What is a payment gateway?

A payment gateway is a technology platform that acts as an intermediary between a merchant and the financial institutions involved in processing electronic payments. It enables businesses—both online and in-person—to securely accept, process, and manage various payment methods such as credit cards, debit cards, and digital wallets.

The payment gateway performs several key functions:

• Encrypts sensitive payment data to protect it from unauthorized access during transmission.
• Transmits payment information from the customer to the merchant’s acquiring bank for processing.
• Communicates with card networks and issuing banks to obtain authorization for the transaction.
• Notifies the merchant and customer of the transaction status (approved or declined) in real time.

In physical stores, payment gateways are often the point-of-sale (POS) terminals or card readers. In online stores, they are the checkout portals where customers enter their payment information. Payment gateways are essential for ensuring secure, fast, and reliable payment processing, and they can also handle additional functions like currency conversion for international transactions.