Payment gateway vs. payment processor (2024)

Let’s start here: There are four parties involved with every credit card transaction:

  • The merchant
  • The customer
  • The issuing bank that issued the customer’s credit card or debit card
  • The acquiring bank that collects the funds from the issuing bank

The role of payment processors and payment gateways differ, yet each is a vital component in accepting credit card payments.

What is a payment processor?

A payment processor executes the transaction by transmitting data between you, the merchant; the issuing bank (i.e., the bank that issued your customer’s credit card); and the acquiring bank (i.e., your bank). The payment processor also typically provides the credit card machines and other equipment you use to accept credit card payments. To accept credit cards at your business, you’ll set up a merchant account with a merchant service provider.

What is a payment gateway?

A payment gateway is a tool that securely transmits the online payment data to the processor to continue the lifecycle of the transaction. It also authorizes payments for card-not-present transactions, mostly for eCommerce websites. Think of it as an online point-of-sale terminal for your business.

The difference is a payment processor facilitates the transaction and a payment gateway is a tool thatcommunicates the approval or decline oftransactions between you and your customers.

What’s the difference between a payment gateway and payment processor?

To put it in perspective, the main differences between a payment gateway and a payment processor are:

Payment GatewayPayment Processor
A payment gateway is the technology that encrypts and transmits the payment details from the point of entry to the payment processor. It also communicates the approval or decline back to the merchant or the customer.A payment processor is responsible for relaying transaction details to and from the customer’s card-issuing bank and the merchant’s acquiring bank.
Payment gateways are commonly used for eCommerce transactions, but can also be used to accept payments with a credit card reader, POS system, or software integration.Payment processors are necessary for all card-based transactions, whether the sale happens online, in-person, or through a mobile app.

Payment gateway vs. payment processor: Which do I need?

The most common use of a gateway is to accept payments for goods and services online; however, in today’s payments landscape, gateway technology has expanded to create a seamless buying experience across all sales channels and devices. In addition to eCommerce transactions, a gateway can also be used to integrate payments with your accounting or CRM software or process transactions at a point-of-sale system or on a mobile device.

Not all merchant account providers have a payment gateway. Some providers use a third-party payment gateway, which can be a hassle when you have a dispute. Who should you contact when you have a problem?

It may be best to select a merchant account and a payment gateway from a single provider. Using a payment gateway to securely process integrated payments can reduce errors, speed up transaction processing, and ease reconciliation.

If you don’t want to invest in credit card readers, or if you don’t have an eCommerce website, you can use a virtual terminal to process transactions, as long as you have an Internet or data connection.

Looking for a payment gateway?

We can help you accept payments the way your business needs to.Contact the Clover sales teamto find out which Clover or partner solution is right for you.

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Payment gateway vs. payment processor (2024)

FAQs

Payment gateway vs. payment processor? ›

The gateway is the beginning and end of the transaction. The customer will enter their credit card information and receive an approval or denial of the transaction. The payment processor moves the information between the customer's bank and the merchant bank. Every transaction processed online needs both.

What is the difference between a payment gateway and a payment processor? ›

A payment gateway is a network that collects, verifies and performs fraud checks on customer's credit card information before sending it to the payment processor. A payment processor is a service that routes a customer's credit card information between the customer's bank and the merchant bank.

Can a payment gateway be a payment processor? ›

Payment gateways and payment processors are often confused, but both are distinct and important components of accepting credit card payments. In short, payment gateways step in first to securely transfer card information to the payment processor.

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.

What is the difference between a payment gateway and a POS? ›

Whereas POS terminals are designed for in-person transactions, online payment gateways allow for card-not-present (CNP) transactions in which the buyer and seller never meet face to face. Credit card information is entered on the website, in a hosted checkout form, or on a mobile app.

Is PayPal a payment processor or 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? ›

Since Stripe combines payment gateway and processor services, it's possible for businesses to save on fees by working with a single provider.

Is Fiserv a payment processor or gateway? ›

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

Is Shopify a payment gateway? ›

If you sell subscription products, then you need to use Shopify Payments as your primary payment gateway. To learn more about subscriptions, refer to Subscriptions. You manage all your store's payment methods in the Payment providers area of Shopify.

What is considered 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.

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.

What is the best online payment system? ›

9 Best Online Payment Processing Services of April 2024
ProductBest for▼
PaymentCloud Read Review4.5/5 Best for High-risk merchants
Amazon Pay Read Review4.5/5 Best for Streamlined checkout
Adyen Read Review4.0/5 Best for Omnichannel commerce
BlueSnapBest for Splitting payments with other vendors
5 more rows

What is a disadvantage of payment gateway? ›

Disadvantages. Payment gateways can be expensive. Transaction fees are usually charged on each transaction and additional monthly fees may apply. Payment gateways may require merchants to organise their own PCI compliance.

Who needs a payment gateway? ›

Merchant or Seller

To accept online payments, the merchant needs a merchant account, which is a type of bank account that allows them to receive funds from online transactions. Integrated with the payment gateway, this account allows for the secure processing of transactions.

Why do merchants use payment gateways? ›

Merchant payment gateways expand your business to a global audience. Anyone with internet access can shop on your website from anywhere in the world. Since these gateways accept multiple currencies, your business gains international recognition.

What is payment gateway in simple words? ›

A payment gateway is a technology platform that acts as an intermediary in electronic financial transactions. It enables in-person and online businesses to accept, process, and manage various payment methods—such as credit cards, debit cards, and digital wallets—in a secure and efficient manner.

What is a payment gateway also known as? ›

Payment gateways are fundamentally required when accepting a credit card transaction online, because they're responsible for storing sensitive credit card data. Sometimes these gateways are referred to as merchant gateways, credit card gateway or payment portal.

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