Traditionally, people, to assure safety, used to transfer their money through a trustworthy and reliable person. Today, in the era of online transactions, this role has been bequeathed to the Payment gateway.

With Credit Lyonnais Security Asia (CLSA) expecting 44% of payments to be accepted through payment gateways and aggregators in FY26, the increase in the number of users can also be estimated. However, to be a part of it, one should know what a payment gateway is and how it works.

A payment gateway is a portal/doorway that accepts various payment methods preferred by the customer and securely transfers the transaction information (credit/debit card) from the merchant’s checkout page to the payment processor.


It secures the data using Standard Security Layer (SSL) encryption which protects the sensitive card information from hackers and frauds while also authenticating the customer’s identity.


The process begins with a customer initiating a transaction by entering the credit or debit card details.


Once the details are entered onto the merchant’s checkout page, the payment gateway forwards sensitive card details, secured by SSL encryption, to the payment processor being used by the merchant’s acquiring bank.


The payment processor, further, forwards the transaction information to the card association. (VISA, Mastercard, etc.) and ask for validation.


On receiving the status from the issuer bank, the card association sends a rejection or approval message to the payment processor, directing it back to the payment gateway.

The payment gateway notifies the customer whether the transaction has been approved.


    The SSL encrypts the information in the following two ways:

  1. By scrambling the data that are illegible to anyone but the user.
  2. By tokenization, where the card details are replaced by a string of encrypted characters.

    Before jumping directly into the process, let us understand some basic terminologies:

  • Customer: a customer is a person who buys any goods or services (here online).
  • Merchant: a merchant is a person that sells goods or services. Example: amazon, Flipkart, etc.
  • Credit/Debit card: A plastic card that can be used to buy products or services on a credit (in case of credit card) and through a bank account (debit card).
  • Sensitive card details include information such as card no., expiry date, magnetic strip, signature panel, and a Card Verification Value (CVV).
  • Card Association: Any Card Issuers that provide Cards accepted by Merchant by agreement with Bank. Example: Visa U.S.A., Inc., Visa International, Inc., MasterCard International, Inc., Discover, etc.
  • Acquiring Bank: It is a financial institution that maintains the merchant’s bank account and enables a merchant to accept and process debit and/or credit card transactions on their store.
  • Issuing Bank: It is the cardholder’s or customer’s bank.
  • Payment Processor: The Payment processor is a Financial Institution that works as a mediator between the cardholder/customer, merchant, acquiring bank, the payment gateway, and the issuing bank to process online payments.
  • Payment Aggregator: A Payment Aggregator can facilitate the connection between the merchant and the acquirer. During this process, a PA receives payments from customers and then transfers them to the merchants

If the transaction is approved, the customer continues with the checkout process to finalize the transaction.


After the transaction is finalized, the processor sends information to the card-issuing bank to transfer funds to the merchant account.


Once this process is completed, the customer gets a confirmation message of the order being placed.


The Payment aggregator receives the funds and settles them with the merchant.


Now that we have understood the mechanism, let us talk business! While numerous Payment gateways in India claim the lowest charges for transactions, Pay10, on the other hand, not competing for prizes, maintains to be the best service provider for the smoothest payment experience. So, what are your primary concerns regarding online transactions? “Pay10 has the solution.”