Online Secure Payment Gateway
An online Payment Gateway is the mechanism that sits between your consumer and you as the Merchant - a little like a virtual PDQ Chip and Pin machine that you would use at your local Petrol Station. The online Payment Gateway will authorise or decline a card payment based on the same principles as a Chip and Pin machine - these include whether there are sufficient funds available, whether the details all matched correctly and whether the has been any fraudulent activity. In order to check these details, the Payment Gateway will liaise with the Card Schemes and Issuing Banks within thousands of a second and report back with its findings and relevant transaction response.
If a credit or debit card payment has been declined by the Payment Gateway, then the transaction will be cancelled, the Merchant and consumer will be informed by a realtime response and no further action will be taken. Using Techbank, this will all be reported within the Merchant Management System for your records as the Merchant.
If the credit or debit card payment has been authorised by the Payment Gateway, then the transaction will be reported as authorised and the Payment Gateway will generate an Authorisation Code to the Merchant and the consumer, again by a realtime response. The Authorisation Code means that the Merchant has been reserved that amount of funds from the consumer's credit or debit card. The consumer will now have a smaller available balance on that card account and will have purchased the good(s) or service(s) from the Merchant via the Payment Gateway. At the same time the Merchant and consumer receive their confirmation Authorisation Code, the Payment Gateway will enter the transaction into a settlement file. Every night a settlement file will be sent by the Payment Gateway to the relevant Merchant Acquirer, ready for the Merchant Acquirer to complete the monetary transfer from the reserved funds on the consumer's credit or debit card account over to the Merchant's business bank account.
In order for the authorisation and settlement process to occur via the Payment Gateway, the Merchant will be required to set up a Merchant Account with one of the Merchant Acquirers. The Merchant has the choice of three types of Merchant Accounts - ecommerce, MOTO (Mail Order Telephone Order) and PDQ (Chip and Pin). Via the Merchant Account, the Merchant Acquirer is then responsible for the transfer of funds from consumer to Merchant, following the confirmation settlement file from the Payment Gateway.
Depending on the agreement between the Merchant and their Merchant Acquirer, these funds can settle the next day or over an extended period of time. This range in settlement time is mainly due to the risk that the Merchant Acquirer has to underwrite. For example, if you are a new business to ecommerce and are selling tickets for a music festival in 6 months time, the Merchant Acquirer may see this as risky, due to the time between purchase and fulfilling the service, as well as the Merchant being new to ecommerce and not being able to demonstrate a history. However, a Merchant who has been trading for a number of years online without any chargebacks and who owns their own stock, dispatches and delivers immediately, will most likely have a smaller risk profile and see their funds settled more quickly.