Payment Processors vs. Payment Gateways
When you sign up to accept payment by credit card, all the terms and processes can seem very confusing, but you don’t need to have extensive knowledge of the intricacies of card payment systems to become a merchant.
To become a merchant you have to open a merchant account, and once you have a merchant account, you will automatically have a payment processor involved in all card transactions. If you sell online, there will also be a payment gateway involved to connect your website to the banking network.
You needn’t worry about where to find all of these service providers because if you sign up with a reputable merchant account provider, they will take care of it all for you.
How it works:
The first step for you is to open a merchant account which is a type of bank account that allows you to accept payments by debit or credit card. Once your merchant account has been opened, you will automatically have a payment processor. Your payment processor is the company that transfers funds from your customers’ credit card accounts into your merchant account.
A payment gateway is the bridge that connects a website to the traditional banking network. A payment gateway uses end-to-end encryption to send the customer’s credit card information to your payment processor so that your payment processor can complete the transaction. The payment gateway then transmits the results of the transaction back to the merchant and the customer.
So you can’t have a payment gateway without having a merchant account and a payment processor, but you don’t have to have a payment gateway if you prefer to have a physical terminal.
How do they work together?
The software for the payment gateway will be installed to the backend of your website by your merchant service provider. When customers buy online, they will be taken from your shopping cart page to the payment gateway page to enter their card details. The encrypted details are transmitted from there through the card payment network to be approved or declined.
Your payment processor manages this process from the payment gateway to all the key role players. If the transaction is approved your website will prompt you to release the goods or service. The exact same process applies if you use the payment gateway to process card payments manually, just you enter your customer’s card details instead of them.
Payment processors are responsible for a very high level of security to protect cardholders’ sensitive information and prevent fraud, and payment gateway software must comply with very high security standards. Security is never static, and payment processors and providers of payment gateway services must adapt and evolve with industry compliance standards.
All of this happens under your merchant account number, so you can track the progress of card payments between approval and final deposit into your bank account.
For more information about merchant accounts, payment processors and payment gateways, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.