Is There a Difference Between Payment Gateways?

A payment gateway is an ecommerce service that processes credit card payments for online and regular stores. They enable these transactions by connecting an Internet website to the traditional banking network, so that the transaction information can be transmitted to a payment processor.

Payment gateways don’t transmit payments (that is the role of payment processors); rather, payment gateways confirm the authorization for the transaction to the merchant in a secure and convenient way for the cardholder.

Payment gateway providers offer a broad range of services that can include processing funds, verifying cardholder accounts, AVS checks, geolocation, delivery address verification, identity morphing detection, analysis of velocity patterns, and calculating tax. Payment gateway providers also have to adhere to PCI compliance standards, and constantly evolve their security standards to prevent fraud.  Payment gateways fulfill a vital role.

Payment gateway services are delivered to users independently, or the software can be integrated with modules in larger financial suites for more effective processing.

Once the payment gateway has secured the authorization of funds for the merchant, the payment processor takes over to complete the transaction. So both are integrated in every online credit card transaction, and are vital for the success of all credit card transactions made online.

How payment gateways work:

As soon as a credit card payment is processed via a payment gateway there are a number of processes that automatically kick in to finalize the transaction. These include:

• Encryption: the data is immediately encrypted and sent from the merchant’s pay point to the payment processor of the merchant’s acquiring bank.
• Authorization request: the payment processor sends the transaction data to the relative card association and the cardholder’s issuing bank approves or declines the payment.
• Finalizing the transaction: the processor relays the approved or declined information back to the payment gateway and the payment gateway transmits the result to the merchant’s website or interface.

At this point the merchant can either release the goods purchased, or advise the customer that the card payment has been declined, as the case may be.  Although this is a complicated process, the payment gateway processes everything in a matter of seconds, costing the merchant and the cardholder very little time.

For more information about payment gateway providers, and how and why they matter in online payment processing, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.