What is a payment gateway?

Point of Sale (POS) Glossary

A payment gateway provides authorization codes when a customer’s credit, debit, or other electronic payment is processed at a point of sale register or via online purchase. Alternatively, it will decline methods that are not valid, such as counterfeit, expired, or insufficient funds. Temporary authorizations do not guarantee the transaction will complete

POS sale software, a terminal or gateway stores the authorization codes and later sends them to a credit card processor. A payment gateway determines if the payment method is valid at the transaction time and is necessary for electronic payment processing.

Once the credit card processor receives the authorization codes generated from the gateway, the processor will attempt to settle the transaction. If successful, funds will be transferred from a customer’s bank to the merchant’s account.