How payment gateways work

Payment gateways play an important part in processing online transactions. Understanding how the payment process works can help you provide a seamless payment experience for your customers.

What payment gateways do 

When a customer purchases goods and services from you, your data needs to be exchanged securely to enable the transfer of funds. 

Without payment gateway technology the transaction from your website could not happen, and money could not be deposited in your bank account. It connects the customer (the cardholder), you (the merchant), their bank (the issuing bank) and your bank (the acquirer) so you can be paid.

A payment gateway securely collects, authorises and transfers customer data in real-time to your bank, which then processes the transaction.

1. Card verification

The card details entered to process the transaction go through a ‘payment switch’ that determines which type of card is being used. This information is essential to the whole transaction because data needs to be sent to the right bank for approval.

2. Data encryption and Security 

The payment gateway encrypts data and sensitive information so that it can transmit securely.

3. Going through the payment processor 

Infrastructure and services that allow payments to be accepted and processed are provided by a third-party vendor called a payment processor. While the payment gateway allows the exchange of information, the processor acts as a middleman between the credit card networks, your bank and your customer’s bank. It ensures your customers have enough money or credit to pay for goods and services and provides extra security around financial information. It is also responsible for verifying the authenticity of a card and completing credit and debit card transaction and payments to you.

4. Getting paid 

Once all of this information comes back to the payment gateway, and is approved by your bank, money is transferred from the customer’s bank into your business transaction account. If you settle your transactions in to a NAB business bank account before 9:30pm AEST, you'll have same-day settlement  and access to your funds seven days a week.