Payment Gateway Solutions
Payment Service Providers (PSPs) are financial entities operating within the regulatory framework of Payment Services and Electronic Money laws. These entities, authorized and licensed under the law, facilitate payment transactions. A Payment Gateway, developed by a PSP, serves as the software infrastructure for money processing. Essentially, PSPs function as intermediaries in financial transactions, facilitating the movement of funds that they do not own.
Payment companies can undertake various financial activities, including utility bill collection and distribution, handling payments for third parties such as online merchants or mobile operators, and offering expedited transfer services between financial institutions across regions.
How Does a Payment Gateway Operate?
A Payment Gateway encrypts crucial payment information, such as credit card numbers, ensuring secure transmission between customers and merchants.
- A customer initiates an order on the website, proceeding to checkout or a similar action.
- The merchant securely transfers order details to the Payment Gateway, and customers choose their preferred payment method.
- The transaction is routed to the issuing bank or a 3D secure page for authentication.
- Upon successful authentication, the transaction is authorized or declined by the bank or card issuer.
- The Payment Gateway notifies the merchant accordingly, and upon settlement with the bank, disburses the funds to the merchant.
When utilizing a Payment Gateway, three key functions come into play: authorization, settlement, and reporting, ensuring smooth transactions regardless of the payment method used by customers.
Security Measures of Payment Gateways:
Payment Gateways employ robust security measures to safeguard sensitive transaction data, encrypting credit card details to prevent unauthorized access.
- Transactions occur over HTTPS, ensuring a secure connection.
- Hash functions validate transaction requests, using a secret word known only to the merchant and the Payment Gateway.
- Virtual Payer Authentication (VPA), under the 3D secure protocol, adds an extra layer of security, enhancing authentication for online transactions.
Benefits of Using a Payment Gateway:
Apart from facilitating money transfers, Payment Gateways offer additional benefits to merchants:
- Enables online product and service sales.
- Facilitates entry into global markets.
- Allows acceptance of payments in local currencies via traditional methods.
- Helps prevent fraud and chargebacks.
- Supports mobile payments.
- Facilitates recurring billing.
- Suitable for high-risk businesses.
- Offers offshore settlement options.