How does a payment gateway function?
Payment gateway takes care of credit card transactions and authorize payments. Most gateway services are provided by third party companies like PayPal, Google and Authorize.Net as well as banks. You would need a merchant account to set up your payment gateway portal.
As the customer submits a request, the data is caught and transmitted to the merchant’s server in encoded form like Secure Socket Layer (SSL) and after that sent to the payment gateway. It then transmits the data to the server of concerned bank.
Getting bank of the merchant passes the data to the bank of the customer.
The card issuing bank of the customer sends response to gateway itemizing whether the exchanges is approved or declined.
Finally, the card issuing bank of the customer deposits the amount in the acquiring bank account of the merchant at the end of the day.