Payment Gateway

What Is a payment Gateway ?

A payment gateway is a technology used by merchants to accept debit or credit wag purchases from customers. The term includes not only the physical card-reading devices found in brick-and-mortar retail stores but besides the requital process portals found in on-line stores. however, brick-and-mortar requital gateways in recent years have begun accepting phone-based payments using QR codes or Near Field Communication ( NFC ) technology .

Key Takeaways

  • Payment gateways are the consumer-facing interfaces used to collect payment information.
  • In physical stores, payment gateways consist of the point of sale (POS) terminals used to accept credit card information by card or by smartphone.
  • In online stores, payment gateways are the “checkout” portals used to enter credit card information or credentials for services such as PayPal.
  • Payment gateways are distinct from payment processors, which use customer information to collect payments on behalf of the merchant.
  • There are also payment gateways to facilitate payment in cryptocurrencies, such as Bitcoin.

Reading: Payment Gateway

How Payment Gateways Work

The payment gateway is a key part of the electronic payment process system, as it is the front-end technology responsible for sending customer information to the merchant acquiring savings bank, where the transaction is then processed .

Payment gateway technologies are constantly evolving to reflect newfangled consumer tastes and technical capacities. In the past, terminals would accept credit cards using charismatic strips and want paper signatures from the customer. With the development of bit technologies, the signature phase could be removed in favor of a personal identification act ( PIN ) entered immediately into the requital gateway hardware. today, contactless purchases are besides available, with many customers now using their phones as a payment device alternatively of fictile accredit cards .

The computer architecture of a requital gateway will differ depending on whether it is an in-store gateway or an on-line payment portal. Online payment gateways will require application programming interfaces ( APIs ) that allow the web site in question to communicate with the fundamental payment process network. In-store payment gateways will utilize a POS end that connects to the payment work network electronically using either a call line or an internet connection .

Payment Gateway vs. Payment Processor

A payment gateway is distinct from a payment processor, a service that connects the customer ‘s bank to the merchant score and facilitates the actual movement of money. You can think of these like two halves of the transaction : a requital gateway collects customer information for payment, and a payment processor uses that data to contact the customer ‘s deposit and the merchant bill, debiting one score and crediting the early .


A payment gateway collects customer circuit board data and encrypts it for late serve.
A payment central processing unit uses that information to charge the customers ‘ depository financial institution or credit card provider.

case of a Payment Gateway

Merchants can gain access to payment gateway systems through merchant acquiring deposit partnerships, or else they can select their own requital gateway arrangement. big banks such as Bank of America ( BAC ) and JPMorgan Chase ( JPM ) have sophisticated payment gateway systems that they offer to customers along with their own merchant acquiring bank services. ultimately, merchants can choose a diverseness of requital gateway technologies arsenic long as they are compatible with the merchant acquiring bank that is being used for requital processing .

One holocene model of a requital gateway is Square ( SQ ), which emphasizes compromising mobile payments for retail businesses. The ship’s company ’ south Square Reader technology allows customers to easily accept payments at ad-hoc locations such as conventions or farmer ’ s markets, or through roaming storefronts such as food trucks.

With the Square Reader payment gateway technology, a merchant can attach a little slice of hardware to their mobile phone which allows the customer to swipe their payment calling card for processing through the mobile earphone ’ s electronic connection. The Square Reader sends the requital information to a merchant ’ randomness acquiring bank which then processes the information for the merchant momentarily .

It is likely that newly products will continue to increase the versatility and speed of payment gateways. In holocene years, blockchain startups have tied introduced payment gateways for cryptocurrencies .

Payment Gateway FAQs

How much Does a Payment Gateway Cost ?

Payment gateways typically charge a combination of initial setup fees, a flat monthly fee, and a small tip for each transaction. Some gateways may besides charge a fraction of each purchase. For exercise, Square charges a ten-cent fee on most card transactions, a well as 2.6 % of payment volume. Stripe charges 2.9 %, plus thirty cents per transaction. There may besides be fees for equipment and initiation .

What Is a White Label Payment Gateway ?

A ashen label payment gateway is a requital gateway whose post can be customized according to their node ‘s preferences. This allows merchants to receive payments through third-party services while using their own appoint and brand .

Can I Build My Own Payment Gateway ?

While you could build a payment gateway from scribble, it would probably be excessively expensive to be worthwhile. Softjourn estimates that building a minimal gateway, to process citation and debit card transactions could cost a quarter of a million dollars, not to mention extra headaches of international transactions, alien currencies, and regulative conformity .

Is Google Pay a Payment Gateway ?

Google Pay is a digital wallet that makes it easier to interact with payment gateways. rather of carrying around a credit or debit card, users can store code calling card data on their phones, allowing them to safely pay without having their cards stage .

Is PayPal a Payment Gateway or Processor ?

While sometimes described as a requital provider, PayPal provides similar services to both a payment gateway and a requital processor. PayPal ‘s merchant accounts share many properties with a processor, allowing merchants to safely accept and redeem payments to their bank accounts. PayPal besides offers a gateway service called PayFlow.

The Bottom Line

Payment gateways are an authoritative feature of the digital economy. By allowing customers to safely and securely share their credit card information, these systems reduce some of the barriers to online commerce. While the first payment gateways consisted of dim-witted card-reading devices, they are now twist systems to collect and authenticate PIN numbers, signatures, and other data for merchant transactions .

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Category : How

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