Payment gateway vs payment processor, what’s the difference, and which is best for your business?
As an online business owner, you might have heard these terms and have some questions in your mind.
This article will discuss all your queries about Payment gateway and payment processors.
After the breakout of Covid-19, online sales are significantly increasing to minimize contact with people.
Most companies are utilizing the digital ways of selling or online way of selling.
And for that, they need to have a digital payment system installed in their online store.
But finding the best online payment system for your business is not easy, especially if you are new to it.
Don’t worry. We will help you with all your queries and question in the coming section of this article.
So, let’s start with the online payment processor.
What is a Payment Processor?
A payment processor is a company that acts as a mediator between the bank and the merchant.
It manages the credit/debit card transaction process from customer to seller.
Basically, what a payment processor does is, they relay information about your customer’s card to your bank and the customer’s bank.
However, they also include a broad range of fees and charges in the name of transaction fees, termination fees, and chargeback fees.
Payment processors often provide physical equipment like the Point of Sales (POS) terminal to receive payment from your customers.
POS helps to read the data of your customer’s payment card by reading the Europay, Mastercard, and Visa (EMV) chip on it.
This can minimize the chance of fraud by making one tome code.
Moreover, an online payment processor can be your option if you want to accept payments from any credit/debit card.
Now you know about the Online Payment Processor, let’s discuss the online payment gateway.
What is Payment Gateway?
A payment gateway is technology business owners use to accept payments from their customers.
Not only does it help you in accepting the physical payment but also the online payment from customers as well.
Most business owner uses an Ecommerce Payment Gateway on their online store.
It is the key component of the online payment processing system as it sends the customer’s information to the merchant’s bank account to proceed with payment.
There were few payment options earlier, but now the best payment gateway can usually accept various payment options.
Online payment gateways are evolving to provide the best and easy way to make payments.
In stores, the payment gateway utilizes a POS terminal, and in online stores, it requires application programming interfaces (APIs) to do the transaction.
Moreover, payment gateways are highly secure, and they can also be called secure payment gateways.
Hence, you get the idea of an Online Payment Gateway.
Now, let’s see the primary difference between a payment gateway and a payment processor.
Payment Gateway vs Payment Processor
Both of these payment channel may sound the same but are distinct from each other.
Payment processors make transactions possible by connecting the customer’s bank with the back-end transaction.
On the other side, the payment gateway makes it happen as it communicates the approval or decline of the front-end transactions.
However, both of them have their own different tasks to perform while a transaction is ongoing between customer and seller.
Let’s see the simple pro definitions of Payment Gateway vs Payment Processor.
Payment Processor– It uses the customer’s card information to charge the amount from the customer’s bank or card provider.
Payment gateway– It collects the information of the customer’s card and encrypts it for later payments.
Hence, you know the primary differences between a payment gateway and a payment processor.
Conclusion
The usual use of an online payment gateway is to accept online payments from customers for products and services.
As the technology for online payments is rising, the frauds are also rising significantly.
Therefore, a Secure Payment Gateway is important at a store to save customers from fraud.
This article has discussed everything about the payment process and the payment gateway.
Both of them work to complete a transaction between the customer and the seller. Without both, no transaction can take place.
Moreover, they have to work together to complete any online transaction.