Digital Wallet vs. Payment Gateway vs. Payment Processor (2024)

Published on 07/26/2018 - Updated on 12/24/2019

The more established the e-commerce sector becomes, the more merchants choose the digital world to develop their businesses. However, setting up an e-commerce business can be tricky sometimes, particularly when it comes to choosing the best payment options to use for the online store.

Most of us have heard terms such as digital wallet – or e-wallet, payment gateway and payment processor before. As they are all connected to online payments, it is common to see people using them interchangeably, and that causes confusion for merchants venturing into the e-commerce world. In this article, we explain their definitions and main differences.

What is a Digital Wallet?

Also known as an e-wallet, a digital wallet is the online equivalent of a physical wallet. It refers to an electronic device or online service consumers can use to make electronic transactions. Users can securely store their bank information and card details in the e-wallet system. Additionally, they can also fund their wallet account and use that money for payment transactions.

E-wallets can be used for online purchases as well as for user authentication. They can store complete user information including credentials, transaction history, and personal details. In addition, digital wallets can also be used in conjunction with other mobile payment systems.

Popular digital wallets include PayPal, Apple Pay, Android Pay and Samsung Pay. The first one has a major difference: it works on a variety of devices and platforms. The other three, on the other hand, are currently device or operating system specific.In Brazil, popular wallets also include PagSeguro, Stelo, and Mercado Pago.

What is a Payment Gateway?

A payment gateway is the online equivalent of PoS machines. That means, essentially, that a gateway works as a bridge between the website and the card acquirers or banks, providing the technical solution that authorizes card payments. When using a payment gateway, merchants are required to establish a contractual relationship with banks and card acquirers, as well as with the gateway provider. In this article, we have discussed in more detail the pros and cons of a payment gateway.

What is a Payment Processor?

A payment processor is responsible for providing all the payment processing services working as a middleman between the e-commerce store and the card acquirers or banks. It can act both as a payment gateway or as a payment intermediator.

When acting as a payment intermediator, the payment processor provides a full service: technical payment processing and money collection. In this scenario, the payment processor is responsible for all the contracts with card acquirers and banks and for the settlement of the funds collected, massively reducing the bureaucracy for merchants. In this article, we have discussed in more detail the pros and cons of a payment processor.

Digital Wallet vs. Payment Gateway vs. Payment Processor

Generally, digital wallets are stored on the client side and are fully compatible with moste-commercewebsites. However, businesses can create a server-side digital wallet to store their customers’ details on their servers.

This type of wallet is becoming increasingly popular among large players due to the security, efficiency, and added utility they provide to the buyer. The information stored is input by the user and contains details such as shipping address, billing address, payment methods (including credit card numbers, expiry dates, and security numbers), among others.

Regardless of its type, a digital wallet is a payment method. A payment gateway or payment processor, such as PagBrasil, on the other hand, works as a channel for the payment transaction between the buyer and the seller. Therefore, consumers can choose to pay via digital wallet, but the website will still need the gateway or payment processor to complete the transaction.

Digital Wallet vs. Payment Gateway vs. Payment Processor (2024)

FAQs

Digital Wallet vs. Payment Gateway vs. Payment Processor? ›

Regardless of its type, a digital wallet is a payment method. A payment gateway or payment processor, such as PagBrasil, on the other hand, works as a channel for the payment transaction between the buyer and the seller.

Is digital wallet same as payment processor? ›

The payment processor or merchant then sends a request to the user's wallet to confirm the transaction. The digital wallet then uses a tokenization process to securely store the user's payment information, such as credit card details or bank account information, in an encrypted form.

Is payment gateway the same as payment processor? ›

The payment gateway securely encrypts the customer's payment data and sends it to the payment processor. The payment processor receives the encrypted payment data from the payment gateway and forwards it to the customer's bank (the issuing bank) to request authorization for the transaction.

What is the difference between payment gateway and e-wallet? ›

So, while an e-wallet holds your funds and facilitates transactions, a payment gateway is the guardian of your payment information, ensuring your online purchases are secure. Together, they form an efficient system for managing money and conducting online transactions.

Is Amazon pay a payment gateway or processor? ›

Amazon Pay provides your business with an online payment processing service that allows Amazon customers to buy on your site using their Amazon account.

Is PayPal a digital wallet or payment gateway? ›

PayPal, Google Wallet, and Apple Pay are examples of internet-based digital wallets, because they don't require purchasing through an app or with a phone, instead using a customer's online profile and saved card information to pay.

Is PayPal a wallet or payment gateway? ›

No, PayPal is not a traditional payment gateway, but it does offer a payment gateway solution (Payflow) as part of its overall payment processing solutions.

Is Stripe a gateway or a processor? ›

Stripe is a payment processing platform that serves as both a payment processor and an acquirer. When a business signs up with Stripe, it does not need to have a separate acquirer or establish a separate merchant account.

Is Fiserv a payment gateway or processor? ›

Provide your customers with a seamless online payment experience through your website or app with our safe and secure payment gateway.

Is Visa a payment gateway or processor? ›

The Payment Gateway sits between the Merchant and Processor, who passes transactions to the Network (MasterCard, Visa, American Express, Discover, etc.) The role of the Payment Gateway is that of a secure information conduit that complies with credit card processing security rules and regulations.

What is the difference between e-wallet and digital wallet? ›

An eWallet (electronic wallet) is a digital version of a traditional wallet that stores payment card information and facilitates electronic transactions. A Mobile Wallet is a digital wallet that resides on a mobile device and allows users to store payment information and conduct transactions through a mobile app.

Is digital wallet and e-wallet the same? ›

You might also see a digital wallet referred to as an e-wallet, both terms referring to a type of software enabling users to store credit and debit card details and loyalty cards in the cloud.

What is considered an e-wallet? ›

An e-wallet is a secure money management app or online platform that allows you to make purchases with retailers on-site, transfer or send money and track rewards programs. You can link the e-wallet to your bank account or pay as you go with a prepay option.

Is Google a payment gateway? ›

The Google Pay API is available for merchants and users in multiple countries or regions. Google Pay API for India operates on a unique India-only form of payment called Unified Payments Interface (UPI).

Is Mastercard a payment gateway or payment processor? ›

Mastercard is a payment network processor. Mastercard partners with financial institutions that issue Mastercard payment cards processed exclusively on the Mastercard network. Mastercard's primary source of revenue comes from the fees that it charges issuers based on each card's gross dollar volume.

Is credit card a payment gateway? ›

A payment gateway is a technology used by merchants to accept debit or credit card purchases from customers. The term includes not only the physical card-reading devices found in brick-and-mortar retail stores but also the payment processing portals found in online stores.

What is digital wallet also called? ›

A digital wallet, also known as an e-wallet or mobile wallet, is an electronic device, online service, or software program that allows one party to make electronic transactions with another party bartering digital currency units for goods and services.

What is a digital payment processor? ›

A payment processor is a company or service that facilitates electronic transactions—such as payments made with credit cards, debit cards, or digital wallets—between businesses and their customers.

Is digital wallet a payment method? ›

A digital wallet lets you make payments in stores, online, or via an app with just one wave—or tap—of your smartphone.

What is considered a digital wallet? ›

A digital wallet (or electronic wallet) is a financial transaction application that runs on any connected device. It securely stores your payment information and passwords in the cloud. Digital wallets may be accessible from a computer; mobile wallets, which are a subset, are primarily used on mobile devices.

Top Articles
Latest Posts
Article information

Author: Geoffrey Lueilwitz

Last Updated:

Views: 6556

Rating: 5 / 5 (80 voted)

Reviews: 95% of readers found this page helpful

Author information

Name: Geoffrey Lueilwitz

Birthday: 1997-03-23

Address: 74183 Thomas Course, Port Micheal, OK 55446-1529

Phone: +13408645881558

Job: Global Representative

Hobby: Sailing, Vehicle restoration, Rowing, Ghost hunting, Scrapbooking, Rugby, Board sports

Introduction: My name is Geoffrey Lueilwitz, I am a zealous, encouraging, sparkling, enchanting, graceful, faithful, nice person who loves writing and wants to share my knowledge and understanding with you.