to payment gateways

Most of the world’s enterprises are now online. There’s a constant demand to increase online transactions. These transactions help users in many ways: shopping online, subscribing to a service, or making a charitable donation, to name a few. Therefore, the ease and security of online payments are critical.

Payment gateways play an essential part in this scenario because they provide the necessary infrastructure for safe and seamless online transactions. The importance and applicability of payment gateways in web development will be explored in this lesson.

Applications of payment gateways

  • Donations: Nonprofit organizations and crowdfunding platforms rely on payment gateways to collect donations and contributions securely. This enables them to support their missions and initiatives effectively.

  • Booking and reservations: Travel agencies, hotels, and event management companies utilize payment gateways to enable customers to book and pay for accommodations, tickets, or reservations online.

  • Mobile apps: Mobile applications often integrate payment gateways to allow in-app purchases, making it easy for users to buy virtual goods, access premium content, or subscribe to services.

  • Digital downloads: Websites offering digital products, such as ebooks, music, or software, use payment gateways to enable instant downloads after successful payment transactions.

  • E-commerce websites: The e-commerce industry utilizes payment gateways to make secure online transactions—irrespective of how massive or tiny the business is.

Working on payment gateways

Payment gateways mostly make transactions by accepting them from credit and debit cards. The information processed during transactions is encrypted and then proceeds to the merchant’s bank.

The steps mentioned below explain how payment gateways work:

  1. The customer provides credit or debit information to the merchant’s site.

  2. Afterward, the payment gateway encrypts the customer’s payment information and sends it to the merchant’s bank.

  3. The merchant’s bank sends the payment information to the card network (Visa, Mastercard, etc.).

  4. After successfully receiving the information on the card network, it sends the payment information to the issuing bank (the bank that issued the customer’s credit or debit card).

  5. Then, the issuing bank authorizes or declines the transaction based on the correctness of the credentials.

  6. The card network sends the authorization response back to the acquirer.

  7. The payment gateway informs the merchant of the authorization response.

  8. After the successful authorization process, if the transaction is approved, the merchant can fulfill the customer’s order.

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