What Are Payment Gateways?

Payment gateways are software and hardware which are responsible for sending transaction information for acquiring banks and issuing banks.  They will determine whether or not a transaction has been declined or accepted. In a nutshell, payment gateways allow banks to communicate with each other. As you can imagine, security is an integral aspect of payment gateways, due to the sensitive data which is being transmitted.


Payment gateways must be protected from fraud, particularly credit card fraud. To do this, credit card associations have established a collection of rules and safeguards which must be adhered to by anyone that has access to credit card numbers. This collection of rules is referred to as the PCI, or Payment Card Industry Data Security Standard. When an order is processed, it will be done using HTTPS, which is a protocol. It’s responsible for securely communicating the credit card data through the parties which take part in the transaction.


A number of payment providers give merchants additional options when a credit card is used to purchase a product. In addition to providing real time transactions, currency conversions can be completed when the two parties involved in a transaction are in different countries. They will also assist in handling language barriers and other payment issues. Payment gateways will charge users a fee each time they’re used.

How they function

Though payment gateways can process transactions in just a few seconds, there are six steps involved in the process. First, the user attempts to buy something using their credit card. Then, their credit card data is securely transmitted along the gateway. Next, the gateway tokenizes the data and transfers it to the acquiring bank of the merchant. Fourth, the processor will return a message saying that it has either approved or rejected the transaction.

The payment gateway will then push the response or token back to the merchant, and last, the payment info will be collected and then placed inside. Many merchants work with multiple gateways as it provides greater flexibility and reliability for customers.

Payment gateways are the standard tools used by merchants to process transactions using both credit cards and debit cards, and because these gateways use encryption, this provides greater protection to customers using their cards to buy products or services.  Payment gateways may also store data such as ACH numbers for accounts and CVV2 data. Many merchants use payment gateways not only because they’re convenient, but because they also reduce their liability.