Payment Gateway
A technology service that securely captures, encrypts, and transmits payment card data from e-commerce websites or point-of-sale systems to payment processors for authorization and settlement.
Payment gateways serve as the digital equivalent of physical card terminals, providing the secure infrastructure needed for online and mobile transactions. For e-commerce businesses, the gateway integrates with the merchant's website or mobile app through APIs or hosted payment pages, capturing customer payment information, encrypting sensitive card data using SSL/TLS protocols, transmitting authorization requests to the payment processor, receiving real-time approval or decline responses, and returning transaction results to the merchant's system for order fulfillment.
Modern payment gateways provide additional functionality beyond basic transaction processing, including tokenization to replace card numbers with secure tokens for recurring billing, fraud detection tools like address verification (AVS) and card security code (CVV) validation, support for alternative payment methods like digital wallets and ACH transfers, recurring billing management for subscription businesses, and detailed transaction reporting and reconciliation tools. Gateways also help merchants reduce PCI DSS compliance scope by handling sensitive cardholder data transmission and storage.
Popular payment gateways include Authorize.net (one of the earliest and most widely adopted), Stripe (known for developer-friendly APIs and modern functionality), Braintree (owned by PayPal), and processor-specific gateways offered by companies like Square and Chase. Gateway pricing typically includes a monthly service fee ranging from $10 to $50, per-transaction fees of $0.05 to $0.30, and sometimes a setup or integration fee. Some payment facilitators like Stripe bundle gateway functionality with processing services under unified pricing.
Related Content
Optimize Your Payment Processing
Let Verisave analyze your merchant statement to identify hidden fees and misconfigurations related to payment gateway.
Get a Free AuditRelated Terms
3D Secure
An authentication protocol for online card transactions that adds an additional verification layer between the cardholder and issuing bank, shifting fraud liability from merchants to card issuers when properly implemented.
ACH Payment
Automated Clearing House payment is an electronic bank-to-bank payment method that transfers funds directly between bank accounts through the ACH network, typically used for direct deposits, bill payments, and recurring transactions.
Acquirer
A financial institution that processes credit card payments on behalf of merchants, maintains merchant accounts, and facilitates the settlement of funds from card-issuing banks to merchant bank accounts.
Address Verification Service (AVS)
A fraud prevention tool that compares the numeric portions of a billing address provided during a transaction against the address registered with the card-issuing bank, returning match result codes to help merchants assess transaction risk.
Aggregator
A payment service provider that enables multiple merchants to process card transactions under a single master merchant account rather than each merchant having their own dedicated merchant account, common with services like Square, Stripe, and PayPal.