A payment gateway is a piece of technology that securely processes online, in-app, and card-not-present credit and debit card transactions by capturing, storing, and passing tokenized card information from the customer to the acquirer. It notifies the merchant whether their payment has been accepted or declined, serving as an intermediary between the customer and the merchant. Once approved, funds are taken from the customer’s account and deposited into the merchant’s bank account. The payment gateway ensures data security by encrypting sensitive payment information before relaying it to the acquirer and issuer, following strict PCI-DSS compliance standards.
While card-present transactions taken in-person may utilize a point-of-sale (POS) system to secure sensitive data, eCommerce sales require a payment gateway to do so. And with eCommerce sales expected to comprise 24% of retail by 2026, you’ll neglect an increasingly large portion of the consumer market if you don’t offer your products for purchase online.[1]
Offering online shopping options is practically a prerequisite for success in today’s market. And what’s a prerequisite for ensuring secure online shopping payment processing? That’s right—a payment gateway.
In addition to safeguarding online transactions, payment gateways grant you access to a virtual terminal through which you can input credit card information received from customers via mail order or telephone (MOTO), email, invoice, or other appropriate means. And in the event your in-store card reader is unable to read your customer’s card, you can troubleshoot by keying their card data into your virtual terminal.
Payment gateways are literally responsible for safeguarding sensitive financial information during payment processing. So, yeah, they’re secure. In fact, to showcase the technological lengths gateways go to for security’s sake, let’s review the protocols most frequently utilized by payment gateways.
PCI DSS-Compliant Gateways
The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards that entities associated with payment processing must meet. This includes payment gateways. Before partnering with a provider, confirm that they’re PCI compliant. You should also inquire about how they, as your provider, can help your business achieve and maintain PCI compliance.
Data Encryption
Data encryption is the practice of converting data from readable plaintext into encoded ciphertext. This encoded text can only be decrypted by a user with the encryption key. And because the data is unreadable to parties without the encryption key, this security measure deters malicious actors from stealing cardholder information.
Secure Electronic Transaction (SET)
Secure Electronic Transaction (SET) is a protocol that ensures the protection of sensitive cardholder information during transmission via electronic portals online. By utilizing encryption and hashing practices, SET prevents hackers and other malicious actors, and even merchants themselves, from accessing customers’ cardholder data during transmission.
Tokenization
Credit card tokenization replaces sensitive card data with non-sensitive tokens. The sensitive data is stored and only accessible through a tokenized mapping system. This means the original data is completely inaccessible without the tokenized system’s separately stored data. As a result, a security breach of tokenized data does not compromise sensitive data.
Secure Socket Layer (SSL)
Secure Socket Layer (SSL) technology protects the connections between web servers and web browsers, as the internet itself is an insecure network. Providing privacy to internet communications, SSL encrypts the link between servers and browsers ensuring the data passed between them remains secure.
Originally introduced by Netscape in 1995 as a method to secure online transactions between businesses and consumers, SSL evolved into Transport Layer Security (TLS). If your payment gateway indicates that they utilize TLS, this provides the same protective services as SSL.