Many small businesses still make a habit of accepting payments through cash or check. Usually, this usually done out of tradition or familiarity. However, online payment systems are now the norm; they have been so for a long time. Therefore, it is imperative that you understand these systems and consider using one. Learn more about how online payment services function.
The Gateway
One of the first pieces of terminology dealing with online payment services is the gateway. The payment gateway is the initial recipient of the funds. This service will usually be included on a website or an app. Once a customer enters the payment information, the payment gateway forwards it to be processed. In essence, the gateway is like a collector of payment information.
Processing Payments
After the information is input into the gateway it goes to the processor. This is an external service that verifies the information entered by the customer. The processor will check the credit card number, name and address. It will also determine whether there is sufficient money available to cover the transaction. If this information all checks out, the result is sent back to the gateway application. At the gateway, the customer receives information about whether the transaction was successful.
Transmitting the Payment
Before information is sent back to the payment gateway, the payment is initiated by the processor. This is the point where the funds are actually drawn from the customer’s account. Shortly after this, the customer will be able to view the transaction on a bank statement or credit card payment history.
Who is a Payment Provider?
Payment provider is a generic term used to describe the organization that handles payments. These companies may operate either a gateway or a processing unit. Some companies do both. When you decide to offer online payment services, you’ll likely work with a payment provider.
