The key to providing a smooth payment transaction process is being able to distinguish the difference between a payment gateway and a payment processor. We will walk through what differentiates the two components and how they work together for your business.
A payment gateway is the technology that connects all parties involved in a transaction: the customer, the business, and the payment processor. It is the virtual version of a POS terminal and securely passes payment information between all parties involved. Payment gateways follow strict security protocols and regulations to ensure sensitive payment and customer data is secured during the transaction.
A payment processor is a company that manages transactions between a customer and a business. The processor acts as the middleman between the customer’s bank and the business’s bank authorizing electronic payments from credit cards, debit cards, or any other electronic payment methods.
The payment processor allows businesses to accept electronic payment methods like debit cards, credit cards, and more. The payment gateway transfers information between the customer, the business, and the payment processor. It is essential for your business to utilize both capabilities to ensure a smooth and efficient payment transaction.
Step-by-step, your payment gateway and payment processor work together to accept electronic payments.
The customer enters payment details on the merchant’s website.
The payment gateway encrypts and sends the transaction data to the payment processor.
The payment processor communicates with the card network and the issuing bank to authorize the transaction.
The payment processor sends the response back to the payment gateway (approved or declined).
If approved, the transaction is completed, and the funds are settled in the merchant’s account.
If you are an ecommerce business, then a payment gateway is required. It is easy for customers to provide your business with fraudulent credit card or bank information. With a payment gateway, you can easily confirm the validity of the payment information keeping your business safe from scammers.
If your business collects any online payments through credit cards, debit cards, or ACH, then it will need a payment processor. Whether you run an online or brick-and-mortar, a payment processor is needed to collect payments. Utilizing both a payment gateway and a processor will help your business succeed.
Coast 2 Coast is proud to offer a line of industry-leading payment processors. Get in touch to speak with a payment processing expert.
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Coast 2 Coast Merchant Services LLC is a registered partner/ISO of Elavon, Inc. Georgia
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