Imagine your online payment is a paper check. When you click ‘buy’ on a website, it’s like you’re giving your paper check to a guy behind a desk. He walks it back to another office, where a girl calls your bank and finds out if you have the funds to cover the check. She also verifies your identity. Your bank transfers money to the seller’s bank, and calls the girl to tell her. She relays the massage to the guy behind the desk, he tells you, and you get to download your 99-cent eBook.

Sound complicated? It is.but its really easy if you understand the process.

When you buy an item, the transaction starts through the payment gateway. The gateway then contacts the payment processor, who contacts your merchant account and the issuing credit card network. Depending on the card, transactions are either authorized by the network on the payment gateway website or by the cardholder’s issuing bank. Once the authorization is either accepted or declined, your merchant account is notified and the payment processor is notified as well. Funds are delivered, goods are sent on their way, and all is well and really easy.

Getting to Know the Important Parts of Online Payment Processing

To manage an efficient and secure online payment processing service, you need several key components, including:

1. A Payment Gateway.


2. A Payment Processor.
3. A Merchant Account.
4. An Online Shopping Cart/Shopping website.

5. Some Means of Fraud Prevention.

6. PCI Compliance.


7. And other components if the goal is complex sales such as international and recurring ones
But what are these? Let’s take them one at a time.

An online shopping cart is the link between your goods and your customers. It’s also where the payment process starts.

Shopping carts and payment services must be integrated to work well together. Once the checkout button is clicked, the shopping cart has done its job. It’s on to the payment gateway.

The payment gateway is like the guy behind the desk. It’s the job of the payment gateway to handle the transaction securely and effectively, sending encoded information from the website to your payment processor.

Payment processors manage the communication between your merchant account (basically, a holding account for credit card transactions) and the credit card network. Much like the girl in the office, the payment processor is the middle man between the paying account and the receiving account.

Fraud prevention and professional-grade security are the most technical pieces of the puzzle. To combat identity theft, online payment processing service rely on a bevy of safeguards, including industry-leading data storage and encryption techniques, order behavior analysis, and complex security algorithms.
By law, credit card processors have to meet strict compliance regulations.