If you are running a business you must be familiar with the terms payment gateways and payment processor, it often confuses people for the difference. Whether they can be synonymously used or they are all different. These two actually are two key links in the chain of payment processing.
Every credit card interaction involves these 4 parties:
- The merchant;
- The customer;
- The acquiring bank which gives the merchant’s processing services;
- The issuing bank which issues the customer’s credit card or debit card
Payment processor and payment gateways are both different and important in its own way.
A payment processor is a often a third party employed by a business owner or merchant to tackle transactions from different channels such as credit cards and debit cards of the acquiring banks. In order to accept payments through credit cards, you will have to set up an account with merchant service provider. The merchant provider completes the transaction by transmitting the data between customers, merchant, acquiring bank and issuing bank. Generally they provide terminals, credit card machines and other equipments required to accept credit card payments.
It is referred to a merchant service provided by an e-commerce application service provider. With the help of payment gateways credit card or direct payments processing for e-businesses, online retailers etc are authorized. Using a payment gateway can reduce errors and speed up transaction processing. Having or not having terminals is your choice. Also, it should be noted that payment gateways can not only be utilized when you have a website. Virtual terminals process transactions if have an internet access.
Now what is a must for your business?
Well if you are not an e-commerce business you do not need a gateway mandatory. A basic merchant account will do. While you look out for a merchant account consider the factors like reasonable payment processing rates, decent customer service etc. A payment gateway is kind of a luxury; it is a virtual point of sale with internet connection. If you are an e-commerce site you may need the payment gateways in near future to expand the horizon. All merchant account providers do not provide payment gateway. To avoid the dispute you should better look for a single provider who can serve both the purposes. As sooner or later a business should expand its wings which will be helped by these payment processing services.
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