Payment Gateway

Understand a payment gateway and how the process works behind an online transaction.


What is a Payment Gateway?

A payment gateway is a mechanism behind credit card transactions between a merchant and their customers. In other words, it is what assures security and facility by sending credit card information from the merchant's website to the payment processor and returning transaction details and its response back to the customer.

Within a few seconds, the payment gateway will be responsible for encryption, request, fulfilment, calculating tax costs, screening orders, and using geolocation to provide a better experience to the customer. To simplify, consider it a "cash register" in an electronic transaction.

E-commerce has become an important part of the retailing industry, responsible for almost 10% of total retail sales, according to eMarketer, and the number keeps growing.

Brazil is Latin America's most important e-commerce market and one of the fastest-growing worldwide. A sophisticated payment system is imperative, and in emerging tech regions like Brazil, the payment gateway is the key to successful, easy transactions.

There are many entities when it comes to completing a payment online. Perhaps the most recognized is the payment gateway, linking the customer to the merchant. Gateways exist in many forms, and all play an important part in the e-commerce economy.

The payment gateway is required to make it happen in any online purchase. Without it, the transactions cannot be completed.

There are many payment gateway providers, and the best way to choose one is first to understand what a payment gateway does for buyers and merchants, then analyze your options considering the offered security features along with good customer experience. So first, the basics.


Payment Gateway vs. Payment Processor vs. Payment Methods

You've probably heard of a payment gateway as a payment processor, but they are different, and both could be used in the transaction. While the payment gateway authorizes the transaction, the processor only transmits it according to the payment method selected.

Online payment requires many steps to process a transaction. These steps happen in the background and may seem confusing.

Let's enlighten each one understanding the difference between a payment gateway, a payment processor, and a payment method:


Payment Gateway Process

The process of online transactions is a swift, very accurate electronic exchange. During this exchange, money is protected, safeguarded, and transferred. Everything happens as fast as a confirmation page loads.

How does a Payment Gateway work?

The payment gateway works by giving the customer a way to buy online.

This is necessary since there is no physical interaction between seller and buyer; a person would require a cash register or a credit card machine for the material purchase.

Instead, the gateway acts as the tender retrieval, like a cash register. It takes in the payment information electronically to be sent to the seller. The best payment gateway systems are fast, secure, and easy to use.

How does a transaction work?

The transaction steps for the payment gateway are simple. When a party enters the payment portal, they are entering the gateway.

As the first part of the payment process, the customer enters their payment information, such as credit card, debit card, or bank account.

The payment system will then process and authorize the payment, which will be sent to the payment processor, which carries the money into the seller’s account.

Example of a Transaction

steps of a payment gateway transaction


Are Payment Gateways Safe?

Payment gateways cannot be ignored when everything we do is online. However, it is no longer unusual for merchants and customers to question their safety.

The answer is that payment gateways are safe and secure and must be configured and managed correctly.

If you are looking for a payment gateway, search for one that offers encryption (protecting customer's sensitive data) and digital signatures to help decrease fraudulent transactions.

Also, search for PCI-compliant certification, tokenization to replace sensitive information, 3D security as an additional layer offering more protection to customers with a validation process, and other technologies that may help protect all personal data from outside sources.

Card Tokenization

Buyers are concerned with financial security when they make online purchases.

Card tokenization replaces a buyer's credit card number with a random string of characters called tokens to ensure a safer transaction, protecting their sensitive information.

This affiliation means card numbers are secure in online transactions, and the chance of a data breach is significantly reduced. Even if a token is stolen, the fraudster won't be able to use it.  

It's important to mention that if a buyer makes multiple purchases with different credit cards, each purchase gets a new card token.

3D secure

Created by Visa and MasterCard, 3D secure - known as payer authentication - is a technical standard that adds a layer of security to online credit and debit card transactions.

Within its benefits, we can consider reducing fraudulent transactions, reducing the chance of chargeback, offering more protection, and increasing customer confidence to buy online.

PCI Compliant certification

The Payment Card Industry Data Security Standard (PCI DSS) is an essential proof of security for all organizations that accept, store, process, and transmit cardholder data in a transaction process.

When you choose a Payment Gateway, ensure your provider is PCI compliant, assuring your business and customers more security.