Definition
Payment Gateway (PG)
A payment gateway is the technology layer that securely transmits a customer's payment details from a merchant's checkout to the banks and networks that authorise the transaction.
A payment gateway (PG) encrypts and routes transaction data — card numbers, UPI requests, net-banking instructions — between the merchant, the acquiring bank, card networks and the customer's bank, returning an approve or decline response.
In India, a pure PG provides the rails but may not handle or settle funds itself; when it also pools and settles merchant money it functions as a payment aggregator and needs RBI authorisation. Many providers offer both gateway and aggregation together.
For merchants, gateway quality affects checkout success rates, fraud screening and support for methods like cards, UPI, wallets and EMI options.
Related terms
- Payment Aggregator (PA)A payment aggregator is an RBI-authorised entity that lets merchants accept various digital payments without each building their own bank integration, pooling and settling funds to them.
- Tokenisation of CardsCard tokenisation replaces your actual card number stored by merchants with a unique, device- or merchant-specific token, so real card details are never saved or exposed online.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.