What is a Payment Gateway?

Angela HudginsCredit Card Processing/ Merchant Services, UncategorizedLeave a Comment

Payment Processing Gateway

A payment gateway connects the interface device used by a consumer to the merchant’s payment processor. That processor sends the transaction to a processing bank which authorizes the consumer’s credit card payment and sends it back to the processor, who deposits the credit into the merchant’s bank account. Examples of interface devices are credit card terminals, virtual terminals, POS software systems, E-commerce sites, and mobile phone apps that can process credit cards.

Some merchant processors have developed their own gateways. They are seamless to the merchant. Square, Stripe, and PayPal have also developed their own gateways.

Authorize.net is an agnostic gateway that allows any merchant processor to connect with it. Many POS software systems have developed interface coding to enable their clients to choose any merchant processor to integrate via Authorize.net to their software. Many processors also allow merchants to choose their processing services via the Authorize.net gateway. Many shopping carts used on E-commerce sites also integrate with Authorize.net.

Sometimes merchants get confused and think that Authorize.net is a processor, but it is not. They get confused because Square, PayPal, and Stripe are credit card processors who have their own gateway. As a result, some people use the terms interchangeably. And because some merchant processors have their own gateways, merchants are unaware that they are using their processor’s proprietary gateway. Since Authorize.net naturally charges fees to earn money for their services, the processor charges an extra fee for the merchant to connect to Authorize.net instead of connecting to their proprietary gateway.

Many web designers create sites that take E-commerce payments. They know that Authorize.net is agnostic, so they tend to tell their clients to ask their processor if they can use the Authorize.net gateway. It is too complicated for them to memorize which shopping carts are compatible with which gateways, so the default is Authorize.net. However, if the merchant is savvy, he can do the research himself with his own processor to find out if the shopping cart used by his website designer will connect to the processor’s proprietary gateway. That will save the merchant some extra fees.

Some merchants also get confused and think they need a gateway when they really want a virtual terminal, an e-commerce site, or a mobile app. Contact us or call us at 505-362-0837.. We take the confusion out of merchant services and the rates and fees!