If you’re about to open a merchant account with your bank, two of the most common terms you will hear about are “payment processor” and “payment gateway”. What are they anyway? Read below to know.
A payment processor is really nothing more than a system that allows you to accept payments from your customers’ credit cards. When the card is swiped, the payment processor captures the information and then goes to the credit card network like Visa or MasterCard, and then to the issuing bank. The aim is to get approval from the issuing bank for payment.
If the credit card holder has been late on payments, the issuing bank will, of course, decline the request for payment. However, if there are no issues, the bank will approve the request. It will then revert. to the payment processor and to the point-of-sale indicating the payment has been approved.
Payment gateway, on the other hand, adds another layer to the payment process.
It is mainly used for websites. If you go to a restaurant, your credit card will be swiped on the point-of-sale machine. However, with websites, you do not have that kind of technology. That is why there’s a need for a payment gateway. It is the portal your customers use to enter their credit card information manually. Once the information is complete, the payment processor will then go through the same channels as an off-line payment. It goes to the credit card network and to the issuing bank to ask for approval of payment.
If you are like most businessman who are new to credit card payment processing, you probably are wondering whether you should go for the basic payment processor or add an extra for payment gateway. We think it matters if you decide to create an app where your customers can order food from you. If not an app, if your website has a shopping cart. Know about Shopify CBD Transactions – Is This Possible?
If you are going to be off-line forever and ever, there’s no need to add a payment gateway. But this is just our opinion. If you want to make an informed decision. You need to talk to a third-party payments processing company. This is different from your issuing bank. As we said before, it is a third party service but it is a service that connects to the credit card networks of MasterCard and Visa and the like.
There are many payments processing companies out there.
However, there are payments processors that do not provide payment gateway. For your own benefit, if you have plans of taking your business to the Internet, make sure to deal only with companies that offer a two-in-one service for payment processing and payment gateway. Read about What Is the Online Credit Card Transaction Process?
You will find plenty of them online, and it is up to you to do research on which ones provide the best service at the lowest possible price. Be prepared to pay, though because quality service providers do cost money. Read about credit card processing solutions