No Credit Card Machine Needed
A payment gateway is an electronic service that makes it possible to take credit cards online or through virtual terminals that can be installed as software for your desktop or apps for your smartphones.
Payment gateway authorizations are not limited to credit card processing, but they usually have this as a primary function. The gateway is usually not seen but accessed by your payment processing software, or your website shopping cart. Through payment gateways, such as Authorize.net, business owners can accept, decline, authorize, and process debit and credit cards securely. .
MOTO and Internet
Who uses payment gateways? Many phone and mail order businesses will invest in software that authorizes credit cards where the card is not present. Known as CNP processing, the gateway is ideal for firms that will not see an actual credit card, or have a face-to-face interaction with the client. Mail Order and Telephone Order (MOTO) stores can get specialized rates for gateways. Internet and e-commerce stores are also very common gateway users, and most shopping carts on the market today make it possible to authorize transaction through a variety of services.
Payment Gateway Fraud
Fraud with payment gateways is not uncommon, and there are criminal groups that will pose as legitimate businesses that would use gateways to authorize cards. Typically, they may pose as contractors in construction or home services, and claim that they need a gateway to take payments for contracting work. In reality, they are piggybacking on a business name but may be providing a fake phone number. If the fraud is not discovered, thousands of dollars in counterfeit transactions can be run through the gateway. When the fraud is uncovered, money is gone and the person who got the gateway is long gone as well. Preventing fraud through payment gateways involves verifying the business signing up beyond a voided check and ID, which may be fake. Often, a call to the company listed online may show that the person requesting gateway services does not work for the firm.
Like many fraudulent leads for credit card merchant services, the people requesting the gateway may originate the lead offshore, and may speak with a thick accent or use words not common in US English like "kindly." (As in, "Kindly send me a quote for your services.") Fraudsters like to use gateways because there is actually a longer approval process for physical terminals and payment processing.