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What is Online Payment Gateway? Meaning, Types, Features & Benefits | Easebuzz

Features & updates - 30 Apr, 2025

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The rapid growth of online payments clearly shows how important payment gateways have become for businesses today.

A payment gateway is a service that securely processes your customers’ card transactions. It acts as a tool between your business and your customers, making sure every transaction is safe, quick, and hassle-free. By using a payment gateway, businesses can also minimise the risk of losses due to delayed payments.

In this article, we will guide you through everything you need to know about payment gateways — what they are, why they are so widely used, how online payments are processed through them, and the different methods available for integrating a payment gateway into your business.

What Is Payment Gateway?

A payment gateway is a digital platform that helps businesses accept and process payments securely through their websites or mobile apps. It enables transactions using credit cards, debit cards, UPI, mobile wallets, and many other digital payment methods.

The payment gateway uses front-end technology that captures payment details and securely sends the customer’s information to the merchant’s acquiring bank for further processing. It acts as a bridge between the customer and the bank, ensuring that every transaction is smooth, fast, and secure.

Today, payment gateways offer a wide range of payment options to businesses, such as credit and debit cards, net banking, Buy Now Pay Later (BNPL) services, cardless EMIs, debit/credit EMIs, one-click checkouts, payment links, UPI, and mobile wallets. They also support alternative payment methods, making it easier for businesses to offer flexible and convenient payment experiences to their customers.

In short, payment gateways are essential for any business looking to provide seamless digital payment options and enhance customer satisfaction.

How Do Online Payments Work with a Payment Gateway?

From a customer’s point of view, making an online payment seems quite simple – just a few clicks and the job is done! However, behind the scenes, there’s a lot more happening. Several key players are involved at different stages of the payment process, each playing an important role. Let’s understand who they are and what they do:

Payment Service Provider (PSP): Also called the payment processor, a payment service provider (PSP) is a third-party company that helps merchants accept online payments. They offer services like payment gateways, card issuing, fraud detection, risk management, acquiring bank services, and multiple global payment methods.
Merchant: This is the business or individual selling goods or services, either online, in-store, or both.
Customer (Cardholder): The individual who initiates the purchase by choosing and paying for the merchant’s goods or services.
Issuer (Issuing Bank): A bank or financial institution that issues debit or credit cards to customers on behalf of card networks like Visa or Mastercard. When a payment is made, the issuer checks if the customer’s account is valid and has enough balance and then authorises the transaction.
Acquirer (Acquiring Bank): The financial institution that processes card payments for merchants. It securely routes the payment details to the card networks and ensures the transaction is completed correctly.
Payment Gateway: The technology that securely captures and transfers payment data between the merchant, acquirer, issuer, and card networks. Once the transaction is approved, the payment gateway sends a confirmation to the merchant.
Card Schemes (Card Networks): These are the networks like UPI, Visa, Mastercard, American Express, and others that connect the acquirer and issuer to authorise card payments.

How a Payment Gateway Works and Processes Payments?

Now that we know the key players, let’s walk through how a payment gateway fits into the online payment process:

Initiating the Payment: The customer selects a product or service and enters their card details (name, card number, expiry date, CVV) on the payment page. Based on the merchant’s integration method – like a hosted payment page, server-to-server, or client-side encryption – this information is passed securely to the payment gateway.
Data Encryption and Fraud Check: The payment gateway encrypts the sensitive card information and runs fraud checks before forwarding it to the acquirer.
Routing Through Card Schemes: The acquirer then sends the payment details to the respective card network (like UPI, Visa or Mastercard), where additional fraud checks are conducted.
Authorisation by Issuer: The issuer bank reviews the transaction. They verify if the card is valid if the cardholder has sufficient funds, and if the transaction looks genuine. Based on these checks, the issuer sends an approval or decline message through the card network to the acquirer.
Final Response to the Merchant: The acquirer communicates the outcome to the payment gateway, which informs the merchant.
- If approved, the customer sees a confirmation page.
- If declined, the customer may be asked to try another payment method.
Settlement Process: Once the payment is approved, the acquirer collects the transaction amount from the issuer’s bank and temporarily holds it in the merchant’s account. The timing of the final settlement – when the funds are transferred to the merchant’s bank account – depends on the agreement between the merchant and their payment service provider.

In simple words, a payment gateway acts like a digital tool between the customer, merchant, banks, and card networks, ensuring every online payment is processed securely and smoothly!

How a Payment Gateway Can Help Your Business Grow?

Convenience for You and Your Customers:

Integrating a payment gateway allows your customers to shop whenever they like — whether it’s during business hours or late at night. It offers them complete freedom to make purchases at their convenience while you can continue running your business without worrying about missed sales. A win-win for everyone!
Faster and Hassle-Free Payments:

Getting customers to pay on time can often be a challenge. With a payment gateway, they can complete transactions instantly without the need for reminders or follow-ups. Quick payments mean improved cash flow for your business and a smoother experience for your customers.
Enhanced Security for Online Transactions:

Security is a top concern for customers when it comes to online payments. A payment gateway significantly reduces the risk of fraud through several measures:
- Customer card details are securely transmitted to the gateway, ensuring only the customer and their bank can access the information.
- Every payment gateway must comply with PCI DSS (Payment Card Industry Data Security Standard) guidelines, ensuring the highest level of security for transactions.
- Additional protection is provided through 3-D Secure, where customers create a password for their card, adding another layer of authentication for online purchases.

By choosing a reliable and trusted payment gateway, you not only offer a safe and smooth experience to your customers but also strengthen trust in your brand — leading to more business growth in the long run.

Why Payment Gateways Are So Important

In today’s world of online shopping, UPI apps, and tap-to-pay options, a payment gateway ensures that every transaction is:

Fast
Safe
Smooth

It keeps your personal and financial information protected while making the buying experience hassle-free.

Understanding Payment Gateway Technology

Encryption (HTTPS, PCI-DSS): Gateways use secure channels (HTTPS/SSL) to scramble card details in transit. They also follow PCI-DSS rules, which mandate strong encryption of all payment data.
Tokenisation: The gateway replaces your real card number with a random “token” for each transaction. The merchant never sees the actual number, so stolen tokens are useless.
Fraud detection: Gateways run multiple checks. They verify the billing address (AVS) and CVV, track the buyer’s IP/device, and use intelligent algorithms or device fingerprinting. These layers together help spot suspicious transactions.
3D Secure & Virtual Payment Address (VPA): For online card payments, banks often add 3D Secure (Verified-by-Rupay/Visa/Mastercard SecureCode), sending you an OTP or fingerprint prompt to confirm. UPI payments use a VPA (e.g. name@bank), so you never share card or account numbers.
Mobile wallets & APIs: Apps like Paytm, Amazon Pay, MobiKwik, PhonePe, and Google Pay connect via APIs. You can pay by scanning a QR or choosing a wallet. The gateway then talks to your bank/wallet app to complete the payment instantly.
More tech: Gateways support NFC (tap-to-pay) and even blockchain/crypto payments. Many wallets use biometrics (fingerprint/face) to unlock or confirm payments. These innovations add convenience and extra security.

Integrating a Payment Gateway into Your Website or App: A Step-by-Step Guide

Unlock secure, hassle-free payments for your customers with an easy-to-integrate payment gateway. Whether you’re running a website or a mobile app, integrating the right payment gateway is key to offering a smooth and reliable transaction experience. Here’s how to get started:

Step 1: Choose the Perfect Payment Gateway

Select a payment gateway that fits your business needs. Consider:

Transaction fees
Supported currencies
Payment methods (Credit/Debit Cards, UPI, Digital Wallets, etc.)

Popular options include Easebuzz, PayPal, Stripe, and more. Integrate with local banks for a tailored experience in specific regions.

Step 2: Set Up Your Merchant Account

Register with the payment gateway of your choice by providing your business details.
Get your API keys to securely link your website or app to the payment gateway.

Step 3: Integrate the Payment Gateway

For Websites: Embed the provided code into your checkout page.
For Mobile Apps: Use the gateway’s SDK or API to process payments securely within the app.

Pro Tip: Test everything in the sandbox environment before going live.

Step 4: Ensure Best Security

PCI DSS Compliance: Adhere to Payment Card Industry Data Security Standards to protect sensitive payment data.
Secure Coding: Implement strong security measures to keep your transactions safe and prevent data breaches.

Step 5: Go Live & Start Accepting Payments

Once you’ve tested and everything’s working smoothly, switch to live mode and start accepting real-time payments securely.

Why Choose Us?

Easy Integration: Simple steps to get your payment gateway up and running.
Secure Transactions: Robust security measures to protect both you and your customers.
User-Friendly Checkout: A smooth, intuitive payment experience for your customers.
Flexible Payment Options: Accept all primary payment methods, from cards to UPI.

Start accepting payments effortlessly and scale your business today with our easy payment gateway integration!

Ready to Integrate?
Get in touch with us to begin integrating your payment
gateway today!

Difference Between: Payment Gateway vs Payment Processor

Aspect	Payment Gateway	Payment Processor
What it does	A payment gateway is a digital tool that helps businesses accept payments online. It connects the merchant’s website to the customer’s bank and safely processes payment details for approval.	A payment processor handles the actual payment. It checks if the customer has enough money and transfers it to the business’s account.
Key functions	Encrypts payment information	Verifies payment method and customer balance
	Sends data to the bank or processor	Moves money from customer’s bank to the business’s bank
	Shows if the payment is approved or declined
Security	Uses encryption and fraud checks (like CVV and address verification) to keep transactions safe	Follows security rules like PCI DSS to protect cardholder data and ensure safe payment processing
Integration	Easy to connect with websites, mobile apps, or e-commerce stores using APIs or plugins	Mostly works in the background and connects with payment gateways or banks; not directly integrated by the business
Types	Hosted payment gateways (redirect to another page )	Bank-affiliated processors (like HDFC Bank, ICICI Bank, SBI Bank, Axis Bank)
	Self-hosted (collect data on your own website)	Third-party processors (like Easebuzz, Square, Stripe)
	API-based gateways
Business relationship	Works closely with businesses through website or app integrations, but doesn’t manage funds directly	Usually offers a merchant account and directly manages the flow of money between banks and businesses

In Simple:

Payment Gateway: This is the tool that securely transmits payment information and facilitates the authorisation of transactions.
Payment Processor: This is the service that processes the payment, including verifying, authorising, and settling funds between the involved parties.

For example, Easebuzz is the only player in India which offers both services as a payment processor and a payment gateway on a single platform. It seamlessly integrates both services, providing businesses with a comprehensive solution for handling and processing payments all in one place.

How Payment Gateways Help Businesses Cut Costs

Payment gateways play a crucial role in helping businesses cut costs by streamlining online payment processing, improving transaction efficiency, and offering lower fees for various payment methods. In India, payment gateways support local options like UPI, Net Banking, and Wallets, providing businesses with cost-effective solutions.

Streamlined and Automated Processes:

Payment gateways automate payment flows, reducing manual work and errors. This speeds up transactions, leading to faster checkouts and higher conversion rates. Integrated tools also simplify financial management by tracking payments and generating reports.
Cost-Effective Payment Options:

Local payment methods such as UPI and Net Banking come with lower transaction fees compared to credit cards, helping businesses save money. Additionally, volume-based pricing offers discounts for businesses with high transaction volumes, while international payment capabilities help reduce cross-border transaction fees.
Reduced Fraud and Chargebacks:

Payment gateways offer advanced security features like fraud detection and PCI compliance to protect against fraudulent transactions, reducing the risk of chargebacks and security breaches.
Improved Cash Flow:

Payment gateways speed up fund transfers and reduce payment delays, improving cash flow and making financial management more efficient.

By reducing manual effort, offering cost-effective payment methods, ensuring better security, and enhancing cash flow, payment gateways help businesses save money and boost efficiency.

Understanding Payment Gateway Charges

When running a business online—whether you’re an SME, a D2C brand, or an educational institution—payment gateway charges can add up quickly. High transaction fees often eat into your profit margins without you even realising it.

That’s where Easebuzz makes a real difference. With its affordable and transparent pricing, businesses can save more on every transaction compared to what other providers in the market charge.

What Are Payment Gateway Charges?

Every time a customer makes an online payment, the payment gateway deducts a transaction fee. This fee includes charges for processing, verification, security, and settlement.

Most payment gateways charge anywhere from 2% to even 5% per transaction, depending on the payment mode and business type. However, Easebuzz offers a much more cost-effective structure.

Payment Gateway Charges Comparison

Provider Type	Average Transaction Charges	Remarks
Easebuzz	1.50%	Transparent pricing with value-added services
Other Payment Gateways	2% – 5%	May vary based on payment method, industry, or volume

Why Choose Easebuzz?

Lower transaction charges: Average rate of just 1.5%, helping you save more
No hidden fees: What you see is what you pay
All-in-one platform: Combines payment gateway, processor, and smart APIs
Custom pricing options: Ideal for growing businesses and large institutions

Final Thoughts

In today’s digital-first world, businesses need more than just a payment gateway—they need a cost-efficient partner. With Easebuzz, you get the benefit of lower transaction charges, faster settlements, and complete control over your collections.

So why pay more elsewhere? - Make the smarter choice. Choose Easebuzz.

FAQ's

What is payment gateway API?

A Payment Gateway API is a software interface that allows online businesses to accept and process digital payments securely. It acts as a bridge between the merchant’s website or app and the payment processor. With this API, merchants can directly integrate payment features into their platforms, ensuring smooth, safe, and real-time transactions.

What is a payment gateway with an example?

A payment gateway is a secure online service that enables businesses to accept payments digitally—whether through cards, UPI, or wallets. It sends the customer’s payment information to the acquiring bank for processing. An example of a reliable payment gateway is Easebuzz, which supports e-commerce platforms, mobile apps, and even brick-and-mortar stores. Popular gateway types include redirect, offsite, and on-site integrations, giving businesses the flexibility they need.

Which payment gateway is best in India?

India has several trusted payment gateway providers. Among them, Easebuzz stands out as a top choice. It offers broad reach, seamless mobile app integration, and strong API and SDK support—making it ideal for SaaS businesses. Easebuzz also supports international transactions, has built-in fraud protection, and is an RBI-approved online payment aggregator.

Which type of e-Commerce is payment gateway?

Payment gateways are essential for both online and offline businesses. Whether you’re running an e-commerce store or a physical retail outlet, a payment gateway helps process credit card and digital payments. It ensures secure transactions between the buyer and the seller.

How to get payment gateway?

Getting a payment gateway for your business is a simple process. First, choose a trusted provider like Easebuzz. Then, sign up, create a merchant account, and obtain API credentials. Once you have them, integrate the payment gateway into your website or app. Easebuzz supports over 150+ payment modes, including UPI, credit/debit cards, wallets, and net banking.

How payment gateway work?

A payment gateway securely handles the entire online payment process. When a customer enters their payment details, the gateway encrypts the information and performs fraud checks. It then forwards the data to the merchant’s acquiring bank, which processes the transaction with the customer’s issuing bank. The result? A secure, fast, and smooth payment experience for both merchants and customers.

What is payment gateway charges?

Payment gateway charges are the fees that merchants pay to use the payment service. These typically include a percentage of each transaction and may also cover setup, monthly maintenance, or chargeback fees. For example, Easebuzz charges a small fee for enabling secure digital payments via its gateway on websites or mobile apps.

What are payment gateway fees?

Payment gateway fees are charges that payment service providers apply for processing online transactions. These fees are typically a percentage of the total transaction amount, and they cover the cost of securely transferring funds from the customer to the business.

How often are payment gateway fees charged?

Payment gateway fees are generally charged on a per-transaction basis. Each time a payment is processed, the service provider applies the fee, ensuring seamless transaction processing.

What is the average payment gateway fee in India?

In India, payment gateways typically charge between 1.5% and 5% per transaction. This can add up, especially for businesses processing large volumes of payments.

How does Easebuzz stand out in terms of payment gateway fees?

Easebuzz offers one of the lowest transaction fees in India, with an average of just 1.5%. This allows businesses to save on processing costs and maximize profitability. Ready to get started with cost-effective payments? Sign up with Easebuzz today to lower your transaction fees!