What is a Payment Gateway?

A Payment Gateway is an ecommerce service provider that securely captures and transmits sensitive credit card, debit card, or digital wallet (Apple Pay, Google Pay) payment data from the shopper’s browser to the acquiring bank and payment networks.

Core Functions

  1. Tokenization & Encryption: Converts sensitive card numbers into secure single-use tokens, preventing raw credit card numbers from touching merchant servers.
  2. Authorization: Requests instant bank approval for the purchase amount.
  3. Capture: Transfers authorized funds from customer bank to merchant account.
  4. Settlement: Deposits funds into the merchant’s bank account after processing fees.

Common Payment Gateway Providers

  • Stripe: Developer-centric API gateway.
  • Shopify Payments: Built-in payment gateway powered by Stripe.
  • PayPal: Digital wallet and merchant gateway.
  • Adyen: Global omnichannel enterprise payment processor.

Developer Takeaway

PCI Compliance & Elements: Never send raw credit card numbers (PAN) directly to your server API endpoints. Use secure iframe primitives (like Stripe Elements or Braintree Hosted Fields) so payment data is tokenized directly on gateway servers, ensuring SAQ A PCI compliance.