It is a point in the network or a service provider that allows internet users to enter into other networks and pay online for their purchases from online stores via websites.
The main issue concerned with online payment gateway is Security i.e. encrypting the crucial and sensitive credit card details like credit card numbers of the shopper and sending the same from shopper to merchant and from merchant to payment processor.
It is similar to POS as present in the physical shops. POS is Point Of Sale which is a terminal being found at every retail shop made up of bricks. This service is provided by various banks.
The linking of an online shopping store with a payment gateway is called Payment Gateway Integration.
The procedure of Payment Gateway:
The customer after shopping submits the order and the same is sent in an encrypted form to the merchant's web server. The SSL encryption takes place in which there is the assurance of secure data transmission.
The same is then sent to Payment Gateway.
These transaction details are then passed to the merchant's acquiring bank.
The acquiring banks then send the details to issuing bank i.e. the bank that has issued the credit card to the customer.
After getting the details, issuing series sends the answer to the online payment that whether the payment has been received or not. If not accepted, the reason is also sent in the response.
The equivalent is then passed to the payment gateway and hence to the merchant's server.
The response is finally sent to the customer in an encrypted form to intimate the customer whether his order has been placed successfully or not.