A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. The payment gateway may be provided by a bank to its customers, but can be provided by a specialised financial service provider as a separate service, such as a payment service provider.

It is equivalent to a physical POS (point of sale) terminal found in many retail outlets. The vendor account provider is usually a separate company from the payment gateway. Some vendor account providers have their payment gateways. However, most of the companies use 3rd party payment gateways.

The payment service usually has two components:

The payment service can be provided by a bank to its customers. Nevertheless, it can also be provided by a private financial service provider as a separate service such as a payment service provider. However, the website facilitates a payment transaction by transferring information between a payment portal, such as a mobile phone or interactive voice response service, and the front-end processor or receiving bank./span>

When a customer orders a product from a payment service-enabled vendor, the payment service company performs various tasks to process the transaction.

Some payment service systems offer white label services that allow payment service providers, e-commerce platforms, ISOs, vendors or purchasing banks to brand the payment service technology entirely on their own. It means that PSPs or other third parties can have an end-to-end user experience without imposing payment processing and additional risk management and compliance responsibility to the company.