Are you looking to take online payments for your business and need to choose between a Payment Gateway or a Payment Processor? What’s the difference? Why choose one over the other? We’re to help you find out.
Behind the Scenes
First, let’s break down what actually happens during a basic credit card payment:
- The customer presents their card to the merchant to make a payment.
- The merchant notifies the issuing bank (customer’s card provider) about the payment.
- The issuing bank validates the card and transfers money to the acquiring bank (merchant’s bank).
The cool thing is that all this happens in a matter of two to three seconds, thanks to the payment processor that facilitates the transfer of all that payment data from the merchant to the issuing bank and then to the acquiring bank at lightning speed.
That’s for transactions where the customer makes a credit card payment using an actual credit card machine. But what about online transactions? For that, we have a payment gateway.
An Online Payment Processor
Yes, that’s basically what a payment gateway is. Its main function is to facilitate the exact same payment process above but for online transactions where the customer cannot tap or swipe their card. These online transactions are primarily for eCommerce. Much less infrastructure is needed and errors can be significantly reduced since there’s no need for a credit card machine, no need to key in PINs, and there’s a slew of things you can potentially do with it to help your business run smoother. Payment gateways often come with features such as easy reconciliation, batch payments, e-receipts, automatic retries and more. If you have an online business or see yourself having one in the future, it’s advisable that you consider choosing a payment processor that has a payment gateway as well.
At the end of the day, it really boils down to what your needs are. If you only do business in a physical store, a payment processor would definitely suffice but if you plan to reach a wider market, increase exposure and sales by going online, a payment gateway is virtually a non-negotiable. Make sure it offers multiple payment options and methods and is PCI DSS compliant. As long as those boxes are ticked, you can’t go wrong. If you need more help and want to try our all-in-one suite of innovative payment solutions, contact us at MerchantSuite for your free consultation and trial.