What Is A Payment Gateway And How Does It Work?

What Exactly Is a Payment Gateway?

Simply put, a payment gateway is a solution that securely reads and transfers a customer’s payment information to a merchant’s bank account—both for online and in-person transactions. Think of it as a cash register, except that the payments it processes are non-cash. That makes payment gateways important in the age of the “new internet,” driven by mobile devices and apps. They enable convenient, secure spending experiences—and help merchants see more sales!

A payment gateway is a software solution that securely collects, processes, and transfers customer payment information to your bank account. Think of it as an online cash register—except that the payments it processes are non-cash.

Payment Gateways vs Payment Processors

The first thing you need to include in your ecommerce plan is deciding on what payment method you would like to use. Payment methods allow you to accept money from your customers through their credit or debit cards. These are often confused with payment gateways, which you will also need. However, gateways are completely different in the way they work.

What Is a Payment Gateway Account?

A payment gateway website payment or software that allows you to accept debit card and credit card payments online, through an ecommerce site, and in your brick-and-mortar store. When connected to a website or point of sale (POS) system, the gateway processes keyed-in or physically-captured information safely and securely. If the transaction is authorized, it will initiate the process of transferring funds into your merchant account.

How Does a Payment Gateway Work?

Payment gateways are one of the most important parts of an ecommerce business, because they act as the bridge between your store and your customers. The gateway process includes authorization of the customer’s payment and encrypting their transaction information. It then confirms the payment with the issuing bank and deposits the money into your merchant account.


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