Many companies use merchant services that provide payment gateways to process online and in-person transactions. As secure technology platforms, payment gateways serve as intermediaries for electronic financial transactions. The payment gateway accepts, verifies, processes, and manages payment methods ranging from digital wallets to debit and credit cards.

Payment gateways serve as a bridge between businesses, customers, and the financial institutions they rely on. They charge a fee for each transaction and connect the payment processing provider with the cash register, retailer app, or eCommerce website checkout interface.

Moreover, payment gateways encrypt all data to prevent theft, hacks, and unauthorized access through various measures, such as card verification value (CVV) checks, address verification systems (AVS), and other advanced fraud detection algorithms.

Once encrypted, the payment gateway forwards transaction data to the business’s bank. Then, the information goes to the customer’s financial institution or applicable payment processor. The process verifies transaction details such as payment method validity and account balance to approve or deny the transaction. The payment gateway does not make transaction decisions but conveys the response received from the customer’s bank to the merchant.