What does a payment gateway do?
A payment gateway captures payment details from a checkout or terminal, encrypts them and sends them to an acquirer or processor for authorization. It then returns the approval or decline to the merchant. A payment gateway also handles tokenization, fraud checks and 3-D Secure, but it does not hold or settle funds.
In detail
A payment gateway is the technical service that carries a payment from the merchant’s checkout or terminal to the party that will authorize it. It captures the payment details, encrypts them, sends them to an acquirer or processor and returns the approval or decline to the merchant.
What a gateway handles
- Data capture: hosted fields, payment pages, mobile SDKs or terminals.
- Security: encryption and tokenization, so the merchant does not store card numbers.
- Checks: fraud screening and 3-D Secure.
- Operations: captures, voids and refunds, plus status updates by API and webhook.
What it does not do
A pure gateway does not hold funds and does not settle merchants. That is the job of the acquirer or the PSP. Under PSD2, technical service providers that never take possession of funds are outside the scope of payment services regulation.
Read What Is a Payment Gateway? and see how the Payment Platform Builder lets operators run a gateway under their own brand.