What’s Payment Gateways and How does it work?

Back in year 1999, when I setup my very first online shopping cart to promote my company products, it is rather an online catalog than a real shopping cart. Back in those day, I don’t think there is any Malaysia based payment gateway service provider.

To integrate online payment for your shopping cart, you either paying an high service fee by using PayPal, or you got to be a well-established retailer to talks to your bank so they can provide such a service. Even though you are lucky enough to get the bank approval, you still need a team of developers to help you to integrate your shopping cart to the bank payment system.

As for the result, we choose to use the traditional way, bank-in, fax over the bank-in slip, and we will ship your order. Fast forward to today, the entire landscapes is different. Especially for the last three to five years, thanks to the online shopping platform, the Payment Gateway in Malaysia is booming.

Before we compare various Payment Gateway Providers in Malaysia, let’s have a quick understand how it work.

What’s Payment Gateway and How it work?
A payment gateway basically is a payment facility that processes Credit/Debit card, FPX Internet Online Banking and eWallet for your businesses regardless is online or brick mortar stores. The payment gateway maybe provided by a bank to its clients or can be provided by a specialized financial service provider.

There are four (4) parties involved in the entire process:

1. The merchant (with online shopping cart, payment portal integrated)
2. The customer (with Credit/Debit card, eWallet or online bank account)
3. The payment gateway
4. The bank

The entire process will be as follow:

1. Buyer select items on merchant’s website/Apps.
2. Buyer check out, will be redirect to Payment Gateway.
3. Payment Gateway will communicate with respective bank.
4. Bank will return the status of the transaction to Payment Gateway
5. Payment Gateway will return to the merchant on the status of the transaction.
6. Merchant will update the buyer on transaction status.

Next article, we will compare various Payment Gateways that available in Malaysia.


Part 2: Comparison of various Payment Gateways in Malaysia
Part 3: How to choose a Payment Gateway?