Welcome to Cardconnect’s Blog

Count on us to be your trusted resource for all things payment processing. Explore insights, industry trends, and actionable tips to streamline your merchant services and drive business growth.

LOCK IN OUR LOWEST RATES

ENTER YOUR INFO BELOW TO GET A QUOTE

"*" indicates required fields

Name*
Address*
Hidden
This field is for validation purposes and should be left unchanged.

What Is a Payment Gateway?

Person makes secure purchase with payment gateways

What is a payment gateway? A payment gateway is used in e-commerce and other online transactions to facilitate the secure transmission of payment information between a customer’s web browser and the merchant’s website. It essentially acts as a bridge between the customer’s financial institution (such as a bank) and the merchant account, ensuring that sensitive information like credit card numbers, bank account details, and other payment data are encrypted and transmitted securely. 

Keep reading to learn the ins and outs of payment gateways and how they work within a transaction. We’ll also discuss the difference between a payment gateway and a payment processor to help you understand what’s required for online payments. 

How Payment Gateways Work

Here are 6 simple steps to help you learn about how payment gateways work, from the start of a customer purchase to the completion of a transaction.

Step 1: Customer makes a purchase

The customer selects items to purchase on a website and proceeds to the checkout page or payment link to make an online payment

Step 2: Payment information input

The customer enters their payment details, such as their credit card number, the card’s expiration date, and CVV code, into the payment form on the merchant’s website.

Step 3: Data encryption and transmission

The payment gateway encrypts the customer’s payment information to ensure it remains secure during transmission over the internet.

Step 4: Authorization request

The encrypted payment data is then sent securely to the payment processor or acquiring bank (often via a credit card network like Visa or Mastercard).

Step 5: Authorization response

The payment processor verifies the authenticity of the transaction and checks whether the customer has sufficient funds or credit available. It then sends an authorization response back to the payment gateway.

Step 6: Transaction completion

If the transaction is approved, the payment gateway sends a confirmation to the merchant’s website, allowing the purchase to be completed. The customer is typically notified if the transaction is declined, and the purchase process may be aborted.

Overall, payment gateways play a crucial role in enabling secure online transactions by ensuring that sensitive payment information is protected throughout the payment process. They provide a seamless and secure way for businesses to accept customer payments online.

What’s the Difference Between a Payment Gateway and a Payment Processor?

While payment gateways and payment processors are both integral parts of the online payment ecosystem, they serve different functions and operate at different stages of the payment process

Payment Gateway

An online payment gateway is a technology that facilitates the secure transmission of payment information between a customer’s web browser and the merchant’s website. If you accept payments online – a payment gateway is required. 

Payment Processor

On the other hand, a payment processor, also known as an acquiring bank or merchant bank, is responsible for facilitating the authorization and settlement of transactions between merchants and customers’ banks. In short, it manages the movement of funds from the customer’s bank to the merchant’s bank, ensuring that transactions are processed smoothly and securely.

Payment Gateway vs. Payment Processor

In summary, the main difference between a payment gateway and a payment processor lies in their respective roles within the payment process. The payment gateway focuses on securely transmitting payment data between the customer and the merchant. 

In contrast, the payment processor manages the authorization, settlement, and transfer of funds between the involved financial institutions. However, it’s worth noting that some companies may offer integrated solutions that combine the functionalities of both a payment gateway and payment processor – sometimes called a payment provider. 

Do you need help with secure payment processing? For assistance with online and in-person credit card payments, contact Cardconnect. Cardconnect offers software and hardware for your point-of-sale systems – promising some of the lowest credit card processing fees. Protect your customers’ data while also protecting them from credit card fraud. Get started today by requesting a free quote

Key Takeaways About Payment Processing

  • A payment gateway is a technology used in e-commerce and other online transactions to facilitate the secure transmission of payment information between a customer’s web browser and the merchant’s website. 
  • A payment processor manages the movement of funds from the customer’s bank to the merchant’s bank, ensuring that transactions are processed smoothly and securely.
  • Both payment gateways and payment processors are required for online transactions. 

Related Articles

business owner learns how to set up a merchant account

How to Set Up a Merchant Account: A Step-by-Step Guide for Businesses

A Cardconnect Merchant Services account to a credit card processing provider gives a business...
LEARN MORE
A business owner making an online purchase

ACH vs. EFT Payments: The Differences Explained

A Cardconnect Merchant Services account to a credit card processing provider gives a business...
LEARN MORE
What is an EFT payment? Customer makes purchase using electronic payment method

What Is an EFT Payment?

What is an EFT payment? An Electronic Funds Transfer (EFT) payment is the electronic
LEARN MORE