Payment gateways

A Payment Gateway is a service that enables businesses to accept online payments from customers securely. It acts as a middleman between the customer, the merchant (business), and the bank, ensuring that payment transactions are processed safely and efficiently.

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🔑 Key Functions of a Payment Gateway:

1. Authorization:

   • Verifies if the customer has enough funds or credit to complete the transaction.

   • Approve or decline the transaction in real time.

2. Encryption & Security:

   • Protects sensitive payment data (like credit card numbers) by encrypting it, ensuring secure communication between the customer and the bank.

3. Payment Processing:

   • Connects merchants, customer’s bank (issuer), and merchant’s bank (acquirer) to transfer funds.

4. Fraud Prevention:

   • Includes security tools like 3D Secure, CVV verification, and Address Verification System (AVS) to detect and prevent fraudulent transactions.

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🛒 Example of Payment Gateways:

• Stripe

• PayPal

• Square

• Authorize.Net

• Razorpay (popular in India)

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✅ How it works (Simple Flow):

1. The customer orders on a website/app and enters payment details.

2. The payment gateway encrypts the data and sends it to the bank.

3. The bank processes the request and responds with approval or decline.

4. The payment gateway relays this response to the website.

5. The transaction is completed if approved, and funds are transferred to the merchant.