What Is a Payment Gateway?

 

What is Payment Gateway?

A payment gateway is a process used by merchants to accept debit or credit card purchases from customers. Through which the physical card-reading devices found in brick-and-mortar retail stores but also the payment processing portals found in online stores. However, brick-and-mortar payment gateways in recent years have begun accepting phone-based payments using Near Field Communication (NFC) technology.

KEY TAKEAWAYS

It is the consumer-facing interfaces used to collect payments.

It consists of the point of sale (POS) terminals used to accept payments by card or by phone in the offline stores.

 Payment gateways has the “checkout” portals used to enter credit card information or credentials for services such as PayPal in the e commerce stores.

How Payment Gateways Work

The payment gateway is the main way of the electronic payment processing system, as it is the front-end technology responsible for sending customer information to the merchant acquiring bank, where the transaction is then processed.

 In the past, terminals would accept credit cards using magnetic strips, which would require paper signatures from the customer. With the development of chip technologies, the signature phase could be removed in favour of a personal identification number (PIN) entered directly into the payment gateway. Today, contactless purchases are also available, with many customers now using their phones as a payment device instead of plastic credit cards.

 Online payment gateways need application programming interfaces (APIs) which allow the website in question to communicate with the underlying payment processing network. In-store payment gateways will utilize a POS terminal that connects to the payment processing network electronically using either a phone line or an Internet connection.

 

Example of a Payment Gateway

Merchants are able to use the payment gateway systems through merchant acquiring bank partnerships, or else they can select their own payment gateway system. some examples of Large banks like Bank of America (BAC) and JPMorgan Chase (JPM) provide sophisticated payment gateway systems that they offer to customers along with their own merchant acquiring bank services. Finally merchants can choose different types of payment gateway technologies as long as they are compatible with the merchant acquiring bank that is being used for payment processing.

  Example of a payment gateway is Square (SQ), which provides flexible mobile payments for retail businesses. The company’s Square Reader technology allows customers to easily accept payments at ad-hoc locations such as conventions or farmer’s markets, or through roaming storefronts such as food trucks.

merchants can attach a small piece of hardware to their mobile phone which allows the customer to swipe their payment card for processing through the mobile phone’s electronic connection by the Square Reader payment gateway technology.The Square Reader sends the payment information to a merchant’s acquiring bank which then processes the information for the merchant momentarily.

 It is likely that new products will continue to increase the versatility and speed of payment gateways in the years ahead, as technology and consumer habits continue to evolve.