Payment Mechanism?

 Introduction: - In earlier days of shopping we purchase clothes, books or other goods. The shopkeepers in small shops take cash for the goods sold. In turn they may give us a cash memo. In bigger shops situated in shopping malls or branded stores, there is a Point of Sale (POS) terminal. This has a small sensor which scans the bar code on the goods and the product is automatically registered along with its price on the computer. The print out is then given to the buyer who pays by cash or by credit/debit card. In e-business payments have to be made online. There is no physical exchange of cash across a counter.

Payments have to be made through the web. This is done by an e-commerce application service provider called as "Payment Gateway"           

A payment gateway authorizes payments made online for anyone who is trading, buying or selling. These may include retailers, manufacturers, dealers and buyers and sellers of goods on the internet. It is the virtual (base) equivalent (equal) of a physical point of sale. Payments are made through debit cards, credit cards and by direct transfers from bank accounts through the net banking facility. Most gateways offer all these options for payments.  

Working of a Payment gateway:

Any customer who uses the payment gateway goes through the following steps:

1.       He/she places an order for the goods to be bought and clicks on a button called 'SUBMIT' once the merchandise is chosen.

2.       The site then asks for the customer's credit card details. Once the details are entered, the browser codes the information.

3.       The transaction details are forwards by the e-business website to the payment gateway. At this stage again information is coded.

4.       The payment gateway forwarded the information to the payment processor which is used by the credit card issuing bank.

5.       The payment processor sends the information to the card association (VISA / MASTER / AMEX)

6.       The card association forwards the transaction to the card issuing bank.

7.       The card issuing bank authorizes the payment. Then it sends its request back through the same process to the merchant website. Once the authorization is received, the sale is approved.

8.       The entire process does not take more than 2-3 minutes depending on the speed of the internet connection.

9.       If the internet connection fails at a step of the process, then the appropriate procedure is adopted. E.g. if the connection fails after payment has been made but before the order is finalized, then the payment is credited back to the card account with a stipulated (specific) time.

The flow chart given below indicates the steps in the process of a secure transaction.

 Website -------------> Payment Gateway-------------> Payment Processor ----------->  Card Association --------> Card Issuing Bank