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How Does Payment Gateway Work?

One of the biggest benefits of an eCommerce website is the ability to get paid instantly for purchases made online.

This payment is processed by a payment gateway which is a safe and secure way of transaction online. Traditionally, many businesses as well as buyers were hesitant to shop online due to payment issues.

But with the latest technology and more safe and secure payment options available online, you can rest free and do shopping online.

With online payment processing, both businesses and buyers were satisfied with their concerns. For businesses, getting money before delivery makes it profitable, and for customers, it offers a secure way of paying for the Goods or Services.

You may wonder how this payment gateway works and it may confuse you, which is why in this article, we will discuss How Payment Gateway Works, the security benefits of payment gateway, and much more.

But first, let’s find out what is a Payment gateway

How Does Payment Gateway Work

What is Payment Gateway?

A Payment Gateway serves as the intermediary between the buyer and the seller, facilitating seamless bank transfers.

This platform enables both parties to conduct transactions using online methods. The payment gateway functions as a safeguard for both customers and sellers, ensuring the protection of their respective interests throughout the transaction process.

The payment data is relayed through an encrypted network which not only protects the payer’s identity but also ensures that there are no leaks in between.

Security Features of Payment Gateway

The following are the security features of the Payment gateway-

  • The network on which the entire payment gateway is operated is encrypted which is impossible to penetrate through hence, securing the network.
  • It uses a process called Tokenization which converts sensitive information like Card numbers, names, CVV, etc. into small tokens that do not have any value individually, however, when accessed by the authorized person, it processes the payment.
  • The payment gateway also authenticates the payments made by the buyer by establishing communication between both banks.

How Does a Payment Gateway Work?

The following are the steps that are followed by the payment gateway to process the online payment-

Card Details

After selecting the products that you want to buy, you’ll have to enter the details of your card in the given section. After you’ve entered your details, the bank verifies the data and checks on which network the card is registered. In India, the majority of the cards use VISA, Mastercard, or Rupay.

Payer’s Validation

Some cars have a two-step authentication as well where an OTP is sent to the payer’s mobile number by the bank and he/she has to enter the correct OTP to validate the process. After completing the validation process, the bank sends the further starts the process of capture.


In this step, the buyer’s account as well as the seller’s account are authenticated and an initiation is made for checking the details. After completing that, the buyer’s account is credited with the amount and then sent to the seller’s account. After completion of the crediting, the payment gateway confirms the transaction and then completes the process of bank transfer.


Are there any charges associated with the Payment gateway?

Payment gateway charges a certain percentage of the transaction ranging from 1%-3% on the amount transferred. Additionally, taxes are also involved in the complete transaction.

Does Paytm provide a Payment gateway?

Yes, Paytm provides a payment gateway by the name Paytm All in one Payment Gateway. The payment gateway provides multiple payment options like UPI, Debit/Credit Cards, Net Banking, Paytm Bank Wallet, etc.

Can we use the UPI payment option in Payment gateways?

Yes, you can use the UPI Payment option in the Payment gateway as it is one of the officially listed services provided by the payment gateway.

is Razorpay a payment gateway?

Yes, Razorpay is a payment gateway providing end-to-end payment gateway services providing options to process the payment easily and faster.