Payment Gateway Definition

By Phillip Parker

Last Updated: September 21, 2011

Merchant Account Payment Gateway Explained:

What is a Payment Gateway? A Payment Gateway is a “behind the scenes” service in the credit card processing industry and is required for merchants wishing to accept online credit card payments or payments through a virtual terminal.

A payment gateway acts as a “middle man” between front-end systems like online shopping carts or virtual terminals, and the banks that process the transaction. The Payment Gateway is responsible for receiving the payment data from the front-end system, encrypting it, sending it to the bank for processing, receiving the bank’s authorization, and then communicating the authorization information back to the front-end.

Most payment gateways are hosted by the providers of the technology on their secure servers. Therefore, most merchants will not need to install additional software on their own servers to run a payment gateway.

Payment gateways can be standalone systems designed to be integrated with other third-party systems, or they can come bundled with their own shopping carts and virtual terminals. Merchants wishing to use a virtual terminal or accept online transactions should first speak with their merchant account provider to get recommendations on compatible payment gateways. Setting up payment gateways is a common practice among merchant account providers and often requires little to no involvement from the merchant, other than signing up for the service and paying fees.

Payment Gateway Video Explanation

Use of this video does not constitute an endorsement of any kind by CardPaymentOptions.com.

About The Author

Phillip Parker

Phillip Parker is an independent card payment expert specializing U.S. and Canadian point-of-sale, e-commerce, and mobile payment acceptance. He has nearly two decades of experience in credit card processing as a journalist and consultant. Phillip is the creator of this website and has written over 1,500 articles covering numerous payment acceptance topics. He has also published critical reviews about most merchant services providers currently in operation.

Expert Guidance

Phillip has consulted businesses of all sizes from mom-and-pop shops processing $10K per month to enterprise level organizations processing in excess of $300MM annually. His specialties include:

– Merchant Account Statement Auditing
– Rate & Fee Negotiation
– Processor & POS Selection
– Software Integrations
– Risk Assessment
– Fraud Prevention
– General Processing Advice

Schedule a Consultation Here

Phillip’s Top Picks

Phillip has researched and reviewed over 1,000 merchant services providers over the last 15 years. He also owns multiple businesses that accept credit card payments. If you are looking for an ethical credit card processor that doesn’t hide fees or lock you into expensive contracts, see Phillip’s merchant account picks here.

In The Media

In addition his contributions on CPO, Phillip has also been quoted in several major publications such as The Los Angeles Times, INC Magazine, Miami Herald, Computer World, and numerous others. If you would like to interview Phillip for your story or podcast, please reach out here.

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