What is a Payment Gateway?
Simply put, a payment gateway is the connection between an online payment device (i.e. website, phone etc...) and the bank that processes any given credit card transaction. Whether being used for an eCommerce store, or a mobile payment application, the payment gateway is a piece of software that works behind the scenes to securely transfer sensitive credit card information from an online payment form to the payment processor.
To get a visual idea of how it works, take a look at the picture below:
Payment Gateway Vs Merchant Account
Sometimes people get the payment gateway confused with the merchant account, but they are two different things. If you look again at the picture above, you can see that the payment gateway is part of a larger process. The phrase "merchant account" is the umbrella term that defines that larger process. In other words, having a merchant account gives you the privilege of being a part of that process by allowing you to accept credit cards. The payment gateway is just the software application that plugs your website or mobile phone into that process.
When necessary, your merchant account provider will bundle a payment gateway with your merchant account so you can accept online payments. Most of the time that gateway will be Authorize.Net because it's so popular. However, some providers have in-house gateways like the Quantum Gateway by CDGcommerce which competes with Authorize.Net.
Payment Gateway Features
Here are some of the major features you can expect to get from a payment gateway:
Security
All payment gateways encrypt sensitive credit card information before they pass it along to the processing bank.
Recurring Billing
Allows you to process membership type recurring payments.
Virtual Terminal
A web version of the physical credit card terminal, the virtual terminal allows you to input a customer's credit card info and process a transaction directly through your computer's web browser via an online web form.
Easy PCI Compliance
There are a few gateway's on the market today that simplify the PCI compliance process for eCommerce merchants. The way it works is that they have a feature that allows you to conduct the entire transaction on the gateway providers own servers, not yours, even though the customer never leaves your website. That way, your own network isn't even involved in the transaction, thus absolving you from the need to maintain a secure network. CDGcommerce is one of the providers that's offering this type of service. Take a look at their instant PCI page to see what I mean. They do a better job of explaining it than I do.
Payment Gateway Integration
Payment gateway integration refers to the process by which one would connect the gateway software to some sort of payment device. That device is usually an eCommerce shopping cart. The integration process can be easy or difficult depending on how you're integrating. If you're using a shopping cart like Shopify or MagentoGo, there are pre-built payment gateway modules that make integration a breeze. It's when the shopping cart doesn't have a pre-built module that integration becomes tough. In that case, you'll have to do a custom integration which requires the talents of a knowledgeable web developer.
Conclusion
So there you have it! If you're an eCommerce merchant, you better believe that you're going to be using a payment gateway to process online payments. So make sure that the gateway offers the features you're looking for, and that it integrates easily with the shopping cart software that you're using.
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