Below are the steps taken when a consumer purchases a good/service online. In this explanation, we are going to assume that the merchant has a shopping cart and that a payment gateway is installed.

Step 1:

The consumer chooses products to purchase on the merchant's ecommerce site.

Step 2:

In the checkout process, the customer review their order to make sure their chosen products are correct. During this step, the customer also chooses the delivery and shipping method. At the end of the checkout process, the customer clicks, "Submit Order".

Step 3:

After step 2, the customer is connected to a payment gateway that allows the customer to enter credit card information.

Step 4:

Once the information is entered, the gateway encrypts this data and sends it to the acquirer.

Step 5:

The transaction is verified through the respective networks such as the Visa Net or the Mastercard System.

Step 6:

The bank responses with either the approval or denial of the purchase.

Step 7:

If the purchase is approved, the bank replies with an authorization code.

Step 8:

Once the gateway receives this approval code, it displays it for the customer and triggers the receipt to process.

Step 9:

The product is shipped to the customer.

Step 10:

At a set time, the gateway processes the specified batch for the day.

Step 11:

Acquirer routes the transaction through the settlment system against the card-issuing bank.

Step 12:

Card-issuing bank routes the transaction back through the settlement system with their fee deducted.

Step 13:

Acquirer deposits the transaction amount into merchant's bank account.

Step 14:

Customer's cardholder bills the customer for the transaction amount who then pays the bill.


  • A payment gateway has the same purpose as a credit card terminal.
  • Payment gateways offer virtual terminals for ecommerce sites.
  • When conducting online sales, ecommerce sites implement a security protocol called the Secure Socket Layer (SSL)