A payment gateway is a tool used in the ecommerce world that processes credit and debit card payments online, often used by businesses who are trading online and in an actual store. The payment gateway allows a business to pass important information between a number of different payment portals – such as their ecommerce website or mobile phone application – and the main bank.

Gateways like this are what joins the business or seller to the person who is making the purchase. For example, if a person buys a product from your business online it is the payment gateway that takes the information and makes the connection between the customer and the bank. Without a payment gateway, there would be no link between the two.

How Does A Payment Gateway Work?

Understanding exactly how a payment gateway works can be difficult, as a lot of the important information is centred upon complex technological elements. Luckily, as a business owner you won’t need to know that and it’s enough just to understand the rough outline of what happens.

When a customer places an order on an ecommerce website the payment gateway immediately steps in. It starts by encrypting all of the information given by the customer and you as a merchant; this works to store information safely and reduces the risk of personal bank details being stolen. Then the gateway sends the information to the bank or payment processor that you as a business use. All of the information relating to the purchase is sent to the relevant banks. The bank then approves the request; they of course can deny it if there is a problem.

Once the bank in question has approved the purchase, authorisation is sent to the payment gateway. This tells the payment gateway it can process the payment and purchase. This ends with you making a sale and the customer’s purchase being confirmed.

The entire process that a payment gateway completes only takes a few seconds, which is why online shopping seems instant whenever purchases are made. However, a lot goes on behind the scenes to ensure purchases and payments are made safely, securely and by the right people. All of this is because of the role a payment gateway plays in an ecommerce business.