Always been curious about the differences between payment gateways and payment processors? Both payment gateways and payment processors are needed for credit card payments and they’re a great way to ensure that payment is both convenient and secure for customers.
What is a payment processor?
Starting from the basics, what exactly is a payment processor? Essentially, a payment process is an intermediary between a merchant and a customer’s bank account. In order to accept credit cards, business owners need to partner with a third-party credit card processor.
After the customer has made a payment, this payment processor will then communicate the transaction to the credit network and subsequently the customer’s bank. The customer’s bank will then approve or decline the transaction before the payment processor informs the merchant bank of either a deposited fund or declined transaction.
What are the benefits of using a payment processor?
Payment processors are great as they accept credit card payments. With payment processors, you’ll also be able to accept a wide array of other payments and it helps with increasing the overall speed of transfers into the accounts.
What is a payment gateway?
A payment gateway is a virtual terminal or point of sale (POS) for paying online. Similar to how physical stores have a credit card terminal for accepting card payments, online stores have their own payment gateway for collecting their customer’s payment information.
Typically how it works is that payment processors and payment gateways work together. While the payment gateway collects and authenticates the digital payment before transmitting it securely, the payment processor communicates between both to complete the transaction.
Benefits of payment gateways
Here are the benefits of using payment gateways:
1. Efficient – Payment gateways are an extremely efficient method and you’ll be able to accept credit card payments with ease. In addition, you’ll also be able to complete purchases both in the store, online, and even when you don’t have your card with you.
For business owners, payment gateways can also integrate payments with the existing accounting software that you have, record sales date and save you and your team time.
2. Secure – Payment gateways are also exceptionally secure so you can be assured that your online payment processing is safe. With regards to the technology that payment gateways use, most of them use SSL encryption. With this particular encryption, it helps to ensure that customer’s financial information are secure and will not be susceptible to a data breach.
3. Various options – As mentioned earlier, payment gateways come with multiple payment options – including card-not-present transactions, so you’re able to accept a wide range of payment methods with ease.
By having a wide range of payment types, it’ll help with increasing overall customer satisfaction and reducing the risk of customers abandoning their cart.
Choosing between payment gateways vs. payment processors
As seen from the above, there are no right or wrong answers when choosing a payment gateway or a payment processor. What matters the most is that you’re selecting a method that best suits your needs.