At the beginning of online shopping era, there were no online payment systems. Every transaction had to be done through post or wire transfers. Since the transaction time was from few days to few weeks, online purchasing was not popular and people were not encouraged to do online shopping. Everything changed once the credit cards were introduced for online shopping.

With credit cards, purchases were faster and secure. Buyer didn’t have to wait for days until the transaction takes place in order to get their goods. The seller could ship the goods as soon as the credit card confirmation arrives and the entire payment process took only couple of seconds.

Let’s have a look at how the online credit card payment system works. First the customer makes the order and clicks a button to make the payment after entering payment details such as credit card details. Then this information is transferred to the seller’s website through SSL (secure socket layer) connection. From the seller’s website, the information is passed to the payment gateway and it is also through a SSL connection. Then the payment gateway sends this information to the payment processor assigned to the merchant and then the processor forwards the information to the card association such as MasterCard or Visa.

Then the card association sends the transaction details to the issuing bank of the credit card and the response to the payment is sent back to the merchant through the same path but in the reverse order. Then the merchant records the payment details and will allow the transaction. Then the merchant can submit the payment details to the bank (merchant’s bank) and get the payments done. This step usually takes about three days.

Offering online payment facility is one good way to get a lot of revenue generated as customers tend to buy (impulse buying) when such a facility is available. When selecting a payment gateway, you need to consider the cost per transaction and the security as well.