A payment gateway serves several functions during the transaction process. From the customer’s point of view, it’s simply added security. For the merchant, it’s the vehicle that carries a transaction along its processing journey.
A payment gateway is an essential part of the checkout process that securely transmits sensitive credit card information between customers, merchants, and financial institutions. For customers, payment gateways add a layer of security when using credit or debit cards. For business owners, it’s a critical tool that keeps transactions safe and seamless. If you’re a small business accepting mobile payments or running an online store, a reliable payment gateway for small businesses is a must.
As a customer, you probably don’t think too much about what happens when you swipe your card. If you think about it at all, you’re probably just worried about the chances of your information getting stolen. Luckily—if you’re shopping with a reputable merchant—they’ll be one step ahead of you thanks to their payment gateway.
A payment gateway serves several functions during the transaction process. From the customer’s point of view, it’s simply added security. For the merchant, it’s the vehicle that carries a transaction along its processing journey.
But how does it all work? Let’s walk through the payment gateway process and how it fits into your larger payment solution.
There are five key components of the payments process:
The payment gateway serves as the middleman—authorizing, encrypting, and delivering sensitive credit card information between the merchant and financial institutions. During a transaction, it securely passes the card data from your POS system or online payment gateway to the payment processor, which then contacts the acquiring bank to get approval or decline from the customer’s bank.
All of this happens in just a few seconds—between the time a credit or debit card is entered and when the message says “Approved.”
So, wait, where does the processing gateway come into play in that seemingly simple process?
Unfortunately, these five components aren’t always interconnected. If a direct API integration is unavailable, merchants will have to find a solution to link their POS system to their processor. That’s where the payments gateway comes in. In addition to that role as a connector, the payment gateway protects your customer’s sensitive information—names, addresses, credit card numbers—from prying eyes and protects you from astronomical fines that come with data breaches.
Think of the payment gateway process like a pizza delivery. The gateway doesn’t make the pizza (that’s your payment processor), but it’s responsible for making sure it gets delivered safely to your home—and still hot.
The gateway payments system uses encryption, tokenization, and other security measures to guard customer data from fraud or hacking. This ensures that during each step of the process—whether approving or declining the transaction—your payment gateway stays PCI compliant, secure, and reliable.
And like your favorite delivery driver, payment gateway services do come with monthly fees or per-transaction costs, depending on the provider.
A virtual terminal is a type of online payment gateway that allows merchants to manually enter card information, especially when the card isn’t present (like in phone or email orders). For ecommerce or remote businesses, this setup allows you to accept credit and debit cards without needing a physical terminal.
If you're strictly online, your gateway acts as the digital register and ensures your transactions are secure from start to finish.
By now, it should be obvious that payment gateways are an important part of payment processing. So, when you’re choosing the gateway that works best for your unique business, there are a few things that you should keep in mind:
If your processor doesn’t directly integrate with your POS or accounting system, a payment gateway is essential. Choose one that integrates well with your existing tools and remains PCI compliant.
Make sure to evaluate payment gateway services for monthly fees, transaction charges, and hidden costs. Some gateways offer cost-effective options, while others may charge more for advanced features or support.
Your gateway should support a wide range of payment methods, including mobile payments, debit, and credit. That way, you won’t miss sales due to limited options.
There are also a few different types of gateways: redirects, check out on-site, payment off-site, and on-site payments. The first two require some sort of third-party software that handles the purchase either by redirecting your customer to a different site or sending their information to a different site to complete their purchase. These options take some of the responsibility off of you, making the process a little lighter on your end, but they also remove some of your control over the transaction. On-site payments, on the other hand, keep everything in your hands throughout the payment process (which does mean a little more work for you).
Stick to payment gateways with strong reputations. Reviews and aesthetics matter, especially in building trust with your customers.
Top-tier payment gateway services should offer robust security measures like tokenization and encryption, plus meet the latest PCI compliance standards.
The difference between a smooth sale and a payment nightmare often comes down to customer support. Look for a provider with dependable support options, especially if payment issues mean lost revenue.
Many people confuse payment gateways with payment processors. While they work closely together, their roles are distinct:
Think of the gateway as the secure delivery truck and the processor as the road system that makes the whole trip possible.
To help you get started on your hunt, here are a few of our preferred gateways, along with a pricing breakdown of each:
This is the first gateway that comes to mind for most merchants. It’s fairly popular among small-to-midsize businesses because of its flexible payment options. It doesn’t hurt that the company has a great reputation either. If you choose to process directly through Authorize.net, it will cost you 2.9% + $0.30 per transaction in addition to a $20 monthly fee. If you choose their gateway only option (and process elsewhere), Authorize.net charges a $25 monthly fee and $0.10 to protect your transactions.
NMI offers the greatest variety of services beyond what you’d expect from a gateway. Whether you’re running a mobile, ecommerce, or brick-and-mortar business (or any combination of the three), NMI’s options ensure you can do so with ease. Unfortunately, because of the various features available to NMI customers, there is no set pricing for their gateway services. If you’re considering NMI, you’ll have to contact them to get pricing for your specific needs.
Payline Data was created with online businesses in mind. While their services are available to all business types, ecommerce is definitely their bread and butter. Similar to Authorize.net, PaylineData offers processing services in addition to their gateway functionality. If you’re just utilizing their gateway services, you can expect to pay $10 per month at $0.20 per transaction, making it a little more expensive than Authorize.net. However, their rates are more competitive when you elect to use them as your payment processor.
If you’re not sure which payment gateway services are right for your business or whether you need a gateway at all, Swipesum is here to help. Our experts specialize in matching businesses with the most cost-effective, secure, and scalable payment gateway and payment processing solutions.
Book a free consultation today and let Swipesum take the guesswork out of your gateway payments strategy.
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Stephen Seaman
Stephen Seaman is the co-founder and COO of Swipesum, an ETA CPP in payments, known for spotting industry trends ahead of major media outlets. With a degree from Northern Kentucky University, Stephen hails from Bardstown, Kentucky, and has lived across the US, now residing in St. Louis since 2014 with his wife Hilary and their two dogs, Baxter and Bruce. Passionate about project management and improvements, he applies these skills at Swipesum and in his personal fitness and nutrition. He enjoys maintaining his pool, hosting visitors, and traveling with his extended family. As a true solutions architect at Swipesum, Stephen is involved in every aspect of the business, constantly implementing new systems and improvements.
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