When you make a payment online, it may seem like a simple process. You enter your card details, click “Pay,” and in a few seconds, your transaction is complete.
However, several steps behind the scenes make it all happen. Two key players in this process are payment gateway providers and payment processors. Although they are often confused, they play different roles in online payments.
We’ll explain what these terms mean and how they differ. We will also discuss why they are both important for businesses that accept payments online. By the end, you’ll have a clear understanding of how they work together to ensure a smooth and secure payment experience.
What Are Payment Gateway Providers?
Payment gateway providers are companies that offer a service to help businesses accept payments online.
A payment gateway acts as a bridge between a customer’s payment information (such as a credit card) and the business’s bank. When you buy something online, the payment gateway collects your payment details and securely sends them to the payment processor.
Here’s a simple way to think about it: A payment gateway is like a cashier at a store. It collects the customer’s money and makes sure the payment is processed properly. Without a payment gateway, it would be impossible for an online store to accept credit cards or other forms of online payments.
Key Features of Payment Gateway Providers
Payment gateway providers offer many important features that make online payments safe and convenient:
- Security: One of the most important jobs of a payment gateway is to keep your information secure. It encrypts your payment details so that they cannot be stolen or misused by hackers.
- Multiple payment options: Many payment gateway providers allow businesses to accept a variety of payment methods, including credit cards, debit cards, mobile wallets, and more. This gives customers more choices and makes it easier for them to complete their purchases.
- Integration with online stores: Payment gateways are usually easy to integrate with most online shopping platforms. This makes it simple for businesses to start accepting payments on their websites.
- Transaction reports: Payment gateway providers often offer reporting tools to help businesses keep track of their transactions. This helps store owners see how much money they are making and if there are any issues with payments.
What Are Payment Processors?
While the payment gateway collects and encrypts the payment information, the payment processors is the service that moves the money. It is responsible for transferring funds from the customer’s bank to the business’s bank.
Think of the payment processor as the engine of a car. You don’t always see it, but it powers everything behind the scenes. After the payment gateway sends the customer’s details, the payment processor steps in to authorize the payment and transfer the money.
Key Features of Payment Processors
Payment processors also play a critical role in online payments. Here’s what they do:
- Authorization: The payment processor checks with the customer’s bank to make sure there is enough money available for the purchase. If the funds are available, the payment is approved.
- Settlement: After the transaction is approved, the payment processor makes sure the funds are sent from the customer’s bank to the business’s bank. This is called settlement.
- Transaction fees: Payment processors typically charge a fee for each transaction they process. These fees are usually small but can add up for businesses that process many transactions.
Why Are Both Important?
If you’re running an online store, you need both a payment gateway provider and a payment processor to accept payments. The payment gateway makes sure you can collect payment details securely. The payment processor makes sure the money gets to your bank.
Using both services ensures a smooth and secure payment experience for your customers. When choosing a payment gateway provider, it’s important to find one that works well with a reliable payment processor.
Conclusion
Payment gateway providers and payment processors work together to make online payments possible. The payment gateway collects and secures the customer’s payment information, while the payment processor authorizes the payment and transfers the money between banks.
If you are starting an online business or want to improve your current payment system, it’s important to understand the difference between these two services. Look for a payment gateway provider that offers multiple payment options to give your customers more ways to pay.A great example of a company that offers reliable and secure payment gateway services is PayTabs. They provide businesses with easy ways to accept online payments while ensuring smooth and safe transactions.