Payment Gateway vs Payment Processor: Which One Do You Need?

You may have used the words payment gateway vs payment processor as a small business owner. These two terms are very much related to your online business. But do you know what the differences are between these two terms? Take a detailed look at this blog post.

First, we must comprehend the essential terms of payment collection. The below are the key players in a credit card transaction:

  • The individual whose card is swiped or typed in is known as the consumer.
  • The merchant is the company who receives the money in return for the products or services that the buyer gets.
  • ERP/accounting software: A business’s resource for recording and reporting financial transactions.
  • The card-issuing bank is the one that provides the customers’ credit card.
  • The bank that provided the customer’s credit card is known as the card-issuing bank.
  • The payment card network is where everything falls together for credit card processing and fee collection.
  • The bank that released the merchant account and the merchant may withdraw funds is known as the merchant’s acquiring bank.

Payment processors and payment gateways are also essential parts of this mechanism, but they have different positions.

What Is A Payment Processor?

If you are a small business owner, you probably know already how to process credit cards. After your client completes an order, funds are credited to your bank account.

However, several procedures occur for you to collect the funds.

A payment processor is essentially a conduit between your bank and your customer’s bank. You will not be able to process purchases or receive funds from your customers without this connection.

What is a Payment Gateway?

A payment gateway is a piece of software that allows the company to safely accept online payments. It’s similar to a POS terminal but just works online.

Online business who takes payments electronically usually uses payment gateway more than others. A suitable payment gateway will let you see the complete batch history to make reporting easier for your business.

Accepting payments electronically through an automated payment portal is a simple way to avoid double data entry, improve payment reliability, and streamline workflow.

Which Do I Need: A Payment Processor or a Payment Gateway?

Businesses that want to process payments within their ERP/accounting software or eCommerce store should use a payment gateway. A basic account will suffice if you don’t have any accounting software. If you’re searching for a merchant account, search for one that provides flat-rate rates, no commitments, PCI enforcement, next-day funding plans, chargeback management, and 24/7 in-house customer service.

A payment gateway is potentially the best option if you choose to streamline your payment acceptance and process credit cards electronically. Be sure to select a processor with its own patented payment gateway while searching for a payment gateway. To ensure PCI enforcement for small businesses, the gateway should be built by in-house tech developers, and customer card details should be stored off-site.

You now understand the distinction between a payment processor and a payment gateway services. Hopefully, you’ve discovered the right option for the specific market requirements.


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