A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payment processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar.
The gateway is not directly involved in the money flow; typically it is a web server to which a merchant's website or POS system is connected.
[2][failed verification] Many payment gateways also provide tools to automatically screen orders for fraud and calculate tax in real time prior to the authorization request being sent to the processor.
Tools to detect fraud include geolocation, velocity pattern analysis, OFAC list lookups, 'deny-list' lookups, delivery address verification, computer finger printing technology, identity morphing detection, and basic AVS checks.
[4] This means PSPs or other third parties can own the end-to-end user experience without bringing payments operations—and additional risk management and compliance responsibility—in house, although the party offering the white labelled solution to its customers might still be responsible for some regulatory requirements such as Know your customer.