The simplest way to think of a payment processor is to start with the example of an electronic card reader. These are also known as POS (Point of Sale) terminals. It’s the little device at a store where customers swipe their credit cards.
This is the main way to physically process credit cards for retail business. Meanwhile, on the ‘back end’ of the transaction, you still need a payment processor. In other words, as you might imagine, if you found a discarded POS terminal, you wouldn’t be able to use it to accept credit cards, because you would also need an account with a payment processor.
Payment gateways vs POS
Of course, your payment processor is not the same as your POS terminal. They’re just the guys that provide and process it. In the same sense, your payment gateway is not the same as a payment processor. Your payment gateway is like the POS terminal, but for online transactions. It links your online store with the traditional banking network. In other words, the payment gateway is software that connects your bank and your customer’s bank to your website.
Encrypted all the way
In a physical in-store purchase, the customer swipes or sticks their card on your POS terminal, and perhaps signs their receipt. Online, the customer will type their card number and CVC onto your website. These details will be encrypted and passed through the payment gateway, which acts like a digital POS terminal. Through the gateway, the encrypted data reaches your payment processor and your payment processor facilitates the sale or purchase, passing money from the customers’ credit card account into your merchant account. The process is encrypted end-to-end. The process of moving money through a payment gateway via payment processor to your business account can take up to one to three days, but the verification of the sale itself is instant.
For more information on how payment gateways work, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.