What is the difference between a merchant service and a payment gateway?
Merchant accounts are provided by a merchant acquirer or acquiring bank, which may also be a credit card processor. A payment gateway is a crucial component to eCommerce. An online payment gateway works like a credit card machine in a sense: It allows your customers to submit payment information via the web.
The merchant account verifies the payment information, processes the transaction, and transfers the funds from the customer's bank to the business's bank. The payment gateway sends a confirmation back to the business's website or point-of-sale system, allowing the customer to complete their purchase.
Merchant of Record vs.
Payment service providers do not assume any responsibilities relating to tax, fraud risk or payment disputes for the transactions that pass through their gateway. Conversely, a merchant of record will take care of these aspects.
But there's a key difference: payment service providers take care of the entire payment process for you. Rather than managing your payment gateway and merchant account separately, payment service providers offer a full-service solution, taking care of both the payment processing and collecting the funds.
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.
Popular examples of PSPs include Stripe, Square, and PayPal. A PSP and a merchant account aren't the same thing. With a traditional merchant account, the merchant has its own account. A PSP, on the other hand, combines a variety of different merchants under a single umbrella account.
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.
Merchant of record vs.
PSPs differ from MoRs because the former deals only with the payment processing part of the transaction and not with tax, fulfillment, compliance, and disputes.
To accept online card payments you need both.
A payment gateway so your business can collect card data, and a merchant account to receive the funds.
A merchant acquirer account versus a payment gateway account
A merchant account with an acquirer is not the same thing as an account with a third party gateway not owned by that acquirer. However, some acquirers do have third party payment gateway offerings, and some integrated solutions use a built-in gateway.
Why do you need a payment gateway?
Payment gateways not only enable online transactions but also improve overall business operations. By providing a more secure and efficient transaction process, enhancing customer experience and facilitating global reach, payment gateways are an important component of digital commerce.
There are four types of payment gateways: hosted payment gateway, API-hosted payment gateway, self-hosted payment gateway, and local bank integration gateway.
Users of digital wallets do not need to fill out order forms on each site when they make purchases. Payment gateways, on the other hand, involve form-filling procedures which may put off many consumers.
While payment gateways provide the dual function of securing both the customer and the merchant throughout a transaction, payment switches protect the many payment processing service providers involved in various transactions.
A payment gateway operates directly with customer intercommunication. When the payment is initiated, the process starts from the details sent to PSP→ card network→ bank which issues the card→ Bank verification regarding the balance→ card network→ PSP→ to both the payment initiator and the receiver about the payment.
Gateways are technical solutions that transfer the merchant's payment information to the bank. PSPs are digital payment intermediaries that act as a bridge between merchants and banks.
As your payment processor, gateway, and online merchant account, PayPal authorizes transactions and helps protect electronic payments that come through your website. So you can easily accept online payments and earn money for your business.
The payment gateway securely encrypts the card details, performs fraud checks and transfers the transaction details to the acquiring bank. The acquiring bank sends the information to the card provider (eg Visa, Mastercard or Rupay) and onwards to the issuing bank for authorisation.
There are multiple options to choose from when you are looking for third-party payment gateways but the most common ones are PayPal, Stripe, Amazon Pay, 2Checkout, Apple Pay, Square and Authorize.net.
What are Payment Service Providers (PSPs)? PSPs (also called Merchant Service Providers) are third-party companies that help business owners accept a wide range of online payment methods, like online banking, credit cards, debit cards, e-wallets, cash cards, and more.
What is an example of a Payment Service Provider?
Square, Stripe, Shopify Payments, Amazon Pay and PayPal are all examples of payment service providers. Also known as third-party payment processors, PSPs allow businesses to accept credit and debit cards, plus other payment types for online, mobile, in-store and recurring payments.
A payment service provider (PSP) is a third-party company that allows businesses to accept electronic payments, such as credit cards and debit cards payments. PSPs act as intermediaries between those who make payments, i.e. consumers, and those who accept them, i.e. retailers.
- Payment gateways can be expensive. ...
- Payment gateways may require merchants to organise their own PCI compliance.
- Integration with certain online stores or website platforms may not be possible due to compatibility issues.
- Customer support may be limited to email, rather than phone or live chat.
Can online payment gateways work without merchant accounts? Yes, but only if the payment gateway is provided by a payment service provider (some payment service providers offer both processing and gateway services in one solution).
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.
