Payment Processor Vs Payment Gateway- Which is needed for eCommerce Selling?July 7, 2020 | Author: Ashley Brown
eCommerce selling has become a new norm nowadays and most people prefer buying online due to its remarkable benefits like free shipping, security, discounts, and online payments. Many retailers have shifted to online selling seeing its benefits to the business. eCommerce business is integrated with online payments or transactions which need proper setup with advanced security. In the process of setting up the payment process, it is important to know the difference between Payment Gateway Vs Payment Processor for better implementation. These terms seem quite synonymous but they are two entirely different things.
In order to optimize the payment process for security and customer engagement while reducing operational costs, it’s important to know what these two distinct services are and how they work. This is a closer look at the role that they play in customer payments and moving the balance to your account.
What is a Payment Gateway?
A payment gateway acts as a doorway to make sales online. A payment gateway allows the seller to charge the customer’s credit/debit card according to the purchase he/she makes online. Just like a physical sales terminal at a retail store, the eCommerce Payment Gateway authorizes card payments directly from the website. The payment gateway acts as a mediator between the transactions on the eCommerce website and the payment processor. Most online merchant accounts come with a payment gateway included, like PayPal.
Most payment gateways perform transactions in a few seconds with these steps:
- Encryption: It is done between the user’s web browser and the merchant server. A payment gateway encrypts data for exclusive use between the seller and buyer.
- Request: The authorization request is initiated once the payment processor gets approval from the credit card company to execute the transaction.
- Fulfillment: When the payment gateway received the authorization, it allows the online store to proceed to the next action.
The eCommerce payment gateway has other functionalities as well including screening orders, calculating tax costs, and performing location-specific activities.
What is a Payment Processor?
Payment processors are like banks or financial institutions that work in the background. They do all the payment processing services. These institutions have partnerships with other companies that deal straight with consumers or merchants. The payment processor quickly passes information back and forth between payment gateway & merchant account, keeping it secure for the end-user. Some payment processors offer direct merchant services, but most companies focus on payment processing.
What is a Merchant Account?
Merchant accounts are basically bank accounts authorizing the merchants to accept credit or debit card payments. These accounts help the payment gateway to process transactions from the eCommerce website. It is important to know that merchant accounts are often termed as MID. Many payment processing and eCommerce payment gateway service providers provide merchant accounts. These accounts can be opened in large banks offering such services.
Differences between Payment Gateway Vs Payment Processor
- Total Transaction Volume
The payment processors ask for different transaction fees depending on the transaction volume. Most payment processors offer lower rates seeing the high volume of transactions. It would be a better idea for small businesses and startups to hire Magento developers to integrate payment gateway having a small volume of transactions.
- Cost & Time of Integration
The cost and time needed for integrating the payment processor are higher in comparison to the payment gateway integration. The Payment processor needs integration to their ISO 8583 platform and passing their certification process. This is not feasible for small business enterprises just started online selling.
Payment processor integration requires a PCI certified infrastructure and loyalty to all compliances set by the authorities of the card association network. The payment gateway deals with all the ins and outs associated with the ISO 8583 integration and the payment processor certification process. The time and cost needed for the payment gateway integration are much lower due to the availability of the simple API layer for accepting and managing payment requests from the merchants.
The payment gateway performs the settlement work on behalf of the merchant while the payment processor guides the merchant to send the end-of-day settlement request and manage the settlement file to import back into the system.
Payment Processor vs. Payment Gateway: Which Do I Need?
The most common use of an eCommerce payment gateway is to accept payments for goods and services purchased online. In addition to basic transactions, a gateway can be used to integrate payments with CRM software or process transactions on a mobile device. Seeing its immense popularity merchants invest in gateway integration when planning of Magento eCommerce development for their business. Some merchants go with a third-party payment gateway, which is quite troublesome at later stages. What to do when you have such a problem?
It is advised to select a merchant account and a payment gateway from a single provider. This will securely process integrated payments as well as reduce errors with fast transaction processing.
Frequently Asked Questions
What are the different types of payment gateways?
There are usually three types of payment gateways available for usage:
- Checkout on site, payment off-site
- On-Site Payments
What are the best payment gateways?
- PayPal is the most commonly used payment gateway for eCommerce stores.
- Stripe is a US-based payment gateway that’s serving merchants in more than 25 countries.
Also read: PayPal Vs Stripe
Is PayPal a gateway or processor?
PayPal is a payment gateway that facilitates, processes, as well as authorizes banking information to online retailers. It is a popular payment gateway serving millions of merchants on a global basis.
What is a gateway for credit card processing?
A gateway is a tool that securely transmits the online payment data to the processor to perform the complete transaction lifecycle. It authorizes the payments for card-not-present transactions, specifically for the eCommerce websites.
Which type of eCommerce is a payment gateway?
eCommerce Payment Gateway is an online payment processing technique that helps businesses to accept credit cards. In other words, it acts as a “Man-in-the-middle” between eCommerce platforms and clients.
What is the eCommerce Gateway?
A payment gateway is a service provided by an eCommerce application service provider that authorizes card payments processing for online retailers, bricks and clicks, or conventional brick and mortar.
The important point from the whole discussion is that the payment processor does not deal directly with authentication and it is basically done by the payment gateway. Thus, selecting the right payment gateway means finding a reliable & secure service to keep the customer’s identity and data secured. A good payment processor must be efficient, affordable & accurate. We are AgentoSupport offer payment gateway integration services. Contact us to know more about how we can serve your eCommerce business with our best & economical Magento eCommerce development services with an engaging experience.