Payment Gateway Vs. Payment Processor: What’s the Difference? | WizoPay

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July 26, 2021
Payment Gateway Vs. Payment Processor

Payment Gateway Vs. Payment Processor: What’s the Difference?

If you’re a business owner or someone familiar with the payments industry, there’s a good chance you’ve probably heard of the terms payment gateway and payment processor. And while you’ve listened to people throw these terms around carelessly, have you ever wondered what the difference is between the two? Unfortunately, their definitions and meanings have so often been misunderstood and conflated together that it’s easy to mistake one expression for the other. This blog will help clear any confusion surrounding payment gateways, payment processors, and everything in between. We’ll explore both of these terms and see what option is right for you regarding the great debate of payment gateway vs. payment processor.

Payment Processor Defined

Before deciding on the payment gateway vs. payment processor discourse, we need to define the two terms clearly. So first, we’ll start with payment processors.

With any transaction, there are always four significant parties involved:

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

A payment processor carries out the transaction between your business, the issuing bank, and the acquiring bank.

In most cases, the payment processor will provide you with equipment such as point of sale systems you can utilize to accept credit card payments. But, before you can receive credit cards at your business, you’ll need to find a merchant partner and set up an account. After that, you should be good to go with credit card transactions.

Payment Gateway Defined

Since we’ve covered payment processors, we can explain payment gateways in more detail. A payment gateway is a tool that transmits online payment data, and this continues through the cycle of the transaction. During this process, the payment gateway keeps all the critical data protected and secure. It also authorizes payments for mostly eCommerce sites due to the nature of the card not being present. You can think of it this way; it’s like an online POS terminal for your business.

The main difference between payment gateway vs. payment processor is that a payment gateway is a tool that communicates the approval or denial of the credit card transaction. On the other hand, a payment processor facilitates the transaction between the customer’s bank and your bank.

Payment Gateway Vs. Payment Processor: Which is Right For Me?

Now that we understand the difference between the two terms, there are many factors you should consider which one to go with for your business. While payment gateways are commonly used to accept payments for goods and services online, some other things you should keep in mind include:

What type of business you have
What type of sales are available: are they online/eCommerce or in-store?
Whether or not you’ll need a CRM integration

Also, it’s crucial for you to ask your provider if they offer a payment gateway system with their merchant accounts. See, some merchant providers use third-party payment gateways, which can be an issue when settling a dispute. It can be challenging trying to figure out whom to contact when multiple parties are involved. No matter what you decide to do, it’s always best to consider all your options before making a final decision.

Turn to WizoPay

At WizoPay, we can help you accept payments however you need for your business. So, contact us to see how we can help you get started today!


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