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I want to process electronic payments. I am currently using PayPal but it costs too much. Many companies are able to provide electronic payments without using gateways. I imagine they use banks web service directly.

How does it work? Should the beneficiary of the payment open an account in that particular bank?. For instance how does "Pay with Square" work? Does it implement call to different banks?

Does any documentation exist?

Thanks

Matroska
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    See http://stackoverflow.com/questions/2647430/building-a-complete-online-payment-gateway-like-paypal/2652309#2652309 – PaulG Apr 23 '12 at 09:35

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Many companies are able to provide electronic payments without using gateways. I imagine they use banks web service directly.

This is incorrect. Basically all web sites which process credit cards (including integrated services like Square) are using a payment gateway. There is generally no way for an average user to determine which one they use, as the details of the payment gateway are not generally exposed anywhere.

Note that PayPal's Express Checkout web frontend is not a gateway. PayFlow Pro is, though.

The customer's bank is never involved directly at all. A typical credit card transaction involves a number of different parties:

  • The customer
  • The merchant (e.g, you and your web site)
  • The payment gateway (e.g, PayPal w/ PayFlow Pro)
  • The payment processor (typically a bank, but not necessarily the customer's bank)
  • The credit card issuer (Visa, Mastercard, etc, possibly under contract with the customer's bank)

Of all of these parties, the one which you will communicate with directly is the payment gateway. Everything else is behind the scenes.

  • I see services that are able to accredit money for free. I heard about bank deals. For example if I wanted to build a payment gateway, how am I supposed to proceed? – Matroska Apr 21 '12 at 17:59
  • Realistically speaking, if you want to take online payments you'll need to process credit cards. There are other ways you can take payments, like ACH (checking account access), but users are MUCH less likely to use them, in large part because they don't have the same consumer protections that credit cards do. –  Apr 21 '12 at 18:10
  • Debit cards are generally processed using the same methods as credit cards. –  Apr 21 '12 at 18:24