What Is a Payment Gateway?

A payment gateway is the business that authorizes credit card or service transactions for online retailers. Each day, more and more people are going on line to purchase items from their favorite merchants. A merchant's success depends on whether customers will buy the products they have on offer.
Merchants need a process so that customers can purchase these goods with confidence. This is where the payment gateway comes in. A merchant account with a reliable and secure payment gateway ensures that customers can purchase items without having to leave their personal information on an unsecured server.
Commercial transactions are usually authorized through several stages of verification. For instance, when you went to your local department store and swiped your credit card for the first time, a terminal was probably used to verify that your card is valid and that you have the available credit to cover the cost of your purchase.
That terminal must send a message through a network to a central computer known as a payment gateway. The payment gateway verifies whether your account has been set up properly and is still active. Then it sends a message back to the department store with a sort of digital signature. That signature is your approval, allowing you to complete your transaction.
The payment gateway then becomes responsible for creating and distributing unique authorization codes or receipts that merchants receive when customers make purchases using credit cards. These authorizations are processed electronically via the network by which the terminal communicated with the central computer. After these steps are completed, the payment gateway sends a message to the merchant with the financial information of your transaction.
The merchant can get paid either by depositing money in their own bank account or by using services of an ecommerce payment service provider that will take a commission of sales transactions for processing credit card payments online. The last type of service providers also provides affiliates with online tools for tracking sales and managing affiliate programs.
The payment gateway is the final step in an agreement between a merchant and their bank to process transactions, meaning that any problems involving this point can cause some serious damage to your business operations. For example, if you are hacked it's possible that the hackers can get access to your payment gateway login information. If that happens, then they can start processing fictitious transactions, which are orders that are placed by the hacker with a fake credit card number or fake bank account information.
Coupled with poor server security practices it may be possible for hackers to obtain payment data while being routed through the merchant's servers. This implies that the hacker has some control over the connection between their system and yours, which can lead to unauthorized capture by third parties of data being sent through that server.
Possible consequences of insecure payment gateway are - customers loss, money lost, downtime on your site or even compromising your security level. That's why you need to make sure that the payment gateway you use is 100% secure, so it can best protect your customers data.
Commercial transactions are usually authorized through several stages of verification. When you used your credit card for the first time at a department store's terminal, a message was sent to a central computer known as a payment gateway to verify that your card is valid and that you have the available credit to cover the cost of your purchase. That message also included a sort of digital signature, known as an authorization code or receipt, which is your approval, allowing you to complete your transaction.
The payment gateway then becomes responsible for creating and distributing unique authorization codes or receipts that merchants receive when customers make purchases using credit cards. These authorizations are processed electronically via the network by which the terminal communicated with the central computer. After these steps are completed, the payment gateway sends a message to the merchant with the financial information of your transaction.
The authorization process for commercial transactions involves several stages of verification performed by different entities in order to minimize risks involved in online credit card transactions. First, the cardholder is asked to provide their credit card details, either by mail or at physical shops using payment terminals.
This information (card number, expiry date and security code) is then sent over the Internet to the acquiring bank's merchant server, which authorizes it via Payment gateway. The last step of authorization involves receiving an authorization code from the payment gateway via a secure web connection. Only then the transaction is deemed valid and may be safely and accurately completed on behalf of the cardholder.
Payment gateways provide authorization services to merchants, which means they help you process credit cards by authorizing transactions in order to eliminate potential risks involved in online or offline credit card purchases. There are two kinds of gateways: those that provide authorization for credit card transactions, and those that provide both authorization and capture services.