What is a payment gateway?

A payment gateway is the software layer that handles the secure transmission and authorization of payment data. When a customer enters card details on an invoice payment page or over the phone, the gateway encrypts that data, sends it to the card network for authorization, and returns an approval or decline, typically in seconds. Common gateway providers include Stripe, Braintree, Square, and Authorize.Net.

For AR and collections, the gateway determines what payment methods are available, how quickly funds settle, and what happens when a transaction fails. A gateway that supports both card and ACH payments with a clean API is the practical foundation for any automated payment collection flow. The gateway also handles PCI compliance at the data-transmission layer, which reduces the compliance burden on the business.

Gateway fees typically appear as a flat amount per transaction plus a percentage of the transaction value. Comparing gateways requires looking at total cost per transaction type, settlement speed, and dispute handling — not just the headline rate advertised on the pricing page.