A payment gateway is a technology service that transmits transaction data securely from a merchant to the payment processor or acquirer. In e-commerce and other card-not-present environments, the gateway acts as the digital counterpart to a physical point-of-sale terminal-facilitating the capture and encryption of payment details and forwarding them for authorization.

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Key Functions of a Payment Gateway:

• Captures cardholder data via online checkout or point-of-sale interfaces
  
• Encrypts and securely transmits payment information to the processor
  
• Routes authorization requests and responses between merchant and acquirer
  
• May include fraud detection tools, tokenization, and 3D Secure support
  
• Ensures PCI DSS compliance for data security during transmission

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While some companies combine gateway, processing, and acquiring services, others offer standalone gateway solutions that must be integrated with a separate acquirer or PSP.

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Risk and Compliance Considerations:

• Does not perform underwriting or assume financial liability for merchants
  
• Plays a critical role in data protection, secure connectivity, and fraud prevention features
  
• Often certified to PCI DSS standards and equipped with tools to reduce the risk of compromised card data

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Merchants need a payment gateway to accept online payments unless they build a direct integration with a processor’s API, which is typically more complex and less common among small or mid-sized businesses.

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In summary, a gateway is the secure bridge between a merchant’s payment front-end and the back-end transaction processing system, enabling real-time communication, encryption, and routing of payment data across the card network infrastructure.

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