Payment Gateway- Functioning, Types and Integration 
                     Payment Gateway- Functioning, 
Types and Integration 
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What’s a Payment Gateway?
• An interface that allows you to process payments directly through your bank 
account. 
• Lets you make transactions through Internet banking, Debit and Credit cards, 
UPI and Online Wallets.
• Encrypts all the sensitive information which comprises card and bank details for 
security reasons.
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How does payment gateway work?
• Customer clicks on the check out button and is routed to the 
payment gateway to input his bank details in order to proceed with 
the payment. 
• Gateway then takes the customer to the issuing bank’s page to 
authorize the transaction.
• After the approval for the transaction, bank checks to make sure 
that the customer holds enough funds in his account before 
processing.
• The processing message is sent to the customer. In case of decline, 
the reason for the failure is communicated with the customer. 
Similarly, during successful processing, the funds are directed 
towards the merchant hereby, completing the transaction.
• Bank settles the money with the payment gateway which in turn, 
settles it in the merchant’s account, providing the customer with a 
confirmation message of the order placed.
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Types of Payment Gateway 
Hosted Payment Gateway- Directs your customer Non-hosted (Integrated) Payment Gateway- 
away from your website’s check out page and redirects Eliminates the process of routing the customer to a PSP, 
them once the payment is processed. allowing them to complete the payment process on the 
When your customer clicks on the gateway link, they are website itself. 
directed to the PSP where they fill their payment details Let customers directly enter their card or banking details on 
and are then redirected to the website to complete the the checkout page and process payments without being 
check out process. redirected to another PSP.
Pros: Pros:
• Extremely secured with PCI DSS compliance • Customizable and provides full control over user 
• Easy to set up and simple to use interface.
• Customizable • Highly versatile as by using an API you can integrate your 
internet payment solution with any device that can be 
Cons: connected over the internet.
• Impossible for merchants to retain the customer 
and control the whole user experience because the Cons:
gateway is external • Merchants are responsible for purchasing the SSL 
certificate and getting a PCI DSS compliance.
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Types of transactions in a Payment Gateway
• Authorization - Determines a customer’s ability to pay and find out if there are enough funds in their card to 
process the transaction, without transferring funds.
• Capture - When you’ve sold a product online that takes time in manufacturing for shipping, you first need to 
authorize the payment before capturing it and settling it in your bank account.
• Sale - When you fulfil your orders immediately, you use sale transaction type where the money is charged and 
transferred at once.
• Refund - Whenever an order is cancelled, the merchant is required to refund the transaction amount and 
submit it for processing. 
• Void - Can only be made in case of an un-settled or un-captured transaction. Void transactions will 
disappear from their customer’s account statement within 24 hours.
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Things to look in a Payment Gateway
• Security - Select the payment gateway that prioritizes security and uses highest bit encryptions. PCI DSS 
certification is necessary for the safety of your customers’ transactions.
• On-boarding Process – Avoid a payment gateway with long, comprehensive and tedious on-boarding 
timeline and process.
• Seamless Integration - Select the platform that offers seamless integration and is merchant and user-
friendly.
• Mobile Optimization - Mobile optimization undoubtedly is the need of the hour. Go for a Payment Gateway 
that provides you the convenience of mobile optimization. 
• Customer Support - Always look for a gateway that provides you customer support and solves your problems 
           24x7. 
For More detailed information on Payment Gateway -  https://www.atomtech.in/blog/what-is-payment-gateway/ 
Atom Technologies Limited CLIENTS FIRST | FORESIGHT | TEAMWORK www.atomtech.in