What is Payment Gateway?
Definition
A service that processes credit card and electronic payment transactions for subscription businesses.
Understanding Payment Gateway
Payment gateways are the infrastructure behind subscription billing. When you subscribe to a service, the payment gateway securely transmits your payment information to the bank, processes the transaction, and returns the result. Major payment gateways include Stripe, PayPal, Square, Braintree, and Adyen.
They handle security (PCI compliance), fraud detection, multiple currencies, and recurring billing automation. The choice of payment gateway affects which payment methods a subscription service can accept and the fees charged — typically 2.9% + $0.30 per transaction for US cards.
Related Terms
Recurring Billing
An automatic payment system that charges a customer at predetermined intervals for ongoing access to a product or service.
Payment Method
The financial instrument used to pay for a subscription, such as a credit card, debit card, PayPal, or bank account.
Subscription
A recurring payment arrangement where a customer pays at regular intervals to access a product or service.
PCI Compliance
Adherence to the Payment Card Industry Data Security Standard for handling credit card information in subscription billing.