A payment gateway is a technology that serves as an intermediary to securely capture, transmit, and authorize payment information between a customer and a merchant during a financial transaction, whether online or in physical stores. It is like a digital equivalent of a physical card reader or cash register, handling non-cash payments such as credit and debit cards, eChecks, and digital wallets like Apple Pay, Google Pay, PayPal, and others. The main functions of a payment gateway include:

• Securely reading and encrypting the customer's payment data to protect it from unauthorized access.
• Connecting the merchant’s website, app, or point-of-sale system to the payment processor and acquiring bank.
• Verifying the validity of the payment information and availability of funds with the issuing bank.
• Authorizing or declining the transaction and communicating the result back to both the merchant and customer.
• Supporting fraud detection measures such as address verification and card security code checks.
• Sometimes, facilitating currency conversions in international transactions.

While the payment gateway transmits and helps authorize the payment, the actual processing and settling of funds are done by the payment processor, which works behind the scenes to transfer money between the customer's and merchant’s banks. Popular payment gateways include services such as Stripe, Square, Authorize.net, and Adyen. They typically integrate with eCommerce platforms and provide layered security with encryption protocols and compliance with industry standards like PCI DSS to ensure safe transactions. In summary, a payment gateway is essential for enabling secure and smooth electronic payment transactions between customers and merchants, both online and in physical retail environments. It acts as a trusted bridge connecting customers’ payment methods with merchants’ bank accounts while protecting sensitive financial data throughout the process.