A payment gateway is the digital equivalent of a point-of-sale terminal. When you buy something online and enter your card details, the payment gateway securely captures that information, encrypts it, and routes it to the payment processor for authorization.
The process takes seconds but involves multiple parties: the payment gateway encrypts data and sends it to the acquiring bank, which forwards it to the card network (Visa/Mastercard), which contacts the issuing bank for approval. The response travels back the same path. All in under 3 seconds.
Major payment gateways include Stripe, PayPal, Razorpay, and Square. They charge merchants 1.5-3.5% per transaction. The global payment gateway market is worth over $30 billion and growing at 20%+ annually, driven by e-commerce growth and digital payment adoption.