payment gateway merchant services

What is a payment Gateway

November 16, 2020

If you accept credit card payments you’ll likely use a payment gateway whether you accept credit cards in a brick-and-mortar store or online. The gateway is responsible for conducting the electronic transaction, much like a standard cash register would conduct a cash transaction.

Gateways are most important for online or phone transactions, check out what you should know about them. Host Merchant Services supports a wide array of payment gateway options, including Authorize.net, Network Merchants (NMI), TSYS TransIT, First Data Payeezy, SwipeSimple, Paytrace, USAePay, and almost all other commercial options.

What a Payment Gateway Does

The payment gateway takes the payment information from the consumer to the acquirer and then back to the consumer with an approval or denial of the transaction.

The payment gateway handles all aspects of the credit card transaction from securely transmitting the data from the customer to the issuing bank, back to the merchant, and eventually the customer again.

The gateway encrypts the sensitive data including the credit card number, customer’s name, and all other identifying information that if stolen could result in identity theft. The gateway does the ‘hard work’ between all parties, communicating the necessary information to conduct the transaction.

Why is a Payment Gateway Important?

Payment gateways are used most often in online transactions, otherwise known as card-not-present transactions.

Without the physical card, the risk of credit card fraud is high. Payment gateways decrease the risk though by using proper data encryption. Without it, hackers could have easy access to a customer’s banking information, which is why it’s so important for businesses to use proper gateways and PCI compliance. Customers won’t shop at businesses that doesn’t take data encryption seriously.

How it Works

It sounds complicated, but when broken down, the process is simple.

  1. The customer makes a purchase and heads to your checkout page.
  2. The customer is sent to a hosted payment page (usually this is within your website still) but if you use PayPal or a similar gateway, customers may be redirected.
  3. Your server communicates with the payment gateway to securely transmit the information.
  4. All data should be encrypted from the moment the customer enters it.
  5. The payment gateway does a fraud check before forwarding the information to the acquiring bank.
  6. The acquiring bank does another fraud check and sends the information to the issuing bank.
  7. The issuing bank sends the approval or denial to the acquiring bank who then sends it to the payment gateway.
  8. The merchant receives the information and processes the transaction if approved or stops the transaction if it’s declined.
  9. The merchant receives the funds electronically after the payment settles.

The right payment gateway is crucial to your company’s security and profitability. Using a reputable gateway ensures secure transmission of all data and reassures customers that your company takes security seriously.

Give your gateway careful thought. Don’t choose just any company to provide the gateway for you as it literally holds your company’s reputation, profitability, and variability in the palm of their hands. Work with a company that takes PCI compliance, fraud checks, and overall customer and business security seriously for the best results.

Save Time, Money, & Resources

Categories

Authorize.net, B2B Payments, Latest News, NMI, Payment Gateways, Payment Processing, Paytrace, TSYS TransIT, USAePay

Contact HMS

Ready for the ultimate credit card processing experience? Ask us your questions here.