Payment Gateways 101

This is a guest post by FeeFighters’ Stella Fayman.

If you’re in ecommerce, “payment gateway” is a phrase you’ve most likely heard before. Yet many business owners have no clue what the word “gateway” actually means. Read below to get the answers to the most common questions about gateways.

What is a gateway?

A gateway is a piece of hosted software (software as a service) that sits between your ecommerce site’s shopping cart (or POS system if you have a physical shop) and the merchant account provider.

The gateway’s main function is to accept your transaction data, clean it up, and pass it along in the proper format to the merchant account provider. Gateways provide additional functionality such as storing a record of the transaction, providing an interface for browsing and modifying transactions, filtering transactions for fraud and generating reports.

Do you need a gateway?

If you plan to accept payments via credit card online and you’re not using a third party processor (like PayPal or Google Checkout) then yes. Third-party processors have the gateway automatically built into their service.

Which gateway should you get?

Depends on who you ask. Be wary. Often, merchant account providers will recommend certain gateways to merchants because they get a commission on the sale instead of really seeing which gateway best suits the merchant’s needs. The most widely used gateways are Authorize.net, First Data Global Gateway, Chase Orbital and Cybersource.

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Keep in mind that merchant account providers will need to help you get set up with a gateway, but they are flexible and can usually work with any number of different options.

Is there any reason why you shouldn’t just get Authorize.net?

Probably not. Unless you have specific technical specifications, gateways all perform the same basic function so there’s usually no need to get a more complicated and expensive gateway.

To learn more, check out the FeeFighters blog, where there is a ton of information about credit card processing.

FeeFighters.com is the comparison shopping site for credit card processors. Just like getting multiple quotes for airfare using Expedia, FeeFighters lets business owners compare top quality processors on an apples-to-apples basis. If you have any questions, feel free to email Stella at stella (AT) feefighters (DOT) com.