What Is a Payment Gateway?

Where the gateway fits
Gateway, processor and merchant account

A payment gateway is the technology at checkout that takes a customer's payment details and passes them on, so the payment can be approved and the money moved. A Federal Reserve staff note describes it this way: "A payment gateway is the transaction processing technology that captures, stores, and transmits payment information from the customer to the merchant." The gateway is one part of a chain that also includes the processor, your merchant account and the banks on each side.

Billed publishes this page. The sources below are a Federal Reserve FEDS Note, the FFIEC IT Examination Handbook glossary, and the PCI Security Standards Council, all opened on October 30, 2026. The banking terms are US terms. Fees vary by provider, so check your own agreement.

Where the gateway fits

The FEDS Note Offline Payments: Implications for Reliability and Resiliency in Digital Payment Systems (August 16, 2024) gives the definition quoted above. FEDS Notes carry the authors' own views, not necessarily those of the Federal Reserve Board.

When a customer pays online, the payment moves through these steps:

The gateway captures the card details at checkout and sends them on.
Authorization: the customer's card-issuing bank approves or declines the transaction for the amount charged.
Settlement: the customer's card issuer receives the details of the sale, and the merchant receives the money.

The gateway is the first step in that chain. The approval comes from the customer's bank, and the money reaches you through settlement.

Gateway, processor and merchant account

Payment gateway: the technology that captures and sends the payment details, as the FEDS Note describes.
Merchant acquirer: the FFIEC IT Examination Handbook glossary (US) defines merchant acquirers as "Bankcard association members that initiate and maintain contractual agreements with merchants for the purpose of accepting and processing bankcard transactions."
Merchant account: the account your card payments settle into. See what is a merchant account.

A payment provider may offer all three together or only one part, so ask which parts it covers before you sign up. For the full flow, see what is payment processing.

Hosted and integrated checkouts

Hosted checkout: the customer is sent to a payment page run by the payment provider, enters their card details there, and comes back to your site or invoice.
Integrated checkout: the card fields sit on your own website or app, and your developer connects them to the provider.

A hosted checkout means card details are entered on the provider's page rather than yours. An integrated checkout gives you more control over the page's design but takes development work. Either way, ask your provider which security requirements apply to your setup. If you're building your own integration, see how to get your Stripe API key and how to get your PayPal API signature.

Card data security

The PCI Security Standards Council's standards page says: "The PCI DSS defines security requirements to protect environments where payment account data is stored, processed, or transmitted." Whatever gateway you use, don't copy card numbers into email, chat, spreadsheets or support tickets, and give staff access only to what they need.

Worked example: fees on one card payment

The business and figures here are a sample, and the fee rates are invented for this example. They aren't real or recommended rates.

A consultant's client pays a $250.00 invoice by card. The consultant's provider charges an invented processing fee of 2.6% + $0.15 per transaction, plus an invented separate gateway fee of $0.10 per transaction.

Percentage fee: $250.00 × 2.6% = $6.50.
Fixed processing fee: $0.15.
Gateway fee: $0.10.
Total fees: $6.50 + $0.15 + $0.10 = $6.75.
Received: $250.00 − $6.75 = $243.25.
Fees as a share of the payment: $6.75 ÷ $250.00 = 2.7%.

If your provider includes the gateway in its processing fee, there's no separate gateway line. Compare the total you'd pay on the same payment, not each fee on its own. See how to reduce payment processing fees.

Where Billed fits

Billed's invoice software page says: "Connect your Stripe account and every invoice you send gets a pay button, so clients can pay by card. Connect PayPal to add a PayPal option as well." Billed's accept payments page says "Billed integrates with Stripe to enable online payments on invoices," and Billed's integrations page says "Billed connects to payment processors and thousands of apps through Zapier."

Billed's accept payments, invoice software, features, integrations and recurring invoices pages don't describe Billed acting as a payment gateway. They describe connecting your own Stripe or PayPal account so clients can pay invoices online. For payment terms on those invoices, see invoice payment terms explained.

When this guide isn't for you

This guide is for small businesses in the US that take card payments online or on invoices. If you're building a payment platform, process very large volumes or operate outside the US, you'll need specialist advice. For more, see how to accept online payments, how to accept credit card payments, international payment methods, the guide to mobile payments, mobile payment statistics, cash flow management and expense tracking for small business.

Frequently Asked Questions

What does a payment gateway do?

It captures a customer's payment details at checkout and sends them on so the payment can be approved and settled. A Federal Reserve staff note says: "A payment gateway is the transaction processing technology that captures, stores, and transmits payment information from the customer to the merchant."

What is the difference between a payment gateway and a merchant account?

The gateway is the technology that captures and sends the payment details. A merchant account is the account the payment settles into.

What is the difference between hosted and integrated checkouts?

With a hosted checkout, the customer enters card details on a page run by the payment provider. With an integrated checkout, the card fields sit on your own website or app. Ask your provider which security requirements apply to each.

How are payment gateway fees charged?

It depends on the provider. A gateway fee may be charged separately per transaction or included in the processing fee. In the sample on this page, invented fees of 2.6% + $0.15 plus a $0.10 gateway fee come to $6.75 on a $250.00 payment.

Is Billed a payment gateway?

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