Definition
A payment gateway is the service that securely captures a customer's card or bank details online and passes them to the payment networks for authorization. It is the online equivalent of a card terminal. Gateways let businesses accept payments on websites, checkout pages, and invoice payment links.
Also called: Payment processor, Online payment gateway
Payment gateway in practice
Strictly, the gateway transmits payment data, the processor moves the transaction through the card networks, and the merchant account holds the funds before they reach your bank. Many modern providers bundle all three, so business owners often use "payment gateway" and "payment processor" interchangeably.
Connecting a gateway to your invoicing tool adds a "Pay now" button to each invoice. Clients pay by card or bank transfer in a few clicks, the invoice is marked paid automatically, and you avoid chasing checks.
Compare gateways on fees, payout speed, supported currencies and payment methods, chargeback handling, and how cleanly they integrate with your invoicing and accounting software.
Example
A tutoring business connects a payment gateway to its invoices. Parents click "Pay now" on the emailed invoice, pay by card, and the business receives the money, minus fees, two business days later.
Frequently Asked Questions
Do I need a payment gateway to send invoices?
No, but it helps. Without one, clients pay by bank transfer or check using the details on the invoice. With one, they can pay by card or bank online, which usually gets you paid faster.
Is a payment gateway the same as a merchant account?
Not exactly. The gateway sends payment data for authorization. The merchant account is where card funds are settled before they reach your bank. Many providers combine both.
Related terms
- Merchant account A merchant account is a type of business bank account that lets a business accept card payments.
- Payment processing fee A payment processing fee is the charge a business pays to accept a card or online payment, usually a percentage of the amount plus a small fixed fee per transaction.
- Payment link A payment link is a URL that opens a secure page where a client can pay a specific invoice or amount online by card, bank transfer, or digital wallet.
- Chargeback A chargeback is the reversal of a card payment initiated by the cardholder's bank after the customer disputes the charge.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.