Nine steps to understand how payment gateways work in India:- www.deekpay.com

For e-commerce business owners, choosing a suitable payment gateway is a critical part of the process after successfully displaying the products online. Once the ordered item in the shopping cart is selected, the user enters the checkout process. The role of the payment gateway is crucial in this part of the process. It enables the merchant website to request payment from the payment method chosen by the customer. Once the payment is approved, the funds are securely transferred from the buyer to the seller. Below, we will explore how payment gateways work in detail.

How do payment gateways work?

Payment gateway plays a vital role in every online transaction across the globe. It authorises transactions between merchants and customers.

Let's dive into the sequence of events in the settlement process:

1) After the customer confirms the order and selects the payment method, the customer's browser encrypts the payment information via Secure Socket Layer (SSL) and sends it to the merchant's website. For this, the merchant needs to obtain SSL certification. The encrypted information is then passed from the merchant's website to the payment gateway.

2) From this step onwards, the payment gateway chosen by the merchant takes over the processing.

3) The payment gateway forwards the encrypted information to the merchant's bank.

4) If the payment method chosen by the customer is a debit card, credit card or e-wallet, the bank further forwards the encrypted information to the respective association, which in turn forwards it to the card-issuing bank.

5) If the chosen payment method is Internet Banking or UPI transaction, the encrypted information will be sent directly to the customer server of the relevant bank.

6) The customer's bank will check the customer's account to confirm availability of funds as well as other conditions such as CVV or PIN matching, any restrictions set by the customer, etc.

7) After evaluation, if the transaction meets all specified protocols, the client's bank will approve the transaction. In case of incorrect data or unavailability of funds, the transaction will be rejected.

8) This response is encoded and returned to the payment gateway.

9) The payment gateway then forwards this response to the merchant to approve or reject the transaction accordingly.

The Importance of Seamless Payment Gateways

The whole process needs to be extremely fast and requires close collaboration between all parties involved. The efficiency of the payment gateway is particularly important here. A reliable payment gateway, at optimal speed, should be able to complete the entire process in just a few seconds.

The role of the payment gateway does not end here. At this stage, the status of the transaction, whether approved or rejected, has been determined. However, the merchant has not yet received payment. At this point, the second phase of the payment gateway process begins.

1) After receiving approval, the merchant sends the authorisation code to their bank via the payment gateway.

2) The merchant's bank then deposits the approved amount into the merchant's account or the payment gateway's aggregated merchant account.

3) Eventually, the money is transferred from the merchant account to the business's bank account.

About Merchant Accounts

A merchant account serves a dual purpose here. It provides protection for business customers and credit card companies. It holds the funds safely until the order is fully satisfied to the customer's satisfaction. If something goes wrong with an e-commerce order, the customer is refunded from the merchant account.

Merchants can choose to have their own merchant account or opt for an aggregated merchant account provided by the payment gateway. This choice depends on the cost factor and the timing of the cash flow in each case.

Regulation of Payment Gateways in India

Business owners need to understand how payment gateways work in India. The functioning of payment gateways is regulated by the Reserve Bank of India (RBI) guidelines. As per the notification dated 17 March 2020, RBI has issued "Guidelines on Regulation of Payment Aggregators and Payment Gateways".

What is the ideal process for choosing a payment gateway?

The choice of payment gateway also depends on how it integrates with the merchant's website. Software developers usually perform this task for merchants. This task requires knowledge of PHP, Java or C# coding. The way the payment gateway works in PHP, Java or C# needs to be thoroughly tested before going live.

There is also off-the-shelf software available for merchants to integrate payment gateways with their websites without coding.

In India, PayU India offers payment gateway services with the highest success rate and has a wide base of satisfied customers. Some of the salient features of working with PayU India include:

PayU India offers over 100 payment options to your customers.

PayU India allows you to accept international payments.

PayU India ensures that operations are fast and easy to use.

PayU India offers the ultimate in security and world-class security.

reach a verdict

With the advancement of digitalisation, merchants now realise the importance of an online presence. Many businesses now offer their services online only. Choosing the right payment gateway is crucial for the success of an e-commerce business. Merchants can read the above points carefully and make informed business decisions.

Frequently Asked Questions

Can you explain in layman's terms what a payment gateway is? A payment gateway is a technology that enables business owners with an internet presence to receive payments online. How do payment gateways work? The work of a payment gateway begins when a customer enters their banking details on a merchant's website. How it works is not complicated - simply put, payment gateways act as a middleman when transferring information between the merchant's website and the bank. Is it safe to use a payment gateway?PayU India provides a safe and secure environment to process payments. With PayU India's payment gateway, you don't have to worry about data leakage or fraud.