Payments
What is a payment gateway and how does it work?


When you start doing research into launching an ecommerce store, one important term that will definitely appear on your radar is payment gateway. While often overlooked by merchants setting up their first online store, it’s an extremely important component that enables online shoppers to pay you on your website. So without a payment gateway, your online store would literally just be a catalogue of products lacking the ability to receive payments. Which isn’t particularly useful to your business or your customers. 

What is a payment gateway?

At its core, a payment gateway is the technology that enables merchants to accept payments from their customers. This is accomplished by acting as the link between your website and the payment provider or customer through which the secure payment data flows through. This includes point-of-sale terminals such as card machines and QR codes that can be scanned via smartphone apps like Masterpass, Zapper and SnapScan in physical brick-and-mortar stores, as well as payment processing portals that receive and process payments made online, such as on ecommerce marketplaces and online stores. 

The infographic below demonstrates the role of a traditional payment gateway in an ecommerce scenario. 

what is a payment gateway PayFast diagram

Around the world there are a few recognisable payment service providers that act as a payment gateway for their merchants. In South Africa, PayFast is a popular online payment solution that processes payments on behalf of more than 80,000 merchants.  

How does a payment gateway work?

Although the term payment gateway specifically refers to the technology that sends the payment data to the merchant acquiring bank, it’s generally used as an overarching term that includes payment solution, payment platform, payment aggregator and payment facilitator.

The process of how a payment gateway works, specifically a payment aggregator as in the case of PayFast, can be simplified to the following steps:

  1. An online shopper adds an item to their shopping cart on your website.

  2. When they are ready to complete the purchase, they go to the checkout page where they add all their delivery details and select to make a payment.

  3. Customers are redirected to the secure PayFast payment engine where they can select their preferred payment method and follow the steps. 

  4. PayFast processes the payment and notifies your ecommerce platform once the payment has been completed successfully so you can deliver the product to your customer. 

  5. The payment is deposited into your PayFast account, from where you can request a payout into the bank account that’s linked to your PayFast account. 

Some of the benefits of choosing a payment gateway like PayFast is that you can sign up and start receiving payments without the need for a merchant bank account. You also don’t need to be concerned with meeting the rigours of PCI DSS requirements, which are necessary when handling sensitive credit card information, as PayFast handles this for you.  

Why do you need a payment gateway?

You need a payment gateway to receive payments online via your ecommerce store. While different payment gateways offer different services, generally they should all give you peace of mind that your customer’s payments are being processed safely and securely. 

A payment gateway can also enable you to get paid via a variety of payment methods, not just credit cards. For example, PayFast facilitates Mastercard and Visa credit card and debit card payments, Masterpass, SnapScan, Zapper, Instant EFT, SCode and Mobicred. A good payment gateway should also provide consistent fraud protection by being PCI Compliant, as well as providing services to manage credit card chargebacks, reconciliation and overall account management.   

How do you choose a payment gateway?

When choosing a payment gateway it’s important to do your research to determine the following:

  • Which payment gateways are available in your country?

  • Are they PCI-DSS Level 1 Compliant?

  • What are their fees, for example do they have monthly fees and/or a per transaction fee and any hidden fees?

  • What ecommerce platforms do they integrate with or have 3rd party plugins for?

  • What additional services do they offer, and are these free or do they come at an additional cost?

  • Do they offer local after-sale and customer support?

  • Do they have good reviews online by merchants and customers? 

How do you set up a payment gateway?

There are several ways websites can integrate into a payment gateway. Some require developers to be involved and are complex, while others work with pre-built shopping carts, that usually just require an ID and other basic information from the gateway, in order to be integrated.

Setting up PayFast as your payment gateway is a simple process that can literally take minutes depending on your ecommerce platform. PayFast integrates with over 80 different shopping cart platforms, including Shopify, WooCommerce, Ecwid and PrestaShop as well as custom integration. Take a look at our shopping carts page to find your platform’s listing that will include information on how to set up the PayFast payment gateway on your online store. You can also read this ‘How to integrate PayFast and get paid’ blog for more information. 

If you’re not sure which ecommerce platform is right for you, read our blog about Ecwid as well as this one which compares Shopify and WooCommerce

When setting up your online store it’s important to sign up and get your payment gateway up and running quickly so that you can start receiving payments as soon as you’re open for business. With the right business model and payment gateway, there’s no stopping what your online store can accomplish. 


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