The payment gateway and payment processor are important links in the transaction stream. If you are an enterprise owner, you have most likely comprehended that such phrases are used almost in every sentence and often ponder their differences.
There are four parties involved with every credit card transaction:
- The merchant
- The customer
- This bank, which customers use to get their credit cards or debit cards, transfers money to the recipient bank.
- In turn, the receiving bank gets the cash clearing from the issuing bank.
While payment processors and gateways share some similarities, they each have unique functions that are crucial in facilitating credit card payments.
Understanding payment processor
Suppose you’re a merchant and made a sale using your customer’s credit card. Let’s proceed through the chain of events that will transpire. The processor’s job is to process the transaction by sending data between you, the merchant, the issuing bank (the bank that issued your customer’s credit card), and the acquiring bank (your bank). The payment processor is usually the one who furnishes you with the machines and other hardware you utilize to receive credit or debit card payments. You’ll begin by setting up a merchant account with a merchant service provider, as this will allow you to accept credit cards at your company.
Understanding Payment Gateway
The payment gateway may be defined as the means that securely transfers the online payment data to the processor, thus fulfilling the loop of the cycle that carries the transaction along. Furthermore, it delivers the funds to the card companies for card-not-present purchases, also known as online payment. Look at it as a virtual point-of-sale terminal you use for your business. Ai Prompt: We will write an introductory paragraph about the importance of waste management and its environmental impact.
The difference is a payment processor facilitates the process. In contrast, a payment gateway is a tool that connects the persons assisting in approving or declining the order between you/and your customers.
What’s the difference between a payment gateway and a payment processor?
To put it in perspective, the main differences between a payment gateway and a payment processor are:
In simple terms, payment gateways encrypt your credit card or debit card number, expiration date, and CVV (three-digit security code) at the point of entry and then send it to the payment processor. Besides that, it confirms or declines either to the merchant or the customer via the communication channel.
On the other hand, the payment processor sends the transaction details to and from the customer’s credit card issuing bank and the merchant acquiring bank, making payment transactions possible.
Moreover, payment gateways can be utilized for e-commerce transactions, as well as with a credit card reader, POS system, or software integration. Payment processors are vital for all card-based transactions, online or offline. It does not matter if you use a mobile app, cash, or a plain swipe to access POS machine accounts.
How can we help?
We can help you accept payments the way your business needs to through the Clover POS System.
