It is important to know how an internet payment processing works.Which will help you build your site.For this first you need to know the participants in a typical online transaction.They include
-Acquiring Bank
An acquiring bank is the bank or financial institution that accepts payments for the products or services on behalf of a merchant.Such banks accepts or acquires transactions performed using a credit card issued by a bank other than itself.But the merchant must open an Internet Merchant Account with an Acquiring Bank to enable online credit card authorization and payment processing.Some big shots in the field are
Barclaycard Merchant services,HSBCi,Lloyd’s TSB Cardnet,Royal Bank Of scotland & NatWest Bank.

-Credit card Association
A financial institution that provides credit card services that are branded and distributed by Customer Issuing Banks. Examples include Visa and MasterCard.

-Customer Issuing Bank
A financial institution, such as a bank, that provides our customer with a payment instrument.The issuer is responsible for the cardholder’s debt payment.

-Internet Merchant Account
This is a special account that allows the merchant to accept credit cards from customers over the internet.A merchant has to apply for an account in an acquiring bank just like applying for a commercial loan.The bank will provide with the services but for this the merchant have to pay a processing fee, Which varies from bank to bank.This fee is termed as a discount rate.

-Payment Gateway & Processor
Payment gateway is a service that provides connectivity between merchants,customers and the financial institutions for processing transactions.This is usually third party providers.Processor is a large data center that processes credit card transactions and settles funds to merchants.It is connected to a merchant’s site on behalf of an Acquiring Bank via a Payment Gateway.

Now comes the most important portion of an online transaction, the payment processing, which can be sub-divided into two sections AUTHORIZATION & SETTLEMENT.

AUTHORIZATION- During the authorization phase, verification is done to check whether the credit card is active and the customer has sufficient credit available to make the purchase.This is done in a sequence of steps.

1.  Customer proceeds to check-out and inputs credit card information.
2.  The Merchant’s Web site receives customer information and sends transaction information to the Payment Gateway.
3.  The Payment Gateway routes information to the Processor.
4.  The Processor sends information to the Issuing Bank.
5.  The Issuing Bank sends transaction result to the processor, which can be authorizing or declining the transaction.
6.  The Processor sends transaction result to the Payment Gateway.
7.  The Payment Gateway passes result information to the Merchant.
8.  The Merchant accepts or rejects transaction and ships goods if necessary

SETTLEMENT- is the second portion of the transaction.It is during this phase the money gets transferred from customer’s account to the merchant’s account.This also includes a few steps-

1. Merchant requests the Payment Gateway to settle a transaction.
2. The Payment Gateway sends all transactions to be settled to the Processor.
3. The Processor sends settlement payment details to Customer’s credit card Issuing Bank at the same time the Processor sends payment details to Merchant’s Acquiring Bank.
4. The Issuing Bank includes the Merchant’s charge on the Customer’s credit card statement while the Acquiring Bank credit’s the Merchant’s account.

With this i am concluding the payment mechanisms,hope the article will help you all.

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3. Structuring Of An E-Commerce Site
4. Understanding-ATG(The e-Commerce Framework)
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