From a customer’s point of view, making payments by credit card is pretty straightforward; it’s even easier than paying cash or writing a check. But drill down into the details, and you’ll find that a complex series of interactions between various entities is at work. Credit cards have been around since the mid-1900s, and every year they become more sophisticated, convenient, and secure. Payment processing has also evolved over the years.
To better understanding how credit card processing works, you need to understand the terms used and their significance. What are the differences between payment processing, payment gateway, and payment facilitator? Sometimes the terms can be confusing.
The credit card journey
When customers initiate credit card transactions on your website or at your POS (point-of-sale), several resources cooperate in processing the transaction and moving the money from the customer’s account to the merchant’s.
Payment Processor vs. Payment Gateway: understanding the difference
If you as a merchant have contemplated accepting online payments, now is an excellent time to start. More and more consumers and businesses are conducting the majority of their business online, and the trend is sure to continue.
If you choose to accept online payments, you’ll need both a payment processor and a payment gateway. The two are often spoken of interchangeably, but they are, in fact, different.
A payment processor manages the credit card transaction process by mediating between the merchant and the financial institutions involved. A processor authorizes transactions and facilitates merchants getting paid on time by seeing to the transfer of funds. In addition, the payment processor will also provide payment terminal equipment that is used to accept the credit cards.
The best payment processors will support credit card payments and a variety of other payment methods. Through
On the other hand, the payment gateway is the technology used by the merchant to accept payments from customers. The term includes the physical card-reading devices used in retail stores as well as payment processing portals used in online stores. Payment gateways can now also accept phone-based payments using QR codes.
The payment gateway maintains a secure connection between the merchant’s e-commerce site and the payment processor. It encrypts credit card data, verifies authenticity, and ensures delivery.
So, in a nutshell, the payment processor is the service provider who expedites the transaction; the payment gateway is the secure communication channel used to transmit payments.
For purchases made at a physical location, the POS terminal supplied by the payment processor is all that’s needed to verify the authenticity of a card. If the card is not present, such as with transactions over the phone or by email, the payment gateway will authenticate the card before securely sending its details to the processor.
Payment processors will often bundle all the services a merchant needs to accept payments, including equipment and support. Often the payment processor has a propriatory gateway to they can control transactions from beginning to end.
Merchant accounts are bank accounts used for accepting credit card payments. You can open a merchant account with your bank, or your payment processor can provide it along with the other services they offer. Sometimes different collection methods call for individual merchant accounts. Be sure to work with a payment processor that will support all the payment channels you choose.
How to get started accepting online payments
Of course, you need an e-commerce platform (your website or e-store). You’ll also need to partner with a payment processor who can provide a payment gateway and help you set up your merchant account.
Make the move to electronic payments easy and give customers the payment options they want.
If you’d like to know more about our approach,
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