{"id":6621,"date":"2019-08-05T10:00:59","date_gmt":"2019-08-05T09:00:59","guid":{"rendered":"https:\/\/www.sage.com\/en-gb\/blog\/?post_type=sage_glossary&#038;p=6621"},"modified":"2026-01-29T11:35:52","modified_gmt":"2026-01-29T11:35:52","slug":"what-is-a-payment-gateway","status":"publish","type":"sage_glossary","link":"https:\/\/www.sage.com\/en-gb\/blog\/glossary\/what-is-a-payment-gateway\/","title":{"rendered":"What is a payment gateway?"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/glossary\/\" class=\"entry-header__link\">Glossary definition<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tWhat is a payment gateway?\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"What is a payment gateway?\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-gb\/blog\/glossary\/what-is-a-payment-gateway\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n\n<p>A payment gateway is an e-commerce service that processes card payments for <a href=\"https:\/\/www.sage.com\/en-gb\/blog\/accept-online-payments\/?scroll=1&amp;autoplay=1\">online businesses<\/a> and in-store.<\/p>\n\n\n\n<p>Payment gateways facilitate these types of transactions by transferring key information between payment portals, such as a web-enabled mobile device on a website and the front end payment processor or bank.<\/p>\n\n\n\n<p>A payment gateway handles three crucial tasks in the payment process:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Authorisation<\/strong> \u2013 confirming with the customer&#8217;s bank that the cardholder information is valid and the funds for the purchase are available in the account.<\/li>\n\n\n\n<li><strong>Settlement<\/strong> \u2013 transferring transaction funds from the customer&#8217;s bank account to the merchant account.<\/li>\n\n\n\n<li><strong>Reporting<\/strong> \u2013 detailing and recording all transactions including chargebacks, refunds, and declines.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-does-a-payment-gateway-work\">How does a payment gateway work?<\/h2>\n\n\n\n<p>When a customer places an order online and enters their card information, it sets off a series of actions to verify, complete, and finalise the transaction in a matter of seconds:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-step-1\">Step 1<\/h3>\n\n\n\n<p>First, the web browser encrypts the payment data that is needed for the transaction. This means the data is translated into a code that&#8217;s undetectable by hackers or cyber criminals.<\/p>\n\n\n\n<p>The gateway then sends the data to the business&#8217; payment processing vendor or their bank.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-step-2\">Step 2<\/h3>\n\n\n\n<p>Next, the payment processor sends the transaction data to a card association (Visa, Mastercard, Amex, etc).<\/p>\n\n\n\n<p>The customer&#8217;s bank then views the authorisation request and approves or denies it once it verifies the account is valid and has the funds available for the purchase.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-step-3\">Step 3<\/h3>\n\n\n\n<p>The results of the authorisation request are then sent back to the merchant.<\/p>\n\n\n\n<p>If the request is approved, the bank sends the funds with through payment gateway and then the payment gateway sends the money to the merchant.<\/p>\n\n\n\n<p>If the authorisation isn&#8217;t approved, the decline communication is sent to the merchant and then the customer (or the message appears on screen if making an online purchase).<\/p>\n\n\n\n<p>The customer will be asked to try their payment method again or use another method.<\/p>\n\n\n\n<p>This process happens within seconds and is seamless to the customer unless the payment is declined or there is an issue with the payment gateway.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-benefits-of-a-payment-gateway\">The benefits of a payment gateway<\/h2>\n\n\n\n<p>One obvious benefit to having a payment gateway is it allows you to <a href=\"https:\/\/www.sage.com\/en-gb\/blog\/accept-online-payments\/\">accept payments online<\/a> without having to be present.<\/p>\n\n\n\n<p>Your customers can enter their own payment information and the gateway handles the rest.<\/p>\n\n\n\n<p>The other benefit is that it can help you cut down on queue times in-store.<\/p>\n\n\n\n<p>If you have a <a href=\"https:\/\/www.sage.com\/en-gb\/blog\/run-cashless-business\/\">POS<\/a> (point of sale) system that is compatible with mobile devices, your staff can take customer payments from anywhere in the store, not just at the register.<\/p>\n\n\n\n<p>This speeds up the payment process and eliminates your customers having to wait for service, which elevates their customer experience.<\/p>\n\n\n\n<p>A reliable payment gateway is important during peak sales times such the holiday season and the likes of <a href=\"https:\/\/www.sage.com\/en-gb\/blog\/black-friday-how-retailers-can-prepare\/\">Black Friday<\/a>.<\/p>\n\n\n\n<p>Businesses that reap the most during seasonal selling peaks are those that pad their payments process with extra layers of support to handle elevated traffic at crucial moments.<\/p>\n\n\n\n<p>Learn more about how to ensure your payments system can <a href=\"https:\/\/www.sage.com\/en-gb\/blog\/better-payments-experience-holiday-season\/\">handle a busy selling season<\/a>.<\/p>\n\n\n\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to the Sage Advice newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Join more than 500,000 UK readers and get the best business admin strategies and tactics, as well as actionable advice to help your company thrive, in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-b1a63862-3fa0-4a5e-bb67-c76b88bbc6b8\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>A payment gateway is an e-commerce service that processes card payments for online businesses and in-store. Payment gateways facilitate these types of transactions by transferring key information between payment portals, such as a web-enabled mobile device on a website and the front end payment processor or bank. A payment gateway handles three crucial tasks in [&hellip;]<\/p>\n","protected":false},"author":346,"featured_media":0,"template":"","meta":{"_sage_video":false,"footnotes":""},"tags":[25],"class_list":["post-6621","sage_glossary","type-sage_glossary","status-publish","hentry","tag-make-receive-payments"],"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice UK","distributor_original_site_url":"https:\/\/www.sage.com\/en-gb\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/sage_glossary\/6621","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/sage_glossary"}],"about":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/types\/sage_glossary"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/users\/346"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/sage_glossary\/6621\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/media?parent=6621"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/tags?post=6621"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}