The present complexity of our world does not always afford us traditional payment methods. So, an online system of payment aids in solving the problem.
A student in South Africa can pay school fees to a school in the United Kingdom with a few clicks from the comfort of his home without fear because he trusts the system.
So, how does this “trusted” payment system really work?
Online payments are made via a payment gateway; A payment gateway is an e-commerce application that enables merchant services to accept payments by authorizing credit cards or direct payment processing.
In a simpler context, a payment gateway is a systematic merchant service designed to mediate between service providers and customers with the exchange of currency.
There are three parties involved in payment gateway transactions;
- Merchant account
- Payment processor
- Customer’s account
The merchant account is a bank account that temporarily receives payment before transferring it to the owner’s regular bank account.
A payment processor is a digital system that uses debit or credit card detail to evaluate the customer’s account paying for a service.
Online payment websites operate either on hosted or non–hosted gateways; hosted payment gateways redirect customers to the payment page to complete the payment transaction, while non–hosted payment gateways keep the website environment without redirecting the user to a different webpage.
Hosted payment gateway is considered more secured and protected against fraud because card details are entered on a different webpage.
The ordering cost and card details are received by the payment gateway system, which encrypts the customer’s card details and transmits them to the bank via electronic networking, but the encrypted card details remain accessible only to the available bank and the customer.
If sufficient funds are available, the payment gateway requests for the customers’ bank to transfer funds to the merchant bank, which then disburses funds into the merchant’s account.
The payment gateway provides notification on the payment status and redirects the customer back to the purchase but gives access to the product or service purchased.
It is an interesting payment method that is taking over the conventional hand-to-hand payment.
Now, we can make payments without using our hands!
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