What is an online payment gateway and how does it work?

Whether it is online shopping, travel booking, or lifestyle expenses, every digital purchase requires an online payment gateway. To keep the payment ecosystem running smoothly, numerous payment gateways remain active throughout the clock and tackle the complexities of online processing while ensuring adequate security and a seamless checkout experience. Let us understand what a payment gateway means and how it works in the article below.

What does payment gateway mean?
 

A payment gateway is a channel that connects individual buyers to merchants and corporates for processing payments. In simple terms, it is a software that authorises you to undertake online payments through various payment modes such as NEFT, RTGS, IMPS, and UPI including mobile wallets that are widely used nowadays. 

Usually, payment gateways are third-party operators that help securely transfer money from your bank account to the merchant through their payment portal. For instance, when you purchase a product online from any e-commerce website, the payment gateway becomes the medium to deduct the amount from your bank account and transfer it to the e-commerce company.

Credit cards, debit cards, and other online payment tools use these payment gateways to securely send your money to various merchants. IDFC FIRST Bank credit cards use the security and reliability of top payment channels in the world to offer you convenient payments. Moreover, you enjoy lucrative deals such as travel and online shopping benefits from these payment gateways.

How does a payment gateway work?
 

Now that you have understood the meaning of a payment gateway, let’s understand how it works. A payment gateway primarily secures your sensitive information throughout the payment process. It encrypts your data and payment details to safeguard them from any fraud. There are numerous steps involved in processing your payments as discussed below.

Step 1. A customer places an order and proceeds with the payment through the checkout button.

Step 2. Subsequently, the e-commerce website redirects to the payment gateway portal where the customer needs to enter his/her bank and card details to proceed with the payment. Post this, payment gateways take the payee to their bank portal or a 3D secure page to authorise the payment.

Step 3. After the payment gateway gets the authorisation, the bank then checks if the customer has sufficient balance in their account to carry out the payment successfully.

Step 4. If the bank does not find sufficient balance an error message appears on the payment portal. However, if the bank gives an affirmative response, the merchant seeks a successful payment from the bank.

Step 5. The bank then settles payment with the payment gateway and the merchant receives the money through the gateway.  

Once the process is completed, the customer receives a confirmation message on their registered mobile number or email ID.

Benefits of using a payment gateway
 

A payment gateway offers security along with several benefits to customers. It allows merchants and e-commerce sites to provide a better interface and user experience. Along with offering simplified payment services, they also provide safe checkout through merchant portals.

Whether you send money through online banking channels or mobile wallets, payment gateways provide a safe environment and keep your sensitive data secure from unauthorised transactions. They also implement fraud detection techniques to reduce the risk of credit/debit card misuse.  

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.