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March 14, 2018

What Exactly is a Payment Gateway

credit card

You have probably heard the term, “Payment Gateway” many times.  As merchant, you know that you need one and that you have one.  Maybe you even know the name of your gateway such as Authorize.net or PayPro Flow.  But, what exactly does the gateway do for you?

 

If you want to process credit cards, then you need a payment gateway. A payment gateway is the merchant service that authorizes credit cards and other direct payments. Payment gateways enable customer payment transactions by transferring information between a payment portal and the front-end processors. Payment portals can include websites, mobile phones, terminals, software or even interactive voice response services.  Consider the “payment portal” to be the place where you enter the credit card number to begin the transaction.  This can include manual entry, swipes, chip reading or even telephone keypad entry.

 

The payment gateway has many tasks to complete to process the transaction

 

  1.  The customer provides their credit card for payment and at the moment of entry (swipe, chip read, manually keyed) the data is encrypted.

 

  1.  Your credit card processor then receives the encrypted data through the gateway as they are processing the transaction

 

  1.  The processor then sends the transaction data to the credit card issuing bank who has control of the credit card’s credit limit and current account standing such as past due, expired or cancelled.

 

  1.  The transaction is then approved or denied

 

  1.  If the transaction is authorized, the issuing bank sends the authorization back to the entry point such as the terminal or even a website shopping cart to know that it is approved. This is when you receive an approval code.

 

The above process takes place in a matter of seconds and the funds are available to the merchant usually within 24-48 hours. Make sure you choose a credit card processor like Chosen Payments that can provide you with secure, innovative and affordable credit card processing methods.

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