Understanding the difference between a Payment Processor and a Payment Gateway

Are thinking of broadening your business horizons into the online market? You are likely deep in thought about the best method to employ to receive and process payments from customers.

Undoubtedly, the best option you have for seamless and secure payment processing is a merchant account. This account will enable you to accept credit and debit card payments online.

A merchant account from a reputable firm such as eMerchantBroker usually comes in a complete package that gives an online retailer access to a payment processor and an integrated payment gateway. Therefore, new merchants have to possess enough understanding of these two services to ensure they pick the right accounts provider for their business.

Payment Processing

A payment processing service handles transactions from credit and debit cards on behalf of the merchant. Upon receiving payment information from a customer, the processor forwards it to the respective card association, e.g. Visa or MasterCard. The card association directly provides a response of approval or decline which is relayed back to the processor. If verification fails, the payment processor can carry out anti-fraud measures against the transaction.

Payment Gateway

A payment gateway is the avenue via which a merchant charges customers’ credit or debit cards with the purchases they make online. As a merchant, a gateway will enable you to receive payment for goods sold directly from your website. Integrated to your website, the payment gateway provides the forms which a customer fills out with information. This information is then taken up by the payment processor for verification.

Afterward, the gateway provides you with an acceptance page where you can authorize the purchase and complete the transaction. Depending on your provider, your payment gateway can come equipped with security measures such as chargeback control and anti-fraud solutions. Moreover, the gateway’s connection to the payment server and the processor is encrypted and wholly managed by your payment services provider.

Both payment gateways and processors can exist as independent firms, which come together to provide their services directly to internet merchants, and use banks to provide merchant accounts. However, it is advisable to go for a company that provides the three services through one contract. Payment service companies vary in the subscription fees they charge, the type of gateways they use and the fraud mitigating measures they take, among other aspects. It is therefore vital to choose the right merchant accounts provider for your business.