Understanding how best to address the need for Internet payment gateway services
requires first briefly examining the participants in an Internet payment processing system.
Participants in a typical online payment transaction include:
· The customer: typically, a holder of a payment card—such as a credit card or debit
card—from an issuer.
· The issuer: a financial institution, such as a bank, that provides the customer with a
payment card. The issuer is responsible for the cardholder’s debt payment.
· The merchant: the person or organization that sells goods or services to the
cardholder via a Web site. The merchant that accepts payment cards must have an
Internet Merchant Account with an acquirer.
· The acquirer: a financial institution that establishes an account with a merchant and
processes payment card authorizations and payments. The acquirer provides
authorization to the merchant that a given card account is active and that the proposed
purchase does not exceed the customer’s credit limit. The acquirer also provides
electronic transfer of payments to the merchant’s account, and is then reimbursed by
the issuer via the transfer of electronic funds over a payment network.
· The payment gateway: This function, operated by a third-party provider, processes
merchant payments by providing an interface between the merchant and the
acquirer’s financial processing system.
· The processor: a large data center that processes credit card transactions and settles
funds to merchants, connected to the merchant on behalf of an acquirer via a payment
gateway.
The basic steps of an online payment transaction include the following:
1. The customer places an order online by selecting items from the merchant’s Web site
and sending the merchant a list. The merchant often replies with an order summary of
the items, their price, a total, and an order number.
2. The customer sends the order to the merchant, including payment data. The payment
information is usually encrypted by an SSL pipeline set up between the customer’s
Web browser and the merchant’s Web server SSL certificate.
3. The merchant requests payment authorization from the payment gateway, which
routes the request to banks and payment processors. Authorization is a request to
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charge a cardholder, and must be settled for the cardholder’s account to be charged.
This ensures that the payment is approved by the issuer, and guarantees that the
merchant will be paid.
4. The merchant confirms the order and supplies the goods or services to the customer.
5. The merchant requests payment, sending the request to the payment gateway, which
handles the payment processing with the processor.
6. Transactions are settled, or routed by the acquiring bank to the merchant’s acquiring
bank for deposit.
requires first briefly examining the participants in an Internet payment processing system.
Participants in a typical online payment transaction include:
· The customer: typically, a holder of a payment card—such as a credit card or debit
card—from an issuer.
· The issuer: a financial institution, such as a bank, that provides the customer with a
payment card. The issuer is responsible for the cardholder’s debt payment.
· The merchant: the person or organization that sells goods or services to the
cardholder via a Web site. The merchant that accepts payment cards must have an
Internet Merchant Account with an acquirer.
· The acquirer: a financial institution that establishes an account with a merchant and
processes payment card authorizations and payments. The acquirer provides
authorization to the merchant that a given card account is active and that the proposed
purchase does not exceed the customer’s credit limit. The acquirer also provides
electronic transfer of payments to the merchant’s account, and is then reimbursed by
the issuer via the transfer of electronic funds over a payment network.
· The payment gateway: This function, operated by a third-party provider, processes
merchant payments by providing an interface between the merchant and the
acquirer’s financial processing system.
· The processor: a large data center that processes credit card transactions and settles
funds to merchants, connected to the merchant on behalf of an acquirer via a payment
gateway.
The basic steps of an online payment transaction include the following:
1. The customer places an order online by selecting items from the merchant’s Web site
and sending the merchant a list. The merchant often replies with an order summary of
the items, their price, a total, and an order number.
2. The customer sends the order to the merchant, including payment data. The payment
information is usually encrypted by an SSL pipeline set up between the customer’s
Web browser and the merchant’s Web server SSL certificate.
3. The merchant requests payment authorization from the payment gateway, which
routes the request to banks and payment processors. Authorization is a request to
20
charge a cardholder, and must be settled for the cardholder’s account to be charged.
This ensures that the payment is approved by the issuer, and guarantees that the
merchant will be paid.
4. The merchant confirms the order and supplies the goods or services to the customer.
5. The merchant requests payment, sending the request to the payment gateway, which
handles the payment processing with the processor.
6. Transactions are settled, or routed by the acquiring bank to the merchant’s acquiring
bank for deposit.
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