How Online Payment Gateways Work?

online payment gateways

What is online payment gateways?

Online payment gateways are the virtual portal that every online purchase made using a credit card has to pass through in order for funds to be securely transferred from a purchaser’s bank account to a merchant account.

How do online payment gateways work?

There are four fundamental steps that each transaction follows through online payment gateways: beginning the purchase, processing payment, payment verification and acquiring payment. Let’s take a look at these steps in detail below:

Step 1: Beginning the Purchase

Each purchase conducted on your company’s website begins when a customer has a selected a product they wish to purchase and submits the information via your website’s checkout page. The customer will send you their billing information, including their name, address, and credit card number through a secure connection via SSL encryption (secure socket layer) to your server.

Step 2: Processing Payment

Once the information from your custom arrives in your system, it is forwarded through another SSL encrypted connection to the payment gateway. Your payment gateway acts as a router that transfers the information simultaneously to the acquiring bank (your bank) and the credit card association for the payment verification.

Step 3: Payment Verification

Before funds can be released by your customer’s bank, the transaction must be verified and approved based on whether the customer has the available funds to complete the purchase. When the purchase is approved, the customer’s bank (or
issuing bank) sends the approval to the credit card company. This approval for purchase is then forwarded by the credit card company back through the payment gateway to the merchant’s bank processor where it is viewed by the customer and the merchant. This entire process usually takes seconds.

Step 4: Acquiring Payment

After the transaction is complete, the funds from the sale are deposited directly into the merchant’s bank account.


To learn more about how Millennium Bankcard helps keep transactions through online payment gateways easy and secure be sure to contact one of our friendly customer service agents today! We also recommend taking a look at the “How Online Payment Gateways Work” Infographic.

Read More About Merchant Services

Internet Merchant Account

Internet Merchant

Perfect for e-Commerce websites. Allows businesses to accept debit or credit card payments over the Internet.

Learn More
Telephone Merchant Account

Telephone Merchant

Best solution for business owners who conduct business over the phone or through the mail.

Learn More
Retail Merchant Account

Retail Merchant

Ideal for businesses who process credit cards and debit cards with the customers card present at the time of sale.

Learn More