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Payment Gateway

A payment gateway is a service that authorizes, encrypts, and transmits payment data between customers and banks. It involves several steps including data encryption, authorization requests, and fraud screening, ensuring secure transactions for e-commerce, mobile apps, and POS systems. Popular examples include Stripe, PayPal, and Square, and they must comply with security standards like PCI DSS.

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Majid Shahid
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10 views2 pages

Payment Gateway

A payment gateway is a service that authorizes, encrypts, and transmits payment data between customers and banks. It involves several steps including data encryption, authorization requests, and fraud screening, ensuring secure transactions for e-commerce, mobile apps, and POS systems. Popular examples include Stripe, PayPal, and Square, and they must comply with security standards like PCI DSS.

Uploaded by

Majid Shahid
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PAYMENT GATEWAY

Definition
A payment gateway is a service that authorizes, encrypts, and transmits payment data from
the customer to the acquiring bank and then back with the transaction result (approved or
declined).

🔄 How a Payment Gateway Works


Here’s a simplified step-by-step flow of what happens during a typical online payment:

1. 🛒 Customer Initiates Payment

 The customer enters card details (Visa, Mastercard, etc.) or uses a wallet (Apple Pay,
Google Pay).

2. 🔐 Data Encryption

 The payment gateway encrypts sensitive payment data (card number, CVV, etc.).

3. 📤 Authorization Request

 The gateway sends the encrypted data to the acquiring bank, which forwards it to the
card network (Visa, Mastercard).

4. 🏦 Issuer Bank Response

 The card issuer checks:


o Is the card valid?
o Is there enough balance/credit?
o Is it flagged for fraud?
 It then approves or declines the transaction.

5. 📥 Gateway Sends Response to Merchant

 The payment gateway receives the decision and notifies the merchant.
 If approved, the transaction is completed, and the customer gets confirmation.
🧩 Core Functions of a Payment Gateway
Function Description
Authorization Approves or declines transactions in real time
Encryption Protects sensitive cardholder data
Tokenization Replaces card data with secure tokens
Fraud Screening Uses rules or AI to detect suspicious activity
Settlement Support Initiates transfer of funds from the bank to merchant
Reporting & Analytics Transaction logs, sales summaries, refunds, etc.

🛍️Where It's Used


 E-commerce websites (Amazon, Shopify, etc.)
 Mobile apps (Uber, food delivery)
 POS systems (in-store card readers)
 Subscription billing systems (Netflix, SaaS)

🌐 Examples of Popular Payment Gateways


 Stripe
 PayPal
 Square
 Razorpay
 Adyen
 Authorize.Net
 Worldpay

🔐 Security Compliance
A payment gateway must be:

 PCI DSS compliant (Payment Card Industry Data Security Standard)


 Capable of 3D Secure (e.g., Visa Secure, Mastercard Identity Check)

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