What is the Difference Between a Payment Gateway and a Payment Processor?

When you’re running a business, there are several ways that you can accept payment from your customers. You can take cash, cards, checks, mobile payments, or online payments. Cash is received at a till and receipts are issued. Checks can be received in person or by mail, then taken to the bank for cashing. Cards are generally swiped, and phones can be too.

In card transactions, there are four parties involved: the buyer, the buyer’s bank, the seller, and the seller’s bank. These four entities are usually linked through a payment portal that accepts the buyer’s cash and sends it to the seller’s bank. There are different types of portals, ranging from electronic keypads to dedicated mobile apps.

Online, offline, or both

For web-based transactions, there is no physical card to be swiped or check to be cashed. Instead, the buyer will input their card details, or they will scan the check and upload it. In both cases, the buyer might read out their card details over the phone, though this is slightly less secure options.

A payment gateway is the system that facilitates cash and check transactions online, in cases where the physical card or check is not present, because the payment gateway is what connects the merchant’s website to the banking system. Examples of payment gateways are mobile apps or web-based purchases, where you click on a ‘buy’ icon and type in your card details. Internet transactions need payment gateways, while physical stores normally do not.

The payment processor is the company that moves the money out of the customer’s credit card account and into the business’s merchant account when the transaction takes place. They don’t just offer payment gateways. They also provide in-person payment tools like electronic keypads and mobile phone card readers. These allow customers to pay by waving their card over the NFC reader of the seller’s phone. Payment gateways are part of the many services they offer.

Fees associated with processing payments

A payment gateway is just one feature typically offered by modern payment processors. Payment processors are sometimes described as merchant processors. These payment gateway processors allow a business to flow smoothly by taking care of all payment systems and putting them in one simple portal that is easy to use, interpret, and understand. It eases cash flow by helping keep tabs on income.

Some payment platforms only offer merchant payment gateways with virtually no additional services, while others don’t offer gateways at all. They restrict themselves to keypads and tills instead. If you have a physical store as well as website, you only need a payment processor, and not a payment gateway. This is even more essential if you have international customers that prefer to make purchases online.

Before you settle on a payment processor, find out how they charge for their services. Typically, platforms charge a nominal fee for every transaction and also take a percentage of the amount that your client has paid.

For more information about the difference between a payment gateway and a payment processor or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.

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