'What Is A Payment Gateway?' — 2Checkout E-Commerce Glossary

What is a Payment Gateway?
The online communications system through which cardholders and merchants transfer information for a transaction.

How Does a Payment Gateway Work?
The system through which authorization is (or isn't) reached, Payment Gateways consist of third-party servers that help authorizing banks approve or decline pending transactions. Essentially, Payment Gateways allow websites and e-commerce companies to communicate with banks and transfer any and all information to see if a transaction can be approved.

Security is an integral component of all payment gateways, as the credit card numbers transferred between merchants/websites and banks need to be protected from any fraudulent parties. Submitting an order is usually completed using HTTPS protocol, which securely communicates personal information through the parties involved in the transaction.

Many Payment Providers, such as 2Checkout, enable merchants with added options when a cardholder purchases a service or product. Aside from providing the ability for real-time transactions, these providers can help to translate currencies between two parties in different countries as well as bridge language and payment methods.

Payment gateways usually charge the merchants and banks who use them a monthly fee or percentage of the sales processed.