Payment gateways and processors are what make the magic happen - at least on the consumer's end. To understand how these technologies work, you'll have to learn what's going on behind the scenes of this intricate financial dance. Let's start with the parties involved; when making a credit or debit card transaction, there are four parties working in conjunction to make that seamless experience happen for your consumer.
- The business accepting the payment
- The consumer
- The bank your business uses (the acquiring bank)
- The consumer's bank (the issuing bank)
The payment gateway and the payment processor are intermediaries between all the parties mentioned above.
Think of a payment gateway as a user-friendly interface where consumers make transactions and employees manage them. Once a payment is made, the gateway triggers the payment processor to begin communicating to the acquiring and issuing banks of each party.
What Is a Payment Processor?
The payment processor is a software provider that executes the payment transaction. The payment processor makes the transaction happen by moving the funds and transmitting transaction data between you, the issuing bank, and the acquiring bank (your business bank).
A payment processor typically provides the means to accept card payments, such as via an online portal or a card-swipe machine. Think of the processor as the "behind-the-scenes" crew that does all the backend work for the gateway.
What Is a Payment Gateway?
A payment gateway is the secure online portal (or stand-alone device) that the consumer uses to enter the card or ACH number.
The payment gateway securely authorizes payments for payment-accepting websites. A consumer might go to their favorite online store and checkout using their payment gateway; it's an online point-of-sale terminal for your business. The payment gateway connects with the payment processor to complete the transaction when the payment data is entered. Different payment gateway companies might offer features that are more appealing to your specific industry, but all of them require a processor to communicate between banks.
Can a Company Offer Both?
Yes, and that's usually preferable. Having a company that's both a payment processor and offers a robust gateway cuts down processing time and communication errors and makes processes like returns less of a nightmare. REPAY partners with multiple banks in the industries we serve to better cater to our clients' needs. Doing so offers a level of redundancy, ensuring consumers' payments are always processed quickly and securely.
At the same time, our gateway runs the gamut of online payment tools to improve the payment experience for your end-users. These include an online portal, SMS/Text payments, Interactive Voice Response systems (IVR), email payment links, the ability to set up recurring payments, automatic updates to stored card data that has expired, custom reporting tools, and more.
The most crucial difference to keep in mind is that a payment processor facilitates the transaction, while a payment gateway is a tool that communicates the approval or decline of transactions between you and your customers.
Which One is Right for You?
It's a bit of a tricky question because you really need both to compete with most other businesses out there. You'll want to work with a processor that has partnered with banks geared toward your industry. For example, the collections industry is often deemed "high-risk" by many banks. That's why we work with banks that understand the industry and won't lump them together with industries like gambling. In this example, a more retail-oriented processor, like Stripe or Paypal, wouldn't be a good choice for those in the collections industry.
After you've found a few processors that work for your industry, it's time to choose a gateway. If you need a way to accept payment for your goods or services online, the most common channel is through a payment gateway, and there are dozens of top names to choose from.
Stripe, for example, might be a great option for retailers, but businesses with more complex structures, like in the auto finance industry, might require something a little more robust.
A payment gateway can help you integrate consumer payments with your accounting or ERP system. For example, REPAY's solutions can integrate into a dealer management system or other customer management system to accept consumer payments. The payments are tracked in real time and your reporting is automatically updated, making digital reconciliation a breeze.
Not all processors that provide a client account offer a payment gateway, and not all gateways are made equally. It's important to do your research, and we advise looking into gateways that are industry-specific. Having a proven history of processing payments in your industry is something that's hard to put a price tag on.
Things to Consider
The critical aspect of payment gateways and processors is secure transactions. Therefore, the gateway and processor must be Payment Card Industry Data Security Standard (PCI DSS) compliant to ensure secure transmission and protection of consumers' financial information.
All gateways and processors must be audited and certified annually to the most current standard, so be sure to look into a company's compliance certification if you are trying to decide on a third party for either. In addition, to use a payment processor and payment gateway, you must have a client account. Many payment-processing providers can also help you set one up.
As mentioned above, many gateway and processor companies are out there looking to gain your business. Your options are seemingly endless, so you can afford to be highly selective when deciding. We suggest first looking into the following aspects when deciding which third-party gateway or processor to use.
- Industry-specific service
What Can REPAY Offer?
REPAY offers payment processors, payment gateways, and client accounts to ensure you and your consumers can have a flawless payment experience.
They are easy to implement and PCI DSS, HIPAA, and SSAE-16 compliant so you can begin taking fully compliant payments.
If you would like more information, reach out today for a free demo.