What is a Payment Gateway? - Dharma Merchant Services (2024)

A payment gateway is the online-equivalent of a credit card terminal. The payment gateways’ job is to encrypt, and then securely authorize a credit card transaction. Payment gateways are fundamentally required when accepting a credit card transaction online, because they’re responsible for storing sensitive credit card data. Sometimes these gateways are referred to as merchant gateways, credit card gateway or payment portal. If you’ve yet to read how a merchant account works, we recommend you take a quick look at this handy diagram, located here.

What Role Does a Gateway Play?

Companies like Dharma are also known as payment gateway providers, since we offerpayment gateway services. Below is a handy diagram that shows the payment gateway’s role in a credit card sale.

What is a Payment Gateway? - Dharma Merchant Services (1)

What is a Payment Gateway? - Dharma Merchant Services (2)

The Security You Need

The most important aspect of these gateways is their security. Utilizing a gateway can help your business to be PCI DDS compliant, ensuring that it is not held liable in the event of a breach that leads to credit card fraud. Any business that has access to card information is required to be compliant with the regulations set forth by the PCI. Fraud detection features in the gateway will guard your transactions against criminal activity.

When a customer submits an order, it is usually completed using HTTPS protocol, securely transmitting the personal information through all parties involved in the transaction. Some software is even capable of providing real-time payments and translation of currency for foreign customers. Each transaction made through the gateway comes with a small fee to the business owner, which is usually just a few cents.

What is a Payment Gateway? - Dharma Merchant Services (3)

Added Benefits

While protection against credit card fraud is essential in today’s world, did you know that a gateway can also help your business run smoothly? Dharma offers its customers the MX Merchant Payment Gatewayto meet the demands of merchant’s with specific, or even unique, payment processing needs, and it comes with a ton of neat features that can really help you stay on top of things.

The MX Merchant Gateway offers an easy-to-use Virtual Terminal as well as a free iPhone/iPad app for mobile processing. It also features recurring billing that makes it easy to setup a subscription or membership, as well as update any customer information needed. Email invoicing makes it a snap to collect payments, and it is incredibly simple to integrate the system into your website withonline payment links.

What is a Payment Gateway? - Dharma Merchant Services (2024)

FAQs

What is a Payment Gateway? - Dharma Merchant Services? ›

A payment gateway is what authorizes credit card payments and is the equivalent of a physical point-of-sale terminal located in most retail outlets. Payment Processor. A merchant account and payment gateway account both connect to the processor & both accounts are essential in order for merchants to accept payments.

What is a merchant payment gateway? ›

What is a merchant payment gateway? A merchant payment gateway is an essential e-commerce tool that securely authorizes and processes online business transactions. Acting as a bridge between a customer's bank and the merchant's website, it encrypts sensitive payment data, ensuring secure and efficient transactions.

What are the 4 types of payment gateway? ›

There are four types of payment gateways: hosted payment gateway, API-hosted payment gateway, self-hosted payment gateway, and local bank integration gateway.

What is your payment gateway? ›

A payment gateway is a technology used by merchants to accept debit or credit card purchases from customers. The term includes not only the physical card-reading devices found in brick-and-mortar retail stores but also the payment processing portals found in online stores.

What does a payment gateway provider do? ›

Payment gateways are a merchant service that processes credit card payments for both ecommerce sites and traditional brick-and-mortar stores. They can be thought of as the metaphorical cash register in an electronic transaction. However, like any cash register, it needs to be secure and convenient.

What is the difference between merchant services and payment gateway? ›

In fact, the two serve totally different functions: a payment gateway facilitates online transactions and allows you to process them, while a merchant account is a holding account where those payments first land before being deposited into your regular bank account.

What is the difference between a payment gateway and a merchant service provider? ›

While a payment gateway is a consumer interface allowing for the collection of card data, a merchant account enables businesses to receive the funds from these card transactions. Without both, a business cannot offer card payment options to its customers.

What is an example of a payment gateway? ›

After your customer clicks on the payment link, they are taken to your payment processor's page to enter their card details and make the payment, after which they are redirected to your website. An example of this type of payment gateway is PayPal.

What is the most used payment gateway? ›

PayPal develops different ways for consumers to pay, including Venmo and its own service for buy now, pay later. One of the most commonly used payment processing platforms. Easy to use and integrate with website hosts and shopping carts.

What is the No 1 payment gateway? ›

PayPal: PayPal is one of the popular payment gateways for overseas money transfer. It can process transactions in over 100 currencies. This application allows you to process both debit card as well as credit card transactions.

Is PayPal a payment gateway? ›

No, PayPal is not a traditional payment gateway, but it does offer a payment gateway solution (Payflow) as part of its overall payment processing solutions.

Do I need a payment gateway? ›

If you sell online, you'll need a secure checkout portal — the payment gateway — on your website or within your app so that people have a place to enter their card information in order to pay you.

How do I find my payment gateway provider? ›

Here are several factors to consider when choosing a payment gateway:
  1. Transaction fees. Most payment gateways charge a fee per transaction. ...
  2. Payment methods. ...
  3. Security. ...
  4. Integration. ...
  5. Customer experience. ...
  6. Global transactions. ...
  7. Customer support. ...
  8. Fraud detection.
Jul 20, 2023

Why do I need a merchant account and payment gateway? ›

To accept online card payments you need both.

A payment gateway so your business can collect card data, and a merchant account to receive the funds. You must have a business license to hold a merchant account, and set-up and operational fees will depend on your business, transaction volumes and risk.

How do I provide a payment gateway? ›

How to create a payment gateway
  1. Create your payment gateway infrastructure. You'll need a server to host your gateway, whether it's your own or via a third party. ...
  2. Choose a payment processor. ...
  3. Create a customer relationship management (CRM) system. ...
  4. Implement security features. ...
  5. Obtain required certifications.

How does a payment gateway make money? ›

Processing: The payment processor (who might also be your merchant bank) makes money by charging a fixed-rate fee every time you process a transaction — no matter whether it's a sale, a decline or return. Plus, it can charge fees for setup, monthly usage and even account cancellation.

What is an example of a merchant payment? ›

For example, a retailer selling a product to a customer. The customer uses a payment card for the purchase, the merchant service provider will move the customer's funds to that of the retailer. This can usually take up to 48 hours for these funds to be credited to the retailer's bank account.

Is PayPal a merchant gateway? ›

No, PayPal is not a traditional payment gateway, but it does offer a payment gateway solution (Payflow) as part of its overall payment processing solutions.

Is PayPal a merchant account? ›

What's the difference between PayPal and a merchant account? PayPal differs from merchant accounts because it functions primarily as a digital wallet, with all of your business accounts – whether composed of proceeds from credit card transactions or cash deposits for paying vendors – combined into a single account.

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