Payment Gateway

A payment gateway refers to the front-end technology that reads payment cards and sends customer information to the merchant acquiring bank for processing. The payment gateway is an important aspect of all electronic payment card processing.

Payment gateways are offered with various features to help facilitate the electronic payment process for merchants.

Payment gateway technology can vary for online merchants and brick and mortar businesses. The payment gateway will be constructed differently for an online company versus a brick and mortar business however the transaction process is still the same.

Websites will require application programming interfaces (APIs) that plug into the online system through programming that enables their functionality. For a brick and mortar business, the company will require a point of sale terminal that connects electronically through either a phone line or internet connection.

The technologies for physical terminals used at brick and mortar merchants are constantly evolving. Terminals can accept contact and contactless cards along with standard magnetic strips. Terminals can be mobile for use in various locations. Terminals can also be stationary with added features built into the terminal system to display customer information.

All payment gateways serve as the first step in an electronic payment transaction. The payment gateway technology transmits a customer’s card information to the merchant acquiring bank. The merchant acquiring bank then facilitates the authorization of the transaction through communication with the processor and issuing bank.

Merchants can gain access to payment gateway systems through merchant acquiring bank partnerships or they may choose their own payment gateway system. Large banks like Bank of America and JPMorgan Chase have sophisticated payment gateway systems that they offer their customers along with their merchant acquiring bank services. Generally, merchants can choose from any payment gateway technology that they prefer however it must be compatible with the services provided by the merchant acquiring bank since the communication is ultimately sent to them for processing.

Square is one of the industry’s most popular payment gateways for merchants requiring mobility in their payment processing. They offer stationary terminals with a variety of integratable features. They also offer Square Reader roaming technology that allows a merchant to take payments anywhere. With the Square Reader payment gateway technology, a merchant can attach a small piece of hardware to their mobile phone which allows the customer to swipe their electronic payment card for processing through the mobile phone’s electronic connection. The Square Reader sends payment information to a merchant’s acquiring bank which then processes the information in minutes for the merchant.