The payment gateway is a secure financial service that can route the funds from a businesses check and credit card transaction or sale to the same businesses bank account - my words.
In more depth? the payment gateway facilitates the transfer of payment information between the payment interface (retail terminal, website shopping cart, virtual terminal, etc.), the card associations (Visa, MasterCard, Amex, Discover), the card issuing bank for authorization of the payment transaction and finally - the merchant bank, for funding!
The payment gateway encrypts data for security (PCI DSS) and check card validity (provide authorization for the transaction). This activity is seamless or invisible to the merchant and customer and remarkably takes place in just seconds.
Gateways today come with real time reporting on credit card transactions visible through a web portal by the merchant. Most include shopping carts and virtual terminals or are compatible with popular shopping cart packages and softwares.
A payment gateway can be used in retail store processing, internet credit card processing and many other types of processing.
In ecommerce or internet credit card processing for example, payment data is forwarded to the payment gateway via your websites shopping cart and a secure (SSL) connection. The payment gateway facilitates seamless, fast, credit card transactions and in the end, merchant funding (money in the bank). The time from sale or transaction processing, to authorization and batching out (product shipped) to merchant funding is typically 2-3 days.
There are a quite a few payment gateways for merchants to choose from such as Authorize.net, Sage, eprocessing network and more, each with unique features, capabilities, add-ons and costs, so sorting through which one is best for your business requires research or professional advice.
The payment gateway is just one piece in a complete credit card processing solution.
It's easy to see how complete merchant solutions for processing electronic payments i.e. coordinating your best options with best business practices by connecting a variety of virtual services such as financial (payment gateways, ach processing, merchant accounts) and telecom (landline and cell phone service) to hardware or equipment, softwares and websites, to banks (several in one transaction!)for secure transfer of electronic funds (think Star Trek) with seamless security and speed - might seem tricky, even overwhelming.