What is a Merchant Payment Gateway?

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  • Written By: Contel Bradford
  • Edited By: Michelle Arevalo
  • Last Modified Date: 03 November 2019
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A merchant payment gateway is a software system that authorizes payments for online merchants and businesses. It is often viewed as the Internet equivalent of a point-of-sale terminal, or cash register, found in retail outlets. The purpose of the system is to ensure that information exchanged between the merchant and consumer is processed in a secure and timely manner. Although a merchant payment gateway is often associated with e-commerce, it can also be used for traditional, brick-and-mortar transactions.

Acting as an independent service, a merchant payment gateway is perhaps best described as the intermediate between the seller’s shopping cart and the financial entities involved in the transaction. This generally includes both the seller’s merchant account and buyer’s credit card company. During credit card processing, the gateway helps with verification, and provides security by encrypting the financial information used in the transaction. Once validity has been proved, and the details are sent to the requesting party, they are decrypted and returned to the merchant’s shopping cart.

For the most part, the action a merchant payment gateway performs is a transparent process that requires no additional intervention from the buyer or seller. Once the consumer completes his order, the merchant’s shopping cart then transmits that data to the gateway over an encrypted connection. This system is completely independent of the interface customers use to transmit their order information, and, as such, offers safety for monetary transactions.


When integrating a merchant payment gateway with a shopping cart, the merchant will typically receive notification of all orders through email. There are usually two messages. One is generated by the shopping cart software and delivers information about the customer and other details necessary to fulfill the order. The second email is automatically sent by the payment gateway. This message provides the merchant with updates on the status of the order approval. Merchants are encouraged to not send out orders until this second message has been received.

The overall reliability of a merchant payment gateway depends largely on the quality of the service provider. This is very important as it is up to the service provider to ensure security through the use of industry standard data encryption. It is also the provider’s responsibility to offer a solution that complies with Payment Card Industry (PCI) Standards and other regulations. There are a number service providers on the market, with Authorize.Net™ and Verisign® being two of the most trusted examples.


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Post 3

@Logicfest -- Here is something else to think about. Do you know why account information went missing most often back when carbon copies of all credit transactions were kept? An insider at a store would swipe them.

These payment gateways have clamped down on that at least a little bit by encoding transactions and setting up good ways to monitor employees.

Post 2

@Vincenzo -- I wish people would lose that fear of information getting stolen online from merchant payment gateways. The simple fact is things are no more dangerous than a few years ago when merchants created carbon copies of every credit card transaction they made. Those carbons could be swiped and credit card information could be gotten that way.

That is not to say that companies should slack off when it comes to making payment gateways secure. Shoppers just need to realize that they may actually be safer than those old carbons that could be stolen by anyone with access.

Internet shopping is a very convenient thing that lets people grab great deals and items they might not have access to locally. I hope people don't let the fear of hackers keep them from using that resource.

Post 1

And that gateway can be the weak point in online sales. That is the point where crooks tend to focus when they want to intercept information and misuse it. It is no wonder, then, companies spend millions of dollars working on ways to keep information safe.

In spite of all those safety measures, there are people still afraid to shop online because of the possibility of hackers getting their mitts on account information. Perhaps there is good reason for people to fear the loss of their information.

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