How payment gateways work for online stores

Here is how a payment gateway works for an online store: when a customer pays, the gateway securely collects their card or wallet details, sends the request through the card network to the customer's bank for approval, tells your store whether the payment was approved, and later arranges for the money to be paid into your account. Several organisations take part in each payment, and each may charge a fee. Understanding who does what helps you choose a gateway and read its pricing with confidence.

A payment gateway is the service that connects your online store to the card payment system. Many providers combine the gateway with other services, so the names can be confusing. This guide explains the journey of a payment in plain terms. If you are setting up or improving an online store, our e-commerce service page explains how we work.

How a payment gateway works: the journey of an online payment

A card payment in an online store usually follows these steps, most of which happen in a few seconds:

1. The customer enters payment details. This happens on a payment page or form provided by the gateway, either on the gateway's own page or embedded in your checkout.
2. The gateway sends the request. It passes the payment details securely to the processor, which forwards them through the card network.
3. The card network routes the request. Card networks are the companies behind the card brands. They connect the store's side of the payment to the customer's bank.
4. The customer's bank decides. The bank that issued the card, called the issuer, checks the card, the available funds and fraud signals, and may ask the customer to verify the payment.
5. The answer comes back. The approval or decline travels back the same way, and the gateway tells your store the result.
6. Your store confirms the order. If approved, the order is confirmed and the customer sees a confirmation page.
7. The money is settled later. Approved payments are grouped and the funds move through the system to your account, usually after a delay.

The customer's verification step is often a check from their bank, such as a code sent to their phone or approval in their banking app. This uses standards such as EMV 3-D Secure, which helps card issuers and merchants reduce fraud in online payments.

Gateway, processor and merchant account

These three terms are often mixed up, partly because many providers offer all of them together.

• Payment gateway. The technology that captures payment details from your website or app and passes them on securely. It is the part your developer connects to.
• Payment processor. The service that moves the payment information between the gateway, the card networks and the banks involved.
• Merchant account. An account that lets a business accept card payments. The bank or provider behind it is often called the acquirer, because it acquires the payments on your behalf before paying them out to your business bank account.

Some providers offer all three as one service and handle the underlying accounts for you. Others expect you to have a merchant account with a bank and connect a separate gateway to it. Both models work; they differ in setup effort, pricing and flexibility. When comparing providers, ask which parts they provide and which you need to arrange yourself.

Card data security matters at every step. The PCI Data Security Standard (PCI DSS) sets security requirements for any business that accepts cards. Using a gateway's hosted payment page or embedded form keeps card details off your own server, which usually reduces how much of the standard applies to you. Your provider can explain your obligations for your checkout type.

Authorisation, capture and settlement

A card payment happens in stages, and knowing them helps you understand what you see in your store and your gateway dashboard.

Authorisation

Authorisation is the bank's approval. It confirms the card is valid and reserves the amount on the customer's card. No money has moved to you yet. An authorisation does not last forever; how long it stays valid depends on the card network and your provider.

Capture

Capture tells the gateway to collect the authorised amount. Many stores capture immediately at checkout. Others authorise first and capture later, for example when an order ships or when a supplier confirms a booking. If the order is cancelled before capture, the authorisation can be released without a refund.

Settlement

Settlement is when the money actually moves. Captured payments are grouped, the parties involved take their fees, and the remaining funds are paid out to your account. This is why money usually arrives in your bank account some time after the sale.

Refunds and disputes

A refund returns money to the customer through the same system. A dispute, often called a chargeback, happens when the customer asks their bank to reverse a payment. The bank reviews the case, and the amount may be taken back from you while it does. Keeping clear order records and customer communication helps you respond.

Fees and payout timing

Payment fees vary widely between providers and countries, so we will not list figures here. Instead, understand the types of charges you might see:

1. Transaction fees. A charge on each successful payment, often a percentage of the amount, a fixed amount, or both.
2. Different rates for different cards. International cards, business cards or certain payment methods may cost more.
3. Currency conversion. If you accept payments in one currency and are paid out in another, conversion costs may apply.
4. Refund and dispute fees. Some providers charge for processing refunds or handling chargebacks.
5. Monthly or setup fees. Some pricing plans include fixed monthly charges or one-time setup costs.
6. Payout timing. Providers pay out on a schedule, and new accounts may have longer delays or a reserve held back while the provider builds trust in your business.

Ask each provider for a full fee schedule and payout terms, and model them against your expected sales, average order value and refund rate.

Choosing a gateway for your market

The best gateway for your store depends on where your customers are, how they like to pay and what your platform supports.

1. Check availability in your country. Providers are not available everywhere, and some only support businesses registered in certain countries.
2. Match local payment methods. Customers in different markets prefer different methods, such as local cards, wallets or bank transfers. Offer what your customers trust.
3. Check currency support. If you sell internationally, check which currencies you can charge in and be paid out in.
4. Check platform integration. Make sure the gateway works well with your e-commerce platform or custom application, including refunds and order status updates.
5. Look for webhooks. A webhook is a message the gateway sends to your store when a payment changes, such as when it succeeds or is refunded. Reliable webhooks keep order statuses accurate.
6. Review fraud tools. Check what fraud screening and customer verification the provider offers.
7. Consider support and reporting. Clear reports and responsive support make reconciliation and problem-solving much easier.

Once you have chosen a gateway, the way it is connected matters. Our guide on how to integrate a payment gateway into a Laravel app covers the technical side, our guide to why orders get stuck on pending explains the role of webhooks, and our guide to taking payments on a travel booking website covers the extra challenges in travel.

Many gateways offer a hosted payment page, an embedded checkout or both, and our comparison of hosted payment pages and embedded checkouts explains the choice.

Summary

• A gateway collects payment details securely and passes them through the card network to the customer's bank.
• The gateway, processor and merchant account are different roles, though one provider may offer all three.
• Payments are authorised, captured and later settled, which is why money arrives after the sale.
• Fees include transaction, card type, currency, refund and fixed charges, with varying payout schedules.
• Choose a gateway that fits your country, customers' payment methods, currencies and platform.

A clear understanding of payments makes choosing a provider and reading its pricing much easier. If you're setting up payments for an online store, you can tell us about it here.