Payment Gateway vs Payment Processor – Sneak Peek Into Its Core Value & Advantages!
Cashless payment is the future of business! The soon a business owner accepts this fact and adapts to cashless transactions, the quicker their business will gain a competitive edge amongst competitors in the global market.
According to Statist.com, the global digital transaction value in 2020 was approximately $5.2 trillion and is expected to double in 2026.
These number doesn’t come from a single category and domain. It’s the combined fortune of businesses of all sizes and categories that have integrated digital payments into their business system, ensuring smooth and quick digital payments for their customer.
Regarding digital payments, merchants have multiple options to choose from these days. But, most of the time, they often get confused over Payment Gateway vs Payment Processor methods.
In contrast, we have decided to give them a brief about both payment options to clarify their doubts and help them adapt to the most suitable payment methods to increase the convenience and security of their digital payment structure.
What is Payment Processor – Definition Explained!
A payment processor is a digital payment service that plays an intermediary between merchants’ and customers’ bank accounts.
It includes five parties: the customer, the merchant, the customer’s bank account, the merchant’s bank account, and the processor.
This method is responsible for the smooth transaction and payment-related queries between these two parties.
For instance, when a business owner decides to accept credit card payment, they merge with a third-party credit card processor to ensure a high-end safe and reliable digital payment system.
Once the customer uses those systems to pay with their credit card, the payment processor communicates the transaction to the credit card network and the customer’s bank.
Irrespective of the payment status (approval or decline), the payment process then inform the merchant about the payment status, whether it has been successfully deposited into their account or the bank has declined the payment for some reason.
Core Advantages of Payment Processor
In contrast, not all businesses require a payment process, especially those that deal with cash. There, you receive cash directly from your customer and operate the transaction accordingly.
The processor method is for those who seek to leverage the cashless payment option to reduce the cash transaction hassle. It’s where they pair up the third-party payment service provider to ensure the seamless transaction of credit card payments.
The service provider here fetches those merchants with multiple payment methods to choose from, allowing them to increase the cashless transaction efficiency.
What is Payment Gateway – Definition Explained!
Unlike the processor, Payment Gateway technology collects and authenticates digital payment information and transmits it securely to the vendor’s payment processing partner.
The payment processor then communicates between parties to complete the transaction. It ensures quick transmission of the payment data to the processor.
The Payment Gateway is commonly referred to as a virtual terminal or point of sale (POS) for online payments. eCommerce websites mostly use a Gateway method for card-not-present transactions.
Core Advantage of Payment Gateway
The first and most essential benefit you will receive using a Gateway Payment method is multiple payment options in various segments.
Payment Gateways is an efficient method; there’s no doubt about it. It allows the purchase to be completed in-store and online by enabling card-not-present transactions.
Moreover, you can easily integrate this with your existing business accounting software. Also, it helps in recording sales data automatically, saving you and your accounting team time and effort.
If you are worried about your online transaction using digital payment methods, then let me clarify that the payment processor and Gateways combine work to assure secure online payment processing.
If not all, then most of the Gateway systems are integrated with SSL encryption to transmit personal information to payment processors.
This method helps them create a secure and reliable payment environment for your customer where all their financial credential and payment information stays safe from a high-tide data breach.
Multiple Payment Options
With the card-not-payment transaction option, the Gateway method consists of a broad range of payment methods for merchants, allowing them to accept multiple card types.
By doing this, merchants provide customers with multiple payment options, significantly increasing their credibility while reducing card rate abandonment.
Payment Gateway vs Payment Processor – Understand Which One to Choose?
Even though both Payment Gateways and Payment Processor do the same – help business owners operate a secure and quick digital payment method, Gateways offers more stability and are available as a standalone platform.
Over the years, many advanced and modern gateways have become payment integration services of some significant Processors.
For example, Worldpay or Vantiv, PayPal, and Stripe are excellent examples of processors with in-house gateway solutions.
Apart from these, Authorize.net, CyberSource, and USAePay operate as standalone gateways connecting to several different processors on the back end.
If you are running a big corporation and merchandise, opt-out of multiple processors and onsite gateways should be your first choice to get maximum coverage on cards, payment methods, currencies, and foreign markets.
However, for smaller merchants, a single-thread integrated payment service is enough for them to conduct smooth transactions.
Now that you have essential information on all the vital aspects of Payment Gateway and processors, choosing the one best fit for your business, payment processing should not be a hassle.
However, looking at the complexities of both methods, I recommend you enrich Metizsoft Solution to adopt a more convenient and comprehensive solution at the forefront.
Frequently Asked Questions (FAQs)
- What is the difference between a payment gateway and a payment service provider?
Payment Gateway and Payment Service Provider, also known as Payment Processor, are two sides of a single coin. Both combine work to ensure secure and effortless transactions but have different methods and procedures. The payment gateway's primary job is to collect a customer's personal information and submit it securely to a payment service provider. Once the payment services provider gets the information, it then facilitates smooth communication between the merchant's bank account and a customer's bank account. Lastly, it processes the transaction and informs the merchant's bank account of the successful payment.
- Do I need a payment gateway and payment processor?
Not necessarily! But it's the best and most convenient option these days as many prefer the digital payment ways of paying for the items they buy. However, if you accept only checks, cash, wire transfers, and in-person credit card payments, you don't need either. However, you'll also miss out on sales to key customers who prefer other payment methods (such as credit cards).
- Do I need a payment gateway and merchant account?
Any business that wants to accept online credit card payments must enable a payment gateway and a merchant account. It's a specific business bank account set to accept card payments. You can get in touch with any payment gateway technology partners, as many will help you set up and access additional merchant services, including merchant accounts.