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What is a payment gateway?

pay - ment gate - way
noun

A payment gateway is an essential tool for facilitating the exchange of transaction information. It plays a crucial role in managing and streamlining data flow during financial transactions.

How does a payment gateway work?

Payment gateways serve as intermediary software and servers that facilitate the exchange of transaction details between acquiring banks and issuing banks. Their primary function is to enable seamless communication within the banking system.

Security is a critical cornerstone of payment gateways, given the need to safeguard sensitive data like credit card details from potential fraudulent activities. To ensure the protection of card information, card associations have established a framework of regulations and security benchmarks, known as the Payment Card Industry Data Security Standard (PCI-DSS or PCI), that must be adhered to by those with access to such data, including gateways.

The process of placing an order usually involves using the secure HTTPS protocol, which enables the confidential transfer of personal information among the parties involved in the transaction. Many payment service providers, like Verifone, offer merchants additional functionalities beyond real-time transactions. These features include  multi-currency conversion for transactions spanning different countries, as well as solutions for bridging language and diverse payment methods.

Payment gateways commonly charge a per-transaction fee from those using their services.