What is a Payment Gateway

Specific software that allows a direct connection between a company website and a banking institution to process and transact payments is referred to as a payment gateway. A payment gateway is largely considered to be an “e-commerce application service provider”, that is, software which permits and authorizes online payments for businesses.

Features of a payment gateway

A payment gateway facilitates online payment transactions between a company website and their bank, while offering a high level of protection and security against fraudulent activity. This is achieved by encrypting sensitive information, such as the identity of the card holder and the number on a credit or debit card, thus making a payment gateway a highly sought after and readily used service to conduct online transactions.

A number of online merchants require custom made software for their specific payment gateway to enable the customization of certain data. Through the payment gateway, companies are able to process, verify and either accept or decline a monetary transaction made by a credit or debit card online.

Failure to integrate a payment gateway into your business will prevent companies from accepting online payments made by credit or debit cards, thus alienating a number of international clients.

The primary features of a payment gateway include the following:

  • Authorization of payments
  • Software for e-commerce business and payment transactions
  • Encryption of sensitive and personal information

Essentially, a payment gateway protects the merchant and payment processor against any fraudulent activity by offering heightened security and privacy. Similarly, offline payment gateways are used, however these are commonly referred to as POS or point of sale terminals.