A payment gateway securely captures, encrypts, and transmits customer payment details (card info, UPI, etc.) from a merchant's site to the acquiring bank, then to the card network, and finally to the customer's issuing bank for authorization, acting as a digital bridge to verify funds and approve or decline the transaction before relaying the response back to the merchant and customer, ensuring a secure transaction flow. It uses encryption and tokenization for security and facilitates fund settlement from the customer's bank to the merchant's account. Step-by-step process: Customer Initiates Payment: A customer enters their payment details (card number, CVV, expiry, UPI ID, etc.) on a merchant's website or app checkout page. Encryption & Transmission: The gateway encrypts this sensitive data into a secure code and sends it to the payment processor/acquiring bank. Authorization Request: The processor forwards the request through the card network (Visa, Mastercard) to the customer's issuing bank (their bank). Bank Verification: The issuing bank checks the account balance and validity, then approves or declines the transaction. Response to Merchant: The approval/decline message travels back through the same path (Issuing Bank -> Card Network -> Processor -> Gateway). Transaction Completion: The gateway relays the response to the merchant, who either accepts the order (confirming to the customer) or declines it. Fund Settlement: For approved transactions, funds are transferred from the issuing bank to the acquiring bank, then settled into the merchant's bank account (usually within days).