INTRODUCTION

A payment gateway is an online payments’ service that, when integrated with the e-
commerce platform, is devised as the channel to make and receive payments.
The procedure to receive payments includes the customer requiring to fill in some details,
like credit/debit card number, expiry date, and CVV.
Post this, the customer proceeds to make a payment, which then, gets transferred from the
buyer’s account to the seller’s (merchant’s) accounts.
The main role of an online payment gateway is to approve the transaction process between
merchant and customer.
It plays a vital role in the online transaction process and authorizes transactions between
merchants and customers.
It helps the e-commerce platform aggravate its existence with ease of payments to offer to its
customers.
Besides, it also leads to the e-commerce platform gaining rapport for leading to not only
quick and secure payments but also convenience and success with the same every time.
A payment gateway service can be provided by banks directly or a payment service provider
authorized by a bank.

HOW DOES PAYMENT GATEWAY WORK ? :

Straight away coming to the functioning of an online payment gateway, it follows a
procedure for settling the payment every time.
This happens when a customer places an order for a service/product from a payment
gateway-enabled merchant.
From filling in the card details to payment finally flowing into the merchant’s account and
settling, the payment gateway passes through a variety of steps-
STEP 1: After the customer places the order online and proceeds to make payment for the
same, he/she needs to enter credit/debit card details.
STEP 2: The card details are encrypted in a secure way with Secure Socket Layer (SSL)
encryption to be sent between the browser and the merchant’s web server.
A payment gateway eliminates the merchant’s Payment Card Industry Data Security Standard
(PCI DSS) compliance obligations without redirecting customers away from the website.
STEP 3: After this, the merchant forwards transaction details to their payment gateway,
which is also an SSL encrypted connection to the payment server hosted by the payment
gateway.
STEP 4: The payment gateway converts the message from XML to ISO 8583 or a variant
message format (format understood by EFT Switches) and then forwards the transaction
information to the payment processor used by the merchant’s acquiring bank.
STEP 5: The payment processor forwards the transaction information to the card association
(I.e.: Visa/MasterCard/American Express).
STEP 6: Next, the credit card issuing bank receives the authorization request, verifies the
credit or debit available and then sends a response back to the processor (via the process same
as for the authorization) with a response code (i.e., approved or denied).
The response code also helps to communicate the reason for the case of a failed transaction,
for example, insufficient funds, and so on.
STEP 7: The processor then forwards the authorization response to the payment gateway, and
the payment gateway receives the response and forwards it onto the interface used to process
the payment.
This process is termed as Authorization or “Auth”. This entirely takes around 2-3 seconds in
general.
STEP 8: The merchant then fulfills the order and the above process can be repeated but this
time to “Clear” the authorization by consummating the transaction.
Typically, the “Clear” is initiated only after the merchant has fulfilled the transaction (I.e.
shipped the order).
This results in the issuing bank ‘clearing’ the ‘auth’ (I.e. moves auth-hold to a debit) and
prepares them to settle with the merchant acquiring bank.
STEP 9: The merchant submits all their approved authorizations, in a “batch” (end of the
day), to their acquiring bank for settlement via its processor.
This typically reduces or “Clears” the corresponding “Auth” if it has not been explicitly
“Cleared.”
STEP 10: The acquiring bank makes the batch settlement request of the credit card issuer.
STEP 11: The credit card issuer makes a settlement payment to the acquiring bank (the next
day in most cases).
STEP 12: The acquiring bank subsequently deposits the total of the approved funds in to the
merchant’s nominated account (the same day or next day).
This could be an account with the acquiring bank if the merchant does their banking with the
same bank or an account with another bank.
HOW TO PICK THE RIGHT PAYMENT GATEWAY FOR YOUR ECOMMERCE
WEBSITE :
Any business that collects online payment or accepts credit/ debit card payments, needs an
online Payment Gateway.
It’s important to research and find the correct payment gateway provider that fits your unique
needs.
A payment gateway should offer numerous benefits, namely, quick settlement of payments,
the hassle-free flow of transactions, and a superb overall experience every time.
Important features to look for in a payment gateway :-
Security:
A secure transaction is a first and foremost need for any business that collects payments
online. Customers must trust in the transaction and that their personal and financial
information will be safe while online transacting. It should ensure the security of the
information a customer put in. Such a service should be compliant with PCI standards.
Customer experience:
A payment gateway should provide unique and swift payment processing and payment
customization. It should be mobile optimized, secure and convenient which will provide
customers with a seamless shopping experience.
Worldwide Payment Acceptance: We live and work in a global market. A payment gateway
should support multi-currency transactions
Merchant Onboarding:
A payment gateway should provide the quickest merchant onboarding, as online transactions
are a primary need in today’s world. The processing and setup fees and rates should fit in the
merchant’s budget.
Payment Options:
Last but definitely not the least, a payment gateway should offer multiple payment options. A
customer should be able to choose a payment method he/she is most comfortable with, be it
Credit/Debit Cards, Netbanking, Mobile Wallets, UPI or any other.
LIST OF THINGS THAT AN ONLINE PAYMENT GATEWAY DOES TO KEEP YOUR
DATA SAFE:
The standard security protocol used in online transactions is SSL(Standard Security Layer) It
protects sensitive card information and authenticates the customer’s identity. A payment
gateway with SSL can be identified by checking the ‘https’ at the beginning of the web
address.
To authenticate customers and merchants an additional layer of security can be implemented
under the 3ds(Three-Domain Secure) protocol. This is a messaging protocol developed by
EMVCo.
Data encryption is one of the most important security measures in the payment gateway,
where the data appears scrambled and illegible to anyone but you.
Another unique way for a secure transaction via payment gateway is tokenization, where
BENEFITS OF PAYMENT GATEWAY :
Gone are the days when, a Payment Gateway was used to be a tool for transferring money,
now a Payment Gateway can do a lot more than that are :

I) White Label :
A white label payment gateway is the name given to a technical service provider that
gives businesses the ability to manage and process payments under their own brand while
using third-party SaaS (Software as a Service).
White label clients such as Payment Service Providers, ISOs, Acquirers, Merchants of
Record, and more have the possibility to manage multiple merchants and all payments across
their entities. The Fee Management Engine allows complex fee arrangements to be structured
in a clear and precise manner, while the Post Processing Engine’s reporting functions allow
the data to be viewed as a whole or at a granular level. All elements of the IXOPAY
administration and merchant interfaces can be customized according to your corporate design
guidelines: integrate your logos, colors, fonts, use your own domain names / URLs. Even our
API reference can be completely re-branded. Get state-of-the-art technology with
organizational maturity, with just one connection you can widen your business scope.
IXOPAY provides connections to over 100 acquirers, 3rd party risk check providers, and
adds up to five new integrations per month. This ensures you the utmost flexibility when it
comes to managing your payment stack. It is also connected to legacy systems such as Base
24 and has a twenty-four-hour service line that offers customer and technical support
whenever needed.
ii ) Easy Checkout:
The swift and seamless checkout experience is a must from a customer’s point of
view. Payment gateway enables these features and makes online shopping as easy as
possible.
iii ) Impulse purchase:
It is observed that more than 40% of customers cancel their purchase if the
checkout/payment method is tedious or complex. But, according to a study, it is observed that
impulse purchase is responsible for 40% of all online purchases, so being provided with an
easy payment option will undoubtedly make an increase in sales.
iv ) Security:
Payment Gateways are often compliant with security standards like PCI DSS, etc.
providing secure transactions.
The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards
designed to ensure that ALL companies that accept, process, store or transmit credit card
information maintain a secure environment.

The Payment Card Industry Security Standards Council (PCI SSC) was launched on
September 7, 2006 to manage the ongoing evolution of the Payment Card Industry (PCI)
security standards with a focus on improving payment account security throughout the
transaction process. The PCI DSS is administered and managed by the PCI SSC , an
independent body that was created by the major payment card brands (Visa, MasterCard,
American Express, Discover and JCB.). It is important to note that the payment brands and
acquirers are responsible for enforcing compliance, not the PCI council.sensitive card details
arev ) API tools for easy interagations :
API stands for Application Programming Interface, and it’s a set of programmatic
instructions that allow one program to interface with another program. In other words, an API
simply authorizes and integrates two applications to communicate with one another in order
to provide a seamless digital experience.
A payment API, also known as payment gateway API or payment processing API operates to
integrate a payment solution with another, existing application, such as connecting a
business’s checkout function to the payment system.
A payment API is also often referred to as the opposite of hosted checkout where the
payment is processed on another website. Unlike hosted checkout pages, payment gateway
APIs allow businesses to accept payment from customers on-site, avoiding the risk of
shopping cart abandonment.
Regarding payment APIs, as an overall rule, developers should pay attention to payment API
flexibility.
From a developer perspective, integrating payments into your software can yield many
benefits to you and the users. It can provide an enhanced customer experience, streamlined
operations, improved security — the list goes on.
But with so many payment APIs out there, choosing the right one for your business, bearing
in mind API flexibility, can be overwhelming.
vi ) Payment gateways also :
. Integrates with shopping cart
. Provides faster payment processing
. Accepts multiple payment options
. Provides charge back prevention
. Provides fraud management
. Provides recurring billing replaced by a string of encrypted characters

PAYMENT GATEWAY AS AN IMPORTANT FACTOR FOR SECURITY OF

PAYMENTS :
Since a payment gateway is such a crucial part of an e-commerce platform, it is imperative to
understand it from the security aspect. Security, being the top-most benefit of a payment
gateway, aids in lessening the intensity and frequency of credit card fraud within the e-
commerce platform.
A payment gateway, as mentioned earlier, authenticates the cardholder/shopper so as to make
a safe flow of payment from his/her account to the merchant/e-commerce platform’s account.
This entire flow of payment is secured with the help of a payment gateway.
A payment gateway maintains security by following a protocol for the same and thus, data of
the customer is encrypted in a safe manner.
There are some definite reasons, which make a payment gateway apt for the e-commerce
platform:

 Integrating a payment gateway does not require much hassle and can be set up easily
by the merchant/e-commerce business that already has a website/application for the
business.
  It requires slight maintenance, and thus, is extremely cost-effective.
 Because of the popularity of a payment gateway, majority of the people are familiar
and comfortable with its concepts. This makes it easier for the online business since
there is no requirement of knowledge for the same.
 A payment gateway helps in quick checkout with the customizable checkout page. A
merchant thus can customize the checkout page in accordance with the demands.
WHAT IS THE ROLE OF A PAYMENT GATEWAY AND WHAT IS ITS SUCCESS
RATE IN INDIA?
Payment gateway for an online business is extremely imperative since it is a channel of
receiving transactions on an everyday basis. Providing the services to receive endless amount
of payments, securely, quickly and conveniently, a payment gateway also aids in multiple
related tasks. Be it storing the customer details for future tracking or increasing your
customer satisfaction with smooth payments, it embraces it all. As the role of a payment
gateway is mainly to authenticate transactions between you and your customers, without it,
an online business remains incomplete.
Payment gateway services are needed for all online credit card processing and works with the
exact procedure a Point of Sale (PoS) device does when you pay for your meal at a restaurant
or for a product at a brick and mortar retailer. Hence, the main role of a payment gateway is
to assure and secure the transactions for you on an everyday basis. Hence, without a payment
gateway, transaction process cannot go forward and the merchant cannot receive the due
amount.
Considering the importance of this channel for the online businesses, apart from the main role
of authorizing the transactions, a payment gateway further performs some important
functions:

 Payment gateway stores customer details securely for future reference

 Accepts various payment methods
 Flows the transactions safely
 Maintains an uninterrupted channel for sending amount from cardholder’s bank
account to acquirer’s bank account
 Enables easy way of making payment