A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit/debit card, e-wallet, online banking transferring or direct payments processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. The payment gateway may be provided by a bank to its customers, but can be provided by a specialised financial service provider as a separate service, such as a payment service provider.

A payment gateway facilitates a payment transaction by the transfer of information between a payment portal (such as a website, mobile phone or interactive voice response service) and the front end processor or acquiring bank.

Merchant (business owner) integrate their payment portals (online store/ shopping cart/ mobile apps) with payment gateway. Hence, the payment portals are now ready and able to receive payments for purchases.

A customer makes an order on the online store & offline store/ shopping cart/ mobile apps. This is either using the checkout button or by making a purchase using the payment form.

With Payment Gateway, the purchasing data from the merchant site will be transferred to the routing/ issuing bank.

Then, either the transaction is approved or declined (depending on the customer bank account status), the status of the purchasing data will be sent to the merchant to acknowledge.

The bank will then settle the money from the customer to the payment gateway and payment gateway will settle the money to the merchant.