Explain How does a Payment Gateway Work?

you may be thinking, why we need a payment gateway? The customer’s card cannot be physically swiped on a POS terminal, as you would customarily do if you processed the payment in a brick-and-mortar shop.

Ergo, you can only rely on the card information that the customer is entering on the payment page. But, how can you be sure that the card the customer is utilizing is their card? In Card-not-present transactions, the fraud risk is significantly higher, and this is where a payment gateway does its magic.

What would transpire if you take the payment gateway out of the online payment flow? Fraudsters would have more facile access to card data you process, exposing your business to fraud and Chargebacks. On top of that, fraudsters would additionally find supplemental ways to initiate illegitimate transactions, leaving you even more exposed to fraud and damaging your brand reputation.

A payment gateway is the gatekeeper of your customer’s payment data. For online merchants, a payment gateway relays the information from you, the merchant, to the acquirer and the issuing bank utilizing data encryption to keep unwanted threats away from the sensitive card data. Aside from fraud management, a payment gateway additionally bulwarks merchants from expired cards, inadequate money, closed accounts, or exceeding credit limits.

Working of Payment Gateway

now that you have understood why merchants need a payment gateway, let us took a step further and analyze how a payment gateway works throughout the payment journey.

The customer culls the product or accommodation they optate to purchase and proceeds to the payment page. Most payment gateways offer you different options for your payment page. emerchantpay’s payment gateway offers you the below options for your payment page tailor-made for your business needs:

Hosted payment page

A Hosted Payment Page Is An Out-Of-The-Box Payment Page Where Customers Are divert When They Are Yare To Checkout. The Payment Gateway Securely Receives The Transaction Data Afore It Passes It To The Acquirer.

A Hosted Payment Page Minimizes The PCI Burden For Online Merchants If You Don’t Amass And Or Store The Cardholder Data On Your Server.

Server-to-server integration

Server-to-server integration is utilized by mobile advertisers and ad networks to determine how many installs were driven by an ad that is accommodated.

the annexed image should explicate what transpires. but briefly, the advertiser will send information on all installs to ad networks so they can match against those who optically discerned the integration.

Unlike web predicated tracking, where information passes through between two parties – the advertiser and the publisher (or ad network), in the case of mobile app installs the information is passed through Google Play or Apple app store as well. This engenders a wall that makes it marginally arduous to apportion data between the advertiser and the ad network.

Client-side encryption

Client-side encryption, withal kenned as encryption-at-source refers to encrypting sensitive on the client-side contrivance afore sending it to the merchant’s server. This enables the merchant to simplify your PCI compliance requisites. In a nutshell, it enables you to accept payments on your website while encrypting card data in your browser, utilizing the payment gateway’s encryption library.

  1. The customer enters their credit or debit card details on the payment page. These details include the cardholder’s name, card expiration date, and CVV number (Card Verification Value). This information is securely passed onto your payment gateway, based on your integration (hosted payment page, server-to-server integration, or client-side encryption).
  2. The payment gateway tokenizes or encrypts the card details and performs fraud checks before they send the card data to the acquiring bank.
  3. The acquiring bank sends securely the information to the card schemes (Visa, Mastercard).
  4. The card schemes perform another layer of fraud check and then send the payment data to the issuing bank.
  5. The issuing bank, after performing fraud screening, authorizes the transaction. The approved or declined payment message is transferred back from the card schemes, then to the acquirer.
  6. The acquiring bank sends the approval or decline message back to the payment gateway who then transmits the message to the merchant. If the payment is approved, the acquirer collects the payment amount from the issuing bank and holds the fund into your merchant account (more on that later on).
  7. deposits the funds into the merchant’s account, a process which is known as the settlement; when the actual settlement will occur, depends on the agreement the merchant has with their payment gateway.
  8. Based on the message, the merchant may either display a payment confirmation page or ask the customer to provide another payment method.


All this information on payment gateways may be amazing. We know that finding the right online payment partner is a key decision for your business and for your daily works like online shopping, bill payment, mobile recharges, etc, which is why we have designed our unified payment platform with a focus on customer experience. a payment solution built for today’s demanding consumers, you will be able to deliver enhanced online experiences and frictionless customer journeys that your customers will love.

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