What Does a Payment Gateway Do With Your Data?

Saurin Parikh
3 min readSep 18, 2019

Hint: It doesn’t store anything.

Three years, four years back, did you imagine that payment gateways would be so omnipresent in your life? Probably not. And yet, here we are. Today, you run into a payment gateway every time you’re making a digital payment. You interact with a payment gateway when you pay Rs 100 for groceries or when you buy an iPhone worth a lakh from an ecommerce company.

Payment gateways have, without doubt, made online transactions very convenient. But a lot of customers typically do face some kind of anxiety when they pay online. Even when we understand that the transaction is going to be secure, there is always a fear at the back of our minds when we enter in our card or bank details. It’s our hard-earned money on the line, after all.

However, since digital payments are not going anywhere but upwards in terms of usage, let’s understand how secure your online transactions are and what exactly a payment gateway does with your data.

Encryption through PCI-DSS compliance

First things first, a payment gateway does not store your data as is. The best payment gateways are PCI-DSS compliant. The PCI Security Standards Council is a global organization that sets compliance rules for managing cardholder data for all online payment systems. PCI-DSS is now the global standard for online security. What this means for you is that your online transactions are encrypted to ensure there is no data interception.

Basically, all the details that you enter like name, address, card information, netbanking details, etc are used only to complete the transaction. The payment gateway never stores sensitive information like CVV, pin or password.

https:// for higher security

Coming back to the encryption bit, data security begins the second you land on a website. A payment gateway uses the highest assurance SSL certificate, which allows TLS encryption of your data. This is a lot of jargon, but in simpler words, you can just look at the URL in your browser. An https:// protocol means that the website you are on is secure.

Most ecommerce companies today work with secure payment gateways to ensure that the data of their customers is not compromised. You can also check if the website or payment gateway page is secure or not by looking for the https:// in the URL, but to additionally understand how payment gateways ensure security, let’s look at something called tokenization.

Tokenization to prevent exposure of data

You enter your 16-digit card number into a payment gateway’s interface. What the payment gateway does is that it replaces this 16-digit number with a single token. This “token” is a unique set of characters that replace your original card number. This allows the payment to be processed without exposing your sensitive details. Tokens are assigned randomly, which makes it extremely impossible to reverse-engineer the actual card number from the token.

Let’s dig in deeper with an example. Tokens can be of two types–format preserving and non-format preserving. Format preserving tokens maintain the appearance of the card number while non-format preserving tokens are alphanumeric numbers.

The best payment gateways use non-format preserving tokens as they are more secure.

While a payment gateway does its best to ensure that your data cannot be breached, there are fraudsters out there who are working equally hard to try and exploit your sensitive information. As someone who transacts digitally, you can also do your bit by understanding common methods of frauds to make sure you don’t fall victim to them.

This story was first published on Razorpay Blog.



Saurin Parikh

Writer, content coach, content marketer, elderly millennial, cool dad. Published work: http://bit.ly/SaurinParikh