A payment gateway is a technology that enables safe transactions by securely transferring payment data between the merchant, the acquirer and the card scheme. It is integral to processing online, in-app and in-store payments.
As digital commerce grows, the importance of payment gateways becomes clearer than ever. Global retail eCommerce is projected to reach USD 7.9 trillion by 2028, up from USD 6.4 trillion in 2025. But as transaction volumes rise, so does the risk of fraud. eCommerce losses due to payment fraud were USD 44.3 billion in 2024 and are expected to increase to USD 107 billion by 2029.
As more businesses look at expanding operations online, a secure and seamless payment gateway is vital. It safeguards customer information while protecting businesses against payment fraud.
In this article, we’ll explore how payment gateways work, their importance for today’s businesses, their benefits and how to choose the right solution for your business.
What is a payment gateway?
A payment gateway is the secure technology that authenticates and transmits payment data between the customer, the merchant and the financial institutions involved in the transaction process. It ensures that each payment is authenticated and funds move safely from the cardholder’s bank (the issuer) to the merchant’s acquiring bank (the acquirer). For more information, watch our video here.
Why do you need a payment gateway?
A payment gateway is essential for any business that accepts online payments.
Key reasons your business needs a payment gateway include:
- Data protection: Encrypts and tokenises cardholder information so no sensitive data is exposed.
- Fraud prevention: Uses tools like real-time risk scoring, velocity checks and 3D Secure 2 to identify and block suspicious activity.
- Regulatory compliance: Meets PCI DSS standards through regular audits and certifications.
- Customer trust: Provides a secure checkout experience that improves confidence and reduces chargebacks.
How do online payments work with a payment gateway?
While the payment process may seem straightforward, multiple parties work behind the scenes to ensure it is completed securely.
Here are the main parties involved and their roles in the payment process:
- Payment service provider, or the payment processor – is a third-party company that provides the payment processing services to merchants, such as the payment gateway, card issuing, risk and fraud management solutions, acquiring and global payment methods, among other things.
- Merchant – this is any party that sells goods and services, through an online and/or in-store shop.
- Customer, or cardholder – the individual who initiates the purchase of a merchant’s goods or services.
- Issuer, issuing bank or card issuer – a bank or other financial institution that issues or helps issue payment cards to customers on behalf of the card schemes. When a customer makes a payment, the issuer transfers the funds through the card schemes to the acquirer. Essentially, they verify that the cardholder has sufficient funds to cover the transaction and that the account is valid (among other checks).
- Acquirer, acquiring bank or acquiring member – the financial institution that processes card payments on behalf of merchants. One of their main roles is to securely route the card payment data to the card schemes for authorisation by the issuer.
- Payment gateway – the technology used by merchants to authenticate and securely transfer payment data between the acquirer, issuer and card schemes. Once the payment has been authorised and approved by the acquirer, the payment gateway sends a verification message back to the merchant.
- Card schemes – the party linking the acquirer to the issuer, so that card transaction information can be passed between the two as part of the authorisation step (we’ll touch on this later). Well-known card schemes include Mastercard, Visa, American Express, Discover and UnionPay.
How does a payment gateway work?
A payment gateway acts as the secure link between the customer, the merchant and the banks that authorise a transaction. It ensures payment data is encrypted, verified and transferred safely at every stage.
Let’s explore how payment gateways fit into the card payment process, step by step, from transaction initiation to final settlement.
- Customer initiates the payment - The customer initiates a purchase by entering their card details on the payment page, which typically includes the cardholder’s name, card number, card expiration date and card verification value (CVV) code. This information is then safely passed on to the payment gateway, depending on the merchant’s preferred integration (e.g. hosted payment page, server-to-server integration or client-side encryption).
- Gateway encrypts and validates the data - The payment gateway encrypts the card details and performs fraud checks before sending the card data to the acquirer.
- Acquirer sends data to the card schemes - The acquirer securely sends the information to the card schemes, which carry out another layer of fraud checks. After this, the schemes transmit the payment data to the issuer for authorisation.
- Issuer authorises or declines the transaction - The issuer authorises the transaction once the necessary fraud screening measures are completed. Namely, it validates the transaction information, ensures the cardholder has adequate funds for the purchase and that the bank account is valid. The issuer will send an approved or declined message from the card schemes to the acquirer.
- Merchant receives the authorisation result - The acquirer passes the message back to the payment gateway to the merchant. Depending on the message, the customer will be directed to a payment confirmation page or asked to provide another payment method.
- Funds are settled - After the payment has been approved, the settlement process can begin. For this, the acquirer collects the payment amount from the issuing bank and puts the funds ‘on hold’ into the merchant account (more on the merchant account below). When the actual settlement will happen depends on the agreement the merchant has with their payment service provider.
Benefits of a payment gateway
Payment gateways have a number of benefits that include, but are not limited to:
Enhanced security
As mentioned earlier, there are a number of checks that take place during the payment process to ensure the person making the purchase is indeed the cardholder. Payment gateways must also be PCI DSS compliant, which means they have to follow specific security standards to safeguard cardholder data, adding another layer of protection against fraud. Further to this, payment gateways usually support additional features like tokenisation, Address Verification Service and risk management solutions (e.g. velocity checks, transaction counts, amount thresholds, device fingerprinting, negative database data, etc.)
Improved payment experience
Having a payment gateway means your customers can make purchases anytime and anywhere. Alongside this, customers can also choose to securely save their payment information for future purchases from a merchant via tokenisation. By creating a seamless payment experience for your customers, you can cultivate brand loyalty and encourage repeat purchases.
Expand into new markets
Many payment gateways support multiple currencies and have the option to integrate with local and global payment methods, letting your customers choose how they pay. For example, emerchantpay currently offers over 60 global payment methods like Apple Pay, Google Pay™, PayPal, SEPA payment schemes and PaysafeCard, among others. Furthermore, you can expand your business globally and tailor your payment gateway to cater to specific customer payment preferences.
Customisable checkout options
Payment gateways can be integrated with your existing website or shopping cart platform. emerchantpay currently offers many payment integration methods like a hosted payment page, server-to-server integration, client-side encryption and connections with popular eCommerce platforms and shopping cart plugins (learn more by reading our FAQs below). Based on your payment setup, the payment flow can be customised to suit the needs of your business.
What’s the role of a merchant account? How does this differ from a business bank account?
While both the merchant account and business bank account are associated with the settlement of funds to the merchant, they each serve different purposes.
A merchant account is a specific bank account that allows merchants to accept and process electronic payments from customers quickly and securely. During the settlement process, the acquirer moves funds from the merchant account to the business bank account.
A business bank account, on the other hand, is what merchants use for everyday expenditures. This is where funds are deposited after settlement takes place. Depending on the agreement with your payment service provider, the acquirer will transfer funds from your merchant account into your business bank account either periodically in bulk or as individual payments.
The important thing to note is that businesses must have a merchant account set up by an acquirer in order to process transactions online, using a payment gateway.
In simple terms, the merchant account acts as a secure holding area for customer payments until they’re cleared and deposited into the merchant’s business bank account.
FAQs
What’s the difference between a payment gateway and a payment processor?
A payment gateway is the technology that securely captures and transmits payment data from the customer to the acquirer on behalf of the merchant. It acts as the interface between the merchant’s eCommerce platform and their acquirer, enabling the authorisation and processing of transactions in both card present and card not present environments.
A payment processor, on the other hand, provides transaction processing services that connect acquirers to the card schemes. These include authorisation routing, clearing file preparation and settlement processing.
emerchantpay is a global payment service provider that offers complete payment processing solutions, including a secure payment gateway, acquiring, anti-fraud solutions and a range of local and international payment methods.
What’s PCI compliance?
PCI Compliance, or the Payment Card Industry Data Security Standard, is a set of requirements for securely handling cardholder data. It ensures payment gateways use measures like 3DS2, point-to-point encryption and SSL certificates to protect against fraud. All gateways must be PCI compliant and breaches can result in fines or suspended processing. emerchantpay’s solutions meet these standards and also include tokenisation, Address Verification Service and fraud management tools to safeguard your business.
Does a payment gateway store customer card details?
No. A secure payment gateway encrypts card data and replaces it with a unique token, ensuring sensitive details are never exposed or stored on your servers. emerchantpay’s gateway follows PCI DSS standards and uses tokenisation to keep customer data safe.
Can a payment gateway help reduce chargebacks?
Yes. By identifying and blocking suspicious transactions before authorisation, a payment gateway helps prevent fraudulent activity that often leads to chargebacks. emerchantpay’s gateway includes advanced fraud prevention to keep your business protected.
What is the cost of emerchantpay's payment gateway?
The cost of using emerchantpay’s payment gateway depends on your business’s specific requirements and unique circumstances, such as your industry, transaction volume, the types of payments you process to name a few examples. Because every merchant is different, we tailor our pricing to suit your needs rather than offering a one-size-fits-all model.
At emerchantpay, every merchant benefits from:
- A dedicated Account Manager and Risk Analyst focused on your business success and day to day operations.
- 24/7 Tech Support from our in-house team.
- Top-tier fraud mitigating solutions like address verification service and real-time risk monitoring.
- Interchange++ pricing is the most transparent pricing method in the industry. You’ll be able to see a detailed breakdown of the processing costs involved in our solutions, so you don’t have to worry about any hidden fees or charges. For more information, you can contact our payment specialists to discuss your setup and processing needs.
Does emerchantpay’s payment gateway process subscription payments?
Yes, our payment gateway provides an easy and hassle-free way for your business to set up and accept subscription payments. Our system will securely store and encrypt customer information and process payments based on your chosen billing cycle. With recurring payments, your business will benefit from increased customer loyalty and it also makes repeat billings easy to manage.
How long does it take to settle funds?
While a payment is authorised almost instantly, the actual settlement of funds (when the money actually reaches your bank account) can vary depending on several factors, including but not limited to the following:
- Your merchant agreement and agreed settlement timeframe (e.g. T+1, T+2 or longer)
- Your industry
- The type of payment (e.g. cross-border versus domestic payments).
Your agreed settlement schedule will be confirmed in the merchant agreement and will be aligned with your business model and processing needs.
What type of payment gateway integrations does emerchantpay provide? How do you add it to your website?
Hosted payment page (pre-built UI)
This integration is suitable for SMEs looking to decrease their PCI DSS requirements and development work. This integration allows the payment page of your online store to be hosted on our secure server, with the option to customise its look and feel.
Server-to-server integration (custom UI)
If you want full control over the transaction flow and website design, our server-to-server integration is your go-to option. In effect, the customer completes the payment on your website, so the customer journey is uninterrupted and native to your website. This is possible through a direct connection between your server and our payment gateway via an API.
Client-side encryption (CSE)
Also referred to as “encryption at source”, this integration method involves embedding our client-side encryption library on your payment page. After the customer completes their payment, this information is securely processed and authenticated via our payment gateway. This option is suitable for merchants looking to manage the design of their payments page, while limiting their PCI compliance requirements.
Platform integration
Another option is platform integrations via plugins and modules, which offer merchants a way to connect to a payment gateway and easily accept payments using their eCommerce platform. emerchantpay’s payment gateway can be integrated with leading platforms like WooCommerce and Umbraco, among others.
Virtual terminal
Our payment gateway also gives you access to our virtual terminal, allowing you to provide payment options like Pay by link transactions and mail order telephone order (MOTO).
Pay by link allows merchants to securely and easily accept payments without a storefront by sending customers a payment link via email or SMS, with a pre-defined transaction value. Once a customer clicks on this link, they’re directed to a secure payment page, where they can fill in their payment details to complete the purchase. With a virtual terminal, you can accept remote purchases easily and securely using your phone, laptop or tablet via our payment gateway.
Does the emerchantpay payment gateway support international payments?
Yes. emerchantpay’s payment gateway is designed to support local and international payments, helping merchants reach customers and process payments securely across key markets.
We work with businesses of all sizes to enable cross-border payments, ensuring that payments are processed efficiently. With emerchantpay, you can accept payments in more than 150 currencies and have funds settled in over 25 currencies (please note that the exact settlement currencies available will depend on factors such as your industry and other business considerations).
In addition to traditional card payments, emerchantpay offers a wide range of alternative payment methods to meet regional and customer preferences, including Apple Pay, Google Pay™, PayPal, SEPA Direct Debit and other local payment options.
You’ll also have access to comprehensive dashboard reporting, giving you visibility into your transaction volumes, statuses, currencies and payment method breakdowns.
How to change your payment service provider
Looking to change your current payment provider? Here’s how you can get started with emerchantpay in just five steps:
- Review your current contract: Prior to making the switch, you’ll first need to view the terms of your existing contract. Important things to look out for include the contract end date, early termination fees and notice periods. Inform your provider about your decision, so your contract is not automatically renewed. If you have processing equipment, confirm if this will continue operating when you start with emerchantpay. Otherwise, we can set you up with new processing hardware and software.
- Set up your new account: As part of this, we’ll need to grab some standard information like your personal and business details, alongside the services you require. We’ll also identify a new payment solution based on your business’ and customers’ needs.
- Installation: Once a setup and transfer date has been agreed upon, we’ll set up a merchant account and install your chosen payment solution, which includes setting up a secure payment gateway.
- Onboarding and training: To help you navigate our products and solutions, we’ll conduct a training session and send detailed guides to show you the ropes. Plus, you’ll receive regular emails notifying you about important features and updates.
- Reporting and ongoing support: Once you’re up and running with us, you’ll receive detailed reports, covering key payment metrics like transaction volume, transaction statuses and more! You’ll also have access to your very own Account Manager, Risk Analyst and 24/7 technical support.
Accept more payments with emerchantpay's payment gateway solutions
With over 20 years of experience in making payments easy for businesses, we can provide you and your customers with a hassle-free, streamlined payment experience. We’re PCI Level 1 compliant, with an all-in-one payment platform that includes an in-house payment gateway, global acquiring, alternative payment methods (APMs), card issuing and in-house risk and fraud management services.
We want to help your business grow, which is why you’ll also have a dedicated Account Manager and Risk Analyst by your side, helping you every step of the way. With us, you’ll be well placed to provide frictionless and safe checkout experiences for your customers for maximised revenue.
Ready to boost your profit margins with our robust payment solutions? Talk to our payment experts and start accepting online payments today.