Payment processing with a human face

Both payment gateways and payment processors are key elements in the chain of financial transaction process. A payment gateway is a technology that serves as an analogue of the point-of-sale terminal system in the eCommerce environment. Payment gateways are integrated into the e-commerce platform through API. The payment gateway gathers, encrypts, and sends a user’s financial data to the merchant’s acquirer’s payment processing center. The payment processing provider manages all data rotation between all transaction participants to complete the online payment if it’s approved by the issuing bank.

To see how online payment processors work, we need to understand the whole online payment cycle: 1. A customer initiates the buying process through the online platform and fills in payment information through the payment gateway. 2. The payment gateway encrypts this information and sends it to the payment processor. 3. The processor sends an authorization request to the payment system, where authorization is approved from the card issuer's bank 4. When the acquirer closes the business day, they send batches with transactions for the day to the payment system for clearing. 5. Further, the issuing bank pays to the acquiring bank for the transactions performed, and the processor receives reports and settlements from the payment system, which it converts into a convenient format and transfers to the client. 6. The payment processing provider updates the transaction status via gateway: approved or declined, depending on the customer’s bank’s answer. 7. If approved, the merchant receives money and the customer sees confirmation of the successful purchase. 8. If declined due to lack of funds, currency conversion policies etc., customers see the denial status and can’t make the purchase. As you can see, the payment processor is involved in each stage of the transaction chain in e-commerce, from the first seconds of authorization to the provision of reports to the acquirer on settlements of transactions.