Customers, without a doubt, value the freedom to choose how they make purchases.
Accepting various payment methods is essential to providing a positive experience for your customers, whether they prefer to use cash, a check, a credit card, a mobile wallet, or a contactless payment solution.
When searching for a payment service provider, online retailers often come across the terms “payment gateway” and “payment processor.”
Understanding the Payment Processor
Companies and banks that process payments are called payment processors used for traditional and online retail sales.
Your company can’t accept credit card payments without a payment processor. Payment processors often supply stores with the hardware they need to accept card payments. In addition, they frequently assist companies in establishing a merchant account, either internally or through a third-party merchant services provider.
Understanding the Online Payment Gateway
A B2B payment gateway functions similarly to a physical point of sale (POS) terminal, such as the credit card readers found at the register.
Payment gateways on the web enable card-not-present (CNP) transactions, in which the buyer and seller never physically interact, as opposed to POS terminals, which are only suitable for in-person transactions. By filling out a hosted checkout form, you can pay with a credit card right from your phone, tablet, or computer. In light of this, it is clear that online merchants cannot function without payment gateways.
Discovering Similarities and Differences Between Payment Gateways and Payment Processors
Understanding the similarities and differences between payment gateways and payment processors will help you better comprehend how they function and select an appropriate payment processing and gateway service provider.
Similarities
- Sending sensitive financial data is encrypted by default when using either a payment gateway or a payment processor.
- The POS terminal decrypts the transaction data from the EMV chip in the credit and debit card and sends it to the payment processor whether you swipe, tap, or dip.
- A secure connection is established when using a payment gateway, allowing for transmitting sensitive information like a credit card number and transaction details.
- Each potential solution should protect your customers’ information using encryption, regardless of which service provider you choose.
Differences
- When a payment gateway is used, it differs significantly from a payment processor. A payment processor is only required for card-present transactions, such as those conducted at a physical retail location using a credit card terminal.
- And for Card-Not-Present transactions, like those made over the phone or through an online store, you’ll need a payment gateway and a processor. With the help of the payment gateway, customers can safely enter their credit card details online. The processing service will then relay that data between the customer and acquiring bank.
- Because the transaction is being sent from your computer (platform) to a terminal, a gateway is still required when using a virtual terminal (even with a POS system).
What is the Best for Your Business?
The most common application of a gateway is to facilitate the acceptance of payments for goods and services purchased online; however, in the current payments landscape, gateway technology has expanded to facilitate the creation of a unified shopping experience across all channels and devices.
In addition to making purchases through the internet, you can also use a gateway to connect your point-of-sale (POS) or mobile payment system to your accounting software or customer relationship management software.
Access to a payment gateway is not standard practice among merchant account providers. When a dispute arises, it can be inconvenient if a provider uses a third-party payment gateway. When an issue arises, who do you get in touch with?
