Online purchases are like a magic trick.
Imagine a customer scrolling through their favorite digital store, adding items to their cart as they go, and finally heading to the checkout page.
After they enter their card details and hit “Buy Now,” within seconds, they receive a confirmation email: purchase complete.
In any other century, this transaction would be viewed in disbelief. And while the entire process is nothing short of amazing, the real magic occurs in one overlooked moment: the milliseconds after clicking “Buy Now.”
Want to know what’s happening behind the scenes? You came to the right place.
In this article , we’ll show you the invisible machinery behind gateway credit card processing.
Along the way, we will introduce key players in each transaction, including the payment gateway, the payment processor, the merchant account, and the banks that make the magic happen.
Let’s dive in.
What Is a Payment Gateway?
If an online transaction were a house, the payment gateway would be the front door.
When a customer knocks—when they click the “Buy Now” button—their financial data and billing info gets scanned. Depending on the results, they’re either welcomed into the house or turned away.
Therefore, while the payment gateway is the most customer-facing element in the transaction process, it also represents the first line of defense for online businesses.
For both parties, privacy is paramount. That’s why gateway credit card processing encrypts sensitive data through “tokenization,” which swaps real card data for a unique, one-time code.
That’s how payment processors stay PCI-DSS compliant, while keeping hackers from abusing personal information (even if they manage to breach a system).
So, what is a payment gateway? It’s the start of a transaction that comes in three forms:
Hosted Gateways
Hosted gateways redirect customers to a third-party page (like your bank’s secure site) to enter payment details.
While hosted gateways are highly secure and PCI-compliant, they often appear less branded and connected to your site. After all, you’re sending customers away from your page to complete the transaction.
If branding is important to your business, hosted gateways might not be the answer.
Self-Hosted Gateways
Want to keep shoppers on your page? Self-hosted gateways can help you achieve that while providing maximum control over the aesthetic and user interface (UI).
However, there’s one major drawback.
With self-hosted gateways, you will be solely responsible for establishing your page’s security setup and PCI compliance.
API Gateways
Application programming interfaces (APIs) offer a compelling (and custom) alternative.
For tech-savvy business owners, API gateways integrate directly into your backend code. This makes APIs ideal for creating a more branded experience.
However, keep in mind that leveraging API gateways on your own will require significant development time and skill. Minor mistakes and lack of maintenance can be costly, as a glitchy gateway will quickly drive away shoppers.
That’s why UniTeller offers gateway API solutions via turnkey implementation and seamless brand alignment. With our integrations, you can skip lengthy development and compliance processes to launch your platform and stay ahead of the competition.
What Is a Payment Processor?
If the gateway is the door, the payment processor is the general manager in the lobby.
They’re the central hub that orchestrates payment transactions from A to Z.
Here’s how it works: once the gateway hands off the customer’s data, the processor pings the card networks (i.e., Visa, Mastercard) and dialogues with the banks for approval.
Along the way, the payment processor verifies funds, flags potential fraud—like unusual purchase patterns—and double checks the card’s CVV and on-file address.
Once everything is approved, the processor works to ensure that the money successfully transfers from the customer’s bank to the merchant’s bank.
This begs the question: can one entity be involved at so many important touchpoints? Because the payment processor operates like a multilingual translator, bridging disparate systems in milliseconds.
At UniTeller, we speak the language of global payments.
As a payment processor, we established one of the fastest (and most reliable) networks on the market. Through our state-of-the-art framework, businesses can send and collect payments in real-time to 120+ countries and 80+ currencies.
What Is a Merchant Account?
Picture a high-tech holding bay in a digital warehouse—that’s a merchant account.
It’s the place where incoming funds temporarily dock before being shipped to your main operating account. Merchant accounts are the neutral territory of a transaction, where the money lingers until final approvals are complete.
Generally speaking, it takes one to three business days for funds to settle. Though this may seem like a bit of a wait, this buffer zone gives banks ample time to reconcile while shielding merchants from chargebacks.
Note: unlike your everyday checking account, a merchant account is designed specifically for gateway credit card processing.
Issuing and Acquiring Banks
It’s time to introduce the unsung heroes of online payments: the banks.
The issuing bank—working on behalf of your customer—makes a key early check. Once the “Buy Now” button is clicked, it verifies available funds or credit to authorize the purchase.
Once the transaction is approved, the acquiring bank—operating on behalf of your business—prepares for the next phase.
It then coordinates with the card networks to pull the approved funds from the issuing bank and deposit them into your merchant account.
Taken in unison, the issuing and acquiring banks form the financial backbone of every online purchase.
The Complete Gateway Credit Card Processing Workflow
Thus far, this article has explored the fine print of online payments. The secret is out: reading this piece takes far longer than the actual process we’re describing.
After all, it often unfolds in five seconds or less.
We’ve already met the cast—now, let’s watch the show. To summarize the workflow, here’s a step-by-step breakdown of gateway credit card processing:
1. Customer Initiates the Payment
Your customer had a need, and you answered the call.
They clicked on your goods and services, selected a few items, entered their card details on your website or mobile app, and hit “Buy Now.”
The transaction has begun.
2. Payment Gateway Encrypts and Transmits Data
“Buy Now” initiates step two: when the payment gateway encrypts the customer’s data.
By tokenizing the most sensitive information, the gateway can safely forward the package to the payment processor.
Security is the name of the game.
3. Payment Processor Communicates With the Banks
Enter the director of the show: the payment processor.
Upon receiving the package, the processor decodes the request, routes it through the card networks, and contacts the issuing bank for a funds check.
Then, the payment processor waits for the signal…
4. Authorization Is Approved or Declined
Now, the issuing bank responds.
If approved? The processor relays the green light through the chain of command.
If declined? The gateway notifies the customer with the gentle suggestion, “Try Again.”
Either way, the issuing bank responds instantly.
5. Payment Is Settled
The finish line is near.
Once approval is secured, the acquiring bank pulls funds from the issuer and parks them in your merchant account. DING! Confirmation reaches your customer, and the transaction is officially complete.
Within one to three business days, the final payment will settle in your main business account.
UniTeller: Global Payments Redefined
Payment processing isn’t just what we do.
It’s who we are.
For over 30 years, UniTeller has connected families and businesses worldwide. Today, that legacy powers fast and frictionless cross-border payments, spanning 120+ countries and 80+ currencies.
With a single API integration, UniTeller can equip your business with real-time access to a global payment gateway. Plus, our white-label solutions will enable you to craft a branded checkout experience that feels effortlessly yours.
Move money around the world in real-time. Find out how UniTeller can boost your business.
