A merchant payment gateway is a software system that authorizes payments for online merchants and businesses. It is often viewed as the Internet equivalent of a point-of-sale terminal, or cash register, found in retail outlets. The purpose of the system is to ensure that information exchanged between the merchant and consumer is processed in a secure and timely manner. Although a merchant payment gateway is often associated with e-commerce, it can also be used for traditional, brick-and-mortar transactions.
Acting as an independent service, a merchant payment gateway is perhaps best described as the intermediate between the seller’s shopping cart and the financial entities involved in the transaction. This generally includes both the seller’s merchant account and buyer’s credit card company. During credit card processing, the gateway helps with verification, and provides security by encrypting the financial information used in the transaction. Once validity has been proved, and the details are sent to the requesting party, they are decrypted and returned to the merchant’s shopping cart.
For the most part, the action a merchant payment gateway performs is a transparent process that requires no additional intervention from the buyer or seller. Once the consumer completes his order, the merchant’s shopping cart then transmits that data to the gateway over an encrypted connection. This system is completely independent of the interface customers use to transmit their order information, and, as such, offers safety for monetary transactions.
When integrating a merchant payment gateway with a shopping cart, the merchant will typically receive notification of all orders through email. There are usually two messages. One is generated by the shopping cart software and delivers information about the customer and other details necessary to fulfill the order. The second email is automatically sent by the payment gateway. This message provides the merchant with updates on the status of the order approval. Merchants are encouraged to not send out orders until this second message has been received.
The overall reliability of a merchant payment gateway depends largely on the quality of the service provider. This is very important as it is up to the service provider to ensure security through the use of industry standard data encryption. It is also the provider’s responsibility to offer a solution that complies with Payment Card Industry (PCI) Standards and other regulations. There are a number service providers on the market, with Authorize.Net™ and Verisign® being two of the most trusted examples.