Youth Climate Ambass Group

What is a Payment Gateway?

A payment gateway is a service that authorizes and processes payments in online and brick-and-mortar stores. It acts as an intermediary between a merchant’s website and the financial institutions involved in the transaction, ensuring that customer payment data is transferred securely and swiftly.

How Does a Payment Gateway Work?

The process typically involves the following steps:

1. Customer places an order on the merchant's website and enters payment details.

2. Payment gateway encrypts the data and transmits it to the acquiring bank.

3. The acquiring bank forwards the data to the card network (e.g., Visa, MasterCard).

4. The card network routes the transaction to the issuing bank (customer's bank).

5. The issuing bank approves or declines the transaction.

6. The decision is sent back through the same route to the merchant and customer.

All of this happens in a matter of seconds.

Types of Payment Gateways

1. Hosted Payment GatewaysRedirect customers to a third-party platform to complete the transaction (e.g., PayPal, Razorpay).

2. Self-Hosted Payment GatewaysCustomers enter payment details on the merchant’s site, and the data is then sent to the gateway.

3. API or Non-Hosted Payment GatewaysIntegrated directly with the merchant's website via APIs for a seamless user experience.

4. Local Bank Integration GatewaysConnects directly to local banks for payment processing, often used in smaller regional setups.