What Is a Payment Gateway?

Man entering credit card number on laptop

Any business accepting electronic payments online, no matter the volume, needs a payment gateway to facilitate the process. A payment gateway is the “virtual” equivalent of a physical credit and debit card reader. It transfers the data between the point of entry – either a terminal, website, or mobile device – to the payment processor to continue the payment lifecycle.

With fraud consistently on the rise, payment gateways help minimize your risk and protect your business by encrypting transactions, verifying addresses or other personal information, and analyzing velocity patterns.

The right payment gateway can help you simplify payment processing, consolidate vendors, and ease reporting and reconciliation.

The Basics of a Payment Gateway

A traditional gateway allows merchants to accept payments for goods and services online. Payment information is most commonly:

  • Entered into an eCommerce website, hosted payment form, or mobile app
  • Hand-keyed into a virtual terminal

In today’s payments industry, gateway technology has expanded to create a “frictionless” purchasing experience across all sales channels and devices. No longer is a gateway solely used for eCommerce transactions. It can also be used to:

  • Integrate payments with existing software that merchants and consumers use daily
  • Process swiped or dipped transactions at a point-of-sale system (POS) or on a mobile device
  • Accept tapped or waved transactions using near field communication (NFC) technology

How a Payment Gateway Works

When a customer pays for goods or services, the encrypted payment details are sent to the payment processor via the gateway. Data communication from the gateway is always encrypted. The payment processor notifies the card-issuing bank and the transaction is approved or rejected. The payment processor then communicates the authorization or decline back to the payment gateway. The gateway sends the approval or decline back to the person who originated the transaction – either the merchant or the customer. If approved, funds are deducted from the customer’s account and settled into the merchant’s bank account. Merchants have the option to upload transactions one at a time or in batches.

Payment Gateway Features and Functionality

With so many payment gateways available, how do you know which one is right for your business? Here are some important features and functionality a payment gateway should deliver to help optimize payments and provide a seamless processing experience.

Fraud Protection

As technology continues to evolve, so does the skillset of the average cybercriminal. You need an innovative fraud solution that delivers the cyber security intelligence your business demands to accept more good transactions and reduce fraud rates. No matter how you accept transactions, our Fraud Detect® solution can help you outsmart fraud and increase customer confidence.

Tokenization

Payment card security is of the utmost importance to us. We help you protect vulnerable data from the moment it enters your system and as it’s transmitted to the card network. With our tokenization solution, TransArmor®, the personal account number (PAN) is replaced with a randomly generated alphanumeric ID, or token, that is meaningless to everyone except the payment processor. This frees you from storing sensitive data in your system and helps minimize PCI scope and liability.

Recurring Payments

Recurring payments provide many benefits for both the merchant and the customer. By creating a payment schedule that works for both parties, payments automatically come in on time, every time. This increases cash flow and improves customer retention, while offering convenience and flexibility for your customers. With our PCI-compliant payment scheduler, merchants and customers can set up a frequency via a hosted payment page, Application Programming Interface (API), or virtual terminal.

Software Integration

Going between multiple software programs and interfaces to manage payments isn’t efficient or cost-effective. Integrating a payment gateway with the software you use to run your business is guaranteed to save you time, provide greater accuracy, and ease transaction reconciliation with centralized reporting. APIs allow two applications to talk to each other, while plugins allow you to modify your existing software platform. We have the APIs and plugins you need for seamless integration.

Hosted Payment Form

A hosted payment form is a secure way to accept eCommerce credit card payments without the need for a shopping cart. We host the form, so sensitive payment data does not pass through your system, reducing your PCI scope and minimizing your liability. Forms can be implemented using a standard template or customized to fit the look and feel of your website.

Virtual Terminal

Whether you need to take payment over the phone or via mail, a virtual terminal enables you to turn your PC into a POS device using an internet connection. Think of it as a terminal “in the cloud.” There is no software to install. Simply log into the gateway to start accepting credit, debit, or ACH one-time or recurring transactions.

Payment Gateway Services

Payment acceptance can be complex, but with the right payment gateway and robust features, you can consolidate and streamline your processing into a single solution that enables convenient payment methods, secures customer data, and complies with PCI standards. Below are two of our payment gateway services.

First Data Gateway

With First Data Gateway, accept secured payments through your website and receive real-time authorization responses from major card brands and/or other local payment providers through a single solution. The feature-rich payment gateway also provides access to services including tokenization, hosted payment form options, and a virtual terminal to accept transactions manually.

PayeezySM Gateway

Payeezy, an alternative payment gateway, is a dynamic eCommerce solution that goes beyond accepting payments, giving you easy access to everything needed to establish or improve your customers’ online shopping experience. Payeezy helps make it easy to sell online, empowering merchants to think bigger, work smarter, and compete in today’s ever-changing marketplace.

Why Do You Need a Payment Gateway?

A payment gateway offers a secure, frictionless experience that allows your customers to make purchases via multiple channels and with any major form of payment. With an omnichannel payment gateway solution, you reduce costs by eliminating the need for multiple vendors; increase sales by offering convenient payment choices that keep customers happy; and streamline operations with robust reporting and software integration.

Our professional team is here to assist you with any questions you have about payment gateways for your business. Get information on First Data’s payment gateway services if you are a:

Small Business

Large Business

Financial Institution