Will that URL mentioned in HTTP/HTTPS authentication provider validdate username/password? Is it a web server url? Has it configured to do BASIC auth?
In general, This provider authenticates users by validating client-specified tokens and sending the values to the HTTP back end in the specified format (header/cookie). (Ref: HTTP/HTTPS Authentication Provider )
One more thing, Since you have selected INTERNAL option under BACKEND, is that url sharing same host/port as SMP? Generally, this checkbox is selected when you got a url exposed via Integration gateway.
Regards,
JK