Depending on a business’s specific needs or the nature of the way it conducts business, a specific payment processing solution should be selected.
Choosing between a payment gateway or a payment processor can significantly impact a business’s operations, customer experience, and bottom line. For this reason, Payeex has put together this guideline outlining the functions of each option to help businesses make an informed decision when deciding on which payment solution to employ. While both ways are equally essential to handling transactions, they individually serve different purposes when it comes to payment processing.
Payment Gateway Vs. Payment Processor
In general, a payment gateway and a payment processor both perform functions regarding obtaining credit card transaction data, getting approval, and processing payment. But, let’s break it down further.
Let’s begin with a deeper definition of what a payment gateway is. A payment gateway refers to the action of making an online purchase on a business’s website. It allows a customer to securely enter their credit card information while the gateway verifies that it is legitimate information. If a business operates through eCommerce, a payment gateway would be the right payment processing solution. This system also offers enhanced security and the support to offer a variety of payment options like credit cards, debit cards, PayPal, etc.
On the other hand, we have a payment processor. A payment processor handles and manages the backend transaction of the processing. It authorizes, clears, and settles all financial transactions that take place. This option is also suitable for both online and physical stores. This processor chooses to approve or deny the transaction between the buyer and the seller. Its role is to securely transfer money into the merchant’s account. Payment processors can be integrated into websites, apps, or point-of-sale (POS) systems.
What’s the Importance of Accepting Credit Cards to a Merchant?
Information about payment gateways and payment processing is important for merchants to know as accepting payment through credit cards is influencing customers spending behaviour. In a recent study, it was concluded that when credit and debit payment options are provided, the willingness to pay is higher compared to cash. Payment methods influence spending behaviour, which poses an important implication for merchants as they should be investing in digitized payment solutions in order to generate more revenue for their business.
Payment Gateway & Payment Processor: Credit Card Transaction
When it comes to credit card transactions, both the payment gateway and the payment processors play different roles, while working together. Next, we will explain how these two separate processes work together to achieve a successful credit card transaction.
When it comes to the payment processor, this process starts by receiving a tokenized customer order and data from the payment gateway, and it acts as an intermediary between the acquirer bank and the card issuer. The payment processor will then notify the payment gateway and it will let it know if the transactions have been approved or declined. During this process, the payment process interacts with the issuer bank to check on the status of approval or decline and then the merchant is notified of the result.
When online purchases are made, the gateway software can securely check the buyer’s card status as it can use information such as the credit card number, expiration date, and security code to quickly validate the credit card. Here, the payment gateway and the payment processor work together to facilitate an approval or decline. If the credit card has been approved, the payment processor begins providing the payment service.
Understanding Payment Gateways
To review, payment gateways can be accessed through a merchant’s eCommerce platform. It is software that is known for completing online transactions with credit cards or debit cards with the help of a payment processor. Payment gateway software is secured, encrypted, and can automatically coordinate the payment process. Having fraud protection is crucial when it comes to payment gateways. This is because poor payment gateways allow for fraud to occur at some points of the transaction. It’s always recommended to research to ensure that your business has selected the right company to work with.
Understanding Payment Processors
Payment processors work as an intermediary between the gateway and the customer’s acquirer bank. It uses information from the credit card’s issuing bank or financial institution to give an approval or denial digital code. Credit card networks include Discover, American Express, Visa, MasterCard, etc. If an invalid credit card is used or a credit card limit has been reached, the issuer will decline the transaction. When a payment processor is used, it will generate a service fee. This includes a combination of a fixed cost per transaction and a percentage of the transaction amount. If a high-volume merchant is negotiating, they may be able to get better pricing terms.
When to Use a Payment Gateway & a Payment Processor
Essentially, these two processes work together as a payment processor will facilitate a transaction that has been received from a payment gateway. The difference is that a payment processor can handle in-store transactions through a POS system without the need for a payment gateway. For online transactions through a website, eCommerce platform, etc., a payment gateway will be required to process these online purchases with a credit card. If a business is operating only in a physical location, only having a payment processor will be enough.
How to Find a Trusted Payment Gateway or Payment Processor Provider
When it comes to finding a trusted payment gateway or payment processor provider, it’s important to do research and select a team that will securely and efficiently handle all of your transactions. It’s recommended that you first identify what your business needs are (this includes purpose, budget, etc.) and then have questions ready to ask a payment processing company. Inquire different providers about fraud prevention and security measures, and evaluate the pricing structure. Consider what features are included in the price, including the transaction fees, the monthly fees, the setup costs, etc. Reading reviews and ratings is also recommended.
If your business is looking to find a trusted payment gateway or payment processing company, Payeex is here to provide your customers with a seamless payment experience. With robust security, global reach, and transparent pricing, our team is dedicated to providing your business with the best services. Contact our team today at 1-833-666-1001 to inquire about our products and services.