Payment gateway vs. payment processor: What’s the difference?
“Payment Gateway” and “Payment Processor”? Sounds like tech jargon, right? So, what’s the difference between a payment processor and a payment gateway, and which does your business need?
What Is a Payment Gateway?
A Payment Gateway is a technology that authenticates and transfers transaction information from a merchant to the acquiring bank or a payment processor for an online transaction. It ensures that sensitive data, like credit card numbers, are securely transmitted and encrypted. For businesses that operate on a global scale, a payment gateway with global payment acceptance lets you cater to international customers without the need to integrate and manage multiple payment solutions.
What Is a Payment Processor?
A Payment Processor is a company that manages the transaction process, which involves communicating transaction details between merchants, card issuers, and acquirers. They ensure that the transaction is valid, the funds are available and then facilitate the transfer of funds from the customer’s account to the merchant’s account.
What Is the Difference?
While both payment gateways and payment processors play crucial roles in the payment ecosystem, they serve different purposes:
- Functionality: A payment gateway authorizes the payment and ensures that the data is safe and secure. A payment processor, meanwhile, handles the actual movement of funds between accounts.
- Security: Payment gateways focus on encrypting sensitive data to ensure that information is passed securely between the customer and the merchant, and also between the merchant and the processor. Payment processors, however, ensure that the transaction itself is legitimate.
- Integration: Payment gateways can be integrated with various online shopping carts and platforms, while payment processors often require more specific integrations.