The most notable thing that makes it inevitable is that consumers appreciate having a wide range of options when making payments. Whether using a credit or debit card, a mobile wallet, or a contactless payment system, flexibility is essential to guarantee seamless payment exposure for your potential customers.
If you are an excellent e-commerce merchant, then it’s likely that you’ve come across the terms and conditions of a payment gateway and a payment processor when intimating a powerful and robust payment service provider. So, in this article, we’ll go over everything you need to know about these two entities, including how they differ, how they can work together, and how to make sure your business has a good credit card processing solution.
Before delving into it, it helps you to understand the critical parties behind every card-based transaction (whether in-person or online):
- It connects payment with third-party CRM, ERP, or accounting platforms, so you don’t have to manually record and report sales.
- card-presents payments swiped, dipped, or tapped on a credit card reader.
- Transactions via phone or mail are manually entered into a virtual terminal.
The Four Key Payment Aspects
Before getting into what a payment processor and a payment gateway do, it’s important to understand the four people involved in any transaction your business platform makes:
- The merchant
- The customer
- The issuing bank
- The acquiring bank
You, the merchant, and the customer are the two most apparent players. Two parties start the transaction by offering a service or a product that your customer is willing and able to pay for. When a customer buys something online, they start the transaction by entering their payment information and naming the products or services they want to buy.
Furthermore, the leading payment solutions such as WP EasyPay, and WPFormify provides seamless and robust ways to accept WordPress Square Payments and vice versa.
The two most significant parties involved in the transaction are the banks and the bank accounts of the customer and the merchant. The issuing bank then hosts the customer’s bank account. Also, the merchant’s bank account is referred to as the merchant account, and its host bank is called the acquiring bank.
Payment Gateway vs. Payment Processor?
Let’s have a quick look at payment gateways and payment processors:
- Payment Gateways are a payment service provider (PSP) category that encrypts and sends payment data to the payment processor once you or the customer initiates a payment. It also notifies you or the customer of the transaction approval or denial.
- Primarily, a payment gateway is used to accept more payment methods via eCommerce websites. Still, the technology also integrates with credit card readers, mobile payment apps, and a point of sale system (POS).
- Payment processors send transaction data to and from the cardholder’s issuing bank, and your merchant acquires the bank.
- A payment processor is required for all debit or credit card transactions, regardless of whether the sales occur in person via a mobile payment app or online.
Critical Role of SSL Encryption
Payment gateway technology has made it possible for the sending resource to meet the needs of the end user with a high rate of success.
After the data arrives at the issuing bank, the payment gateway decodes the encrypted data. It presents it to the bank in a usable format. The issuing bank then authorises or declines the information entered by the customer. Before authenticating the customer and the payment card, the bank sometimes looks at other information, like where the computer is located and what the customer has been doing lately.
Once the issuing bank confirms that the customer’s request is real, the payment gateway uses SSL encryption to send the transaction details securely to the payment processor. As we’ve already talked about, this is a big part of how the transaction is finished.
Another Integral Element for Secure Online Payment Processing
Suppose you’re an e-commerce merchant interested in the acceptance of online payments. In that case, you will also need a Secure Sockets Layer (SSL) certificate. This digital certificate creates a safe and secure connection between your website and your customer’s browser by encrypting any data sent or received. In particular, if you want to help prevent fraud, adding an SSL certificate appends an “s” to the “http” in your website (e.g., “https”). It shows users that your site is safe and secure, which can help you make more sales and keep people from leaving their shopping carts.
Pros of an All-Inclusive Solution
All the payment gateways were initially designed for conventional e-commerce transactions, and payment gateway technology has evolved to keep pace with the changing payment landscape. In most modern payment gateways, for instance, you can also handle payment processing across a broader horizon of channels and devices to provide seamless and robust omnichannel exposure for your merchants and potential customers. It includes:
- Integrates payment solutions with third-party ERP, CRM, and accounting platforms, eliminating the need to capture and report incoming sales manually.
- Card-present payments can be swiped, dipped, or tapped on a credit card reader.
- Phone or mail order transactions that can be manually entered into a virtual terminal.
It is possible to gather your merchant account, payment gateway, and payment processing from different providers. However, this can create difficulties whenever issues or disputes arise.
Who is responsible if your online stores suddenly stop accepting credit cards in the middle of the night? If you secure all three from the same provider, you need to minimise interoperability issues and problems. If you face any issue, you need only one provider to get ahead.
The most notable and essential strategy to draw from the above discussion is that the payment processor doesn’t deal directly with authentication. The role of the payment terminal (when a customer hands over a card in person) and the payment gateway (when a customer pays from afar on the Web) in a transaction
In a nutshell, selecting a well-suited payment gateway refers to finding a service that is considered reliable and protects the customer’s identity and sensitive data and information. A strong and easy-to-use payment processor or gateway must be fast, accurate, and cheap. This will make your payment process go more smoothly.