A virtual gateway facilitates the transfer of information between a payment portal (i.e., website shopping cart), and the payment processing company or acquiring bank.When a customer orders a product from a virtual gateway-enabled merchant, the payment gateway performs a variety of tasks to process the transaction.
Learn about how merchants and credit card processors utilize the virtual payment gateway process
Step 1: The customer places their order on the website by pressing the ‘Submit Order’ button, or perhaps enters their card details using an automatic phone answering service.
- If the order is via a website, the customer’s web browser encrypts the information to be sent between the browser and the merchant’s web server.
- The payment gateway may allow transaction data to be sent directly from the customer’s browser to the virtual gateway, bypassing the merchant’s systems. This reduces the merchant’s PCI compliance obligations without redirecting the customer away from the website.
Step 2: The merchant then forwards the transaction details to their payment gateway. This is another encrypted connection to the payment server hosted by the payment gateway.
Step 3: The virtual gateway forwards the transaction information to the payment processor used by the merchant’s acquiring bank.
Step 4: The payment processor forwards the transaction information to the credit card company.
- If an American Express or Discover Card was used, then the credit card processor acts as the issuing bank and directly provides a response of approved or declined to the virtual gateway.
- If another form of payment such as Visa or MasterCard was used, the card association routes the transaction to the correct credit card issuing bank.
Step 5: The credit card issuing bank then receives the authorization request and does fraud and credit or debit checks and then sends a response back to the payment processor through the same process as the request for authorization.
Step 6: The credit card processor then forwards the authorization response to the virtual gateway.
Step 7: The virtual gateway receives the response, and forwards it on to the website— or whatever interface was used to process the payment—where it is interpreted as a relevant response then relayed back to the merchant and cardholder. This is known as the Authorization.
Step 8: The merchant then fulfills the order and the above process is repeated but this time to “Clear” the authorization by completing the transaction. Typically the “Clear” is initiated only after the merchant has fulfilled the transaction. This results in the issuing bank clearing the authorization and prepares them to settle with the merchant acquiring bank.
Step 9: The merchant submits all their approved authorizations to their acquiring bank for settlement via its payment processor.
Step 10: The credit card issuer then makes a settlement payment to the acquiring bank.
Step 11: The acquiring bank subsequently deposits the total of the approved funds into the merchant’s nominated account. This could be an account with the acquiring bank if the merchant does their banking with the same bank, or an account with another bank.
A virtual gateway also provides tools to automatically screen orders for fraud and calculate tax in real time prior to the authorization request being sent to the payment processor. The entire virtual gateway process from authorization and settlement to funding typically takes about three days.