Payment gateway

What is a payment gateway?

A payment gateway is a technological solution that allows ecommerce businesses to accept and process payments from their customers securely and efficiently. Its main function is to facilitate online payments, acting as an intermediary between the merchant, the customer, the payment processor, and the involved banking institutions.

The payment gateway is responsible for transmitting transaction information securely, whether for in-person payments (for example, via a physical POS) or online payments (through digital services and APIs). Any online business needs a payment gateway to receive payments, protect sensitive data, and ensure the security of operations.

Additionally, it allows the secure storage of confidential information, such as credit card data, in compliance with the PCI DSS security standard.

How does a payment gateway work?

The general process of an online payment gateway unfolds in the following steps:

• Payment initiation and data submission

When the customer completes the purchase process on an ecommerce site, the website redirects them to the payment gateway. There, they enter their banking or card details, which are automatically encrypted to ensure a secure connection.

• Verification by the issuing bank

The card-issuing bank checks whether the customer’s account has sufficient balance or credit and validates the transaction data.

• Transaction confirmation

Once the transaction is verified, the payment processor communicates with the merchant’s acquiring bank. If the transaction is authorized, the acquirer proceeds with settling the amount into the seller’s account.

• Authorization and communication with the merchant

Finally, the customer receives a confirmation notification indicating that the transaction was successfully completed.

If the transaction is declined, the merchant can offer the customer the option to select an alternative payment method. Declines may occur due to various factors, such as network errors, pre-established limits for the merchant, or issues related to the bank.

Hiring a payment gateway

If you want to learn about all the factors to consider when choosing a payment gateway for your business, we leave you some useful articles:

• How to choose the best payment gateway or virtual POS for your ecommerce