A payment gateway is a technology used by merchants to accept debit or credit card purchases from customers. It acts as a bridge between a website’s checkout system and the financial institutions involved in the transaction. When a customer enters their payment details, the gateway securely encrypts and transmits this information to the payment processor or acquiring bank. The processor then communicates with the customer’s issuing bank to verify and authorize the transaction.

Once approved, the payment gateway sends a confirmation back to the website, allowing the transaction to be completed. If declined, it notifies the merchant and customer accordingly. Payment gateways also help detect and prevent fraud by using various security protocols such as SSL encryption and tokenization.

They are essential for e-commerce businesses, enabling smooth, secure, and efficient online transactions. Popular examples include PayPal, Stripe, and Square. By handling sensitive financial data, payment gateways ensure trust and compliance with industry standards like PCI DSS.