A Payment Gateway enables online merchants to accept card payments and alternative payments securely by encrypting sensitive information and passing the transaction details to the acquiring bank. Acquiring bank then notifies the issuer bank that an account/card holder has requested a payment. A payment gateway facilitates the transfer of information between the online merchant and the payment service provider or the bank.

A number of payment gateways provide various screening tools to monitor transactions for fraudulent activity and tools to prevent fraud. Payment gateways also provide reporting facilities to merchants to keep track of their orders.

Payment gateway and payment process definition

Following is a simple process that defines the payment process (credit card processing) behing a payment gateway whether with Areto Systems or not:

1. The customer’s web browser encrypts the information to be sent between the browser and the merchant’s server (an online shop). This is done via SSL (Secure Socket Layer) encryption.
2. The online shopw then forwards the transaction details to the preferred payment gateway (e.g. AretoPay). This is another SSL encrypted connection to the payment server hosted by the payment gateway.
3. The payment gateway forwards the transaction information to the payment processor.
4. The payment processor forwards the transaction information to the card association (e.g., Visa/MasterCard)
5. The processor acts as the issuing bank, if the customer uses an American Express or Discover Card. He directly provides a response of approved or declined to the payment gateway.
6. Otherwise, the card association routes the transaction to the correct card issuing bank.
7. The credit card issuing bank receives the authorization request and sends a response back to the processor (via the same process as the request for authorization) with a response code. In addition to determining the fate of the payment, (i.e. approved or declined) the response code is used to define the reason why the transaction failed. This can be because of insufficient funds or bank link not available.
8. The processor forwards the response to the payment gateway.
9. The payment gateway receives the response, and responds back to the online merchant’s web site.
10. Although this seems complex, this entire process typically takes between 10 to 20 seconds.
11. The entire process from authorization to settlement, considering the issuing bank transfered the funds, all the way to the acquirer or processor, typically takes 3 days.