How is payment gateway architecture?

01 Dec 2023

Payment gateway system architecture includes the Customer, the Merchant, the Issuing Bank, and the Acquiring Bank—each playing a crucial role in the intricate ballet of digital transactions.

Critical Stakeholders for Online Payments:

• Customer: The instigator of the process, initiating the transaction by purchasing a product or service.
• Merchant: The vendor of products or services who accepts money from the client.
• Issuing Bank: The custodian of the customer's bank account, typically providing a payment card. It settles the payment with the acquiring bank.
• Acquiring Bank: The guardian of the merchant's bank account, receiving the payment initiated by the customer.

A Common Payment Sequence:

• Customer Purchase: The customer buys a product or service, triggering the start of the payment process.
• Processing Phase: The payment goes through processing, transforming from intent to reality.
• Bank Deduction: The issuing bank deducts the payment from the customer's account, recording the transaction.
• Money Transfer: The acquiring bank smoothly transfers the funds to the merchant's account, concluding the financial transaction.

The Inside Story:

While this process seems straightforward, the intricacies come to light when considering the role of the payment gateway and payment processor. These elements are the unsung heroes working behind the scenes, ensuring the reliability and security of every online payment transaction.

What is a Payment Gateway?

Akin to a credit card terminal for point-of-sale transactions, a payment gateway is tailored specifically for online transactions, commonly known as a Card Not Present (CNP). Acting as the final checkpoint, it is where a customer inputs payment details for their purchase.

How Does a Payment Gateway Work?

When a customer finalizes a purchase and proceeds to payment, they input their payment details. The payment gateway encrypts this information and transmits it to the issuing bank.

The data is decrypted in a usable format and authenticated by the issuing bank. Once verified, the payment processor securely delivers the information, commonly using Secure Socket Layer (SSL) encryption.