Payment gateway

What is a payment gateway?

A payment gateway is a platform that allows ecommerce businesses to accept customer payments securely, efficiently and conveniently. Its purpose is to make it easy for customers to pay online.
It connects a bank account with the corresponding payment processor and is responsible for transmitting transaction information, either physically through a payment terminal or virtually through online payment services and APIs.

Any online business needs a payment gateway to accept payments and ensure transaction security. This allows customers to store essential data and sensitive information — such as card details — securely, thanks to the PCI-DSS (Payment Card Industry Data Security Standard).

How does a payment gateway work?

Who is involved?

Five key actors participate in every online transaction:

• the buyer

• the merchant

• the issuing bank (the buyer’s bank)

• the acquiring bank (the merchant’s bank)

• the payment gateway, which connects all actors

Step 1:

Once the customer proceeds to checkout, the ecommerce website redirects them to the payment gateway, where they enter their banking details. The next step is data encryption to ensure a secure connection.

Step 2:

The issuing bank checks if there are sufficient funds in the customer’s account.

Step 3:

The payment processor contacts the merchant’s bank. If the payment is authorized, the acquiring bank settles the amount in the merchant’s account.

Step 4:

Finally, the customer receives a notification confirming that the transaction has been completed successfully.

Extra:

If the merchant’s bank declines the transaction, the customer can choose an alternative payment method. Factors such as network errors, transaction limits or bank-related issues can impact approval.

Choosing a payment gateway

If you want to explore everything you should consider when selecting a payment gateway, here are some helpful articles:

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