There is a lot to consider when you are setting up an e-commerce website. After building the site and implementing a shopping basket where users can store products they want to purchase you will need to devise a method of accepting payment and confirming the order. This is where a payment gateway becomes necessary. This article will explain what a payment gateway is and the steps that it will take to process payments from potential customers.

A payment gateway is a service that that handles the complicated and technical process of encrypting and verifying the customer's payment card and then transferring the funds from the customer to the merchant. A payment gateway works in the background of the website and the user will never directly interact with it. Instead the user will generally be directed to a checkout page where the merchant is able to ask for pertinent data relating to the customers name, address and payment card details. There are a great number of payment services providers online and the vast majority of them will already have payment gateways already built, tested and ready to add onto your website should you require their services.

After the user confirms an order all of their data is encrypted (typically using SSL) and sent to the merchants server. From here the merchant forwards the encrypted information on to the payment gateway which takes a number of steps to process the transaction.

- First the gateway will send the transaction details to the merchant's bank.
- Next the gateway will contact the payment card issuer with the transaction details.
- From here the card issuer will forward details of the transaction to the card holder's bank.
- Upon receiving the transaction details the bank will then decide whether or not it is able to process the transaction.
- When the bank decides to allow or decline the transaction it sends a response back to the payment gateway which will provide the website with the response where it will be passed on to the customer.
- Once the products are dispatched the merchant is then able to submit a settlement request to their acquiring bank (typically they will do this in a batch)
- The acquiring bank is then able to transfer the funds to the merchants chosen account

Employing a payment service provider to supply a payment gateway can take a lot of the hassle out of setting up an online business, making the process for the merchant as simple as possible and the transaction as secure as possible for the customer.