The Definition of a Payment Gateway

Learn what a payment gateway does, and how merchant accounts utilize one.

When a business wants to accept money for goods that it sells, it needs to transfer those funds through a payment gateway. This gateway is like a figurative path the money needs to travel down to get from the customer’s account to the business owner’s. Payment gateways are only used online, and their primary goal is to keep a customer’s data secure as money is moved throughout cyberspace.

If you want to accept credit cards online, read on for the definition of a payment gateway and how it helps your business interests.

A payment gateway is a type of ecommerce service provider that is used by online retailers and brick and mortar stores. Its purpose is to authorize credit card payments, and it helps facilitate the transfer to the payment portal. When you utilize a merchant account for your business, you’re actually running the card through a payment processor, which pushes the data through a gateway to a portal, where the money is finally accepted.

The gateway is important because it is the means to transfer money, and it affects everything from speed of transfer to security of both the buyer and seller. Several layers of SSL encryption are utilized by the gateway in an attempt to create something like a vacuum. Most gateways encrypt the information of the buyer and seller, essentially creating a single session. The transaction takes place within that session, and once the session ends once all the data has left the gateway.

All of this usually takes about 2-3 seconds, but the actual movement of money from one account to another can vary depending on the type of merchant account you have. Talk with the team who supports your merchant account and ask them the typical transfer rates, which may be affected by the customer’s bank or credit card company as well.