Payment Gateway and Payment Processor
Ashley Corn January 3, 2022

With the increasing number of online transactions, the term gateway has become very popular. It is because in most of the cases, when you face an incomplete transaction, then there may take place en error at the gateway. Actually, it works like a bridge between the payer’s bank and the payee’s bank.

Both the payee’s bank server and payer’s bank server exchange the fund through this gateway. Usually, third party payment applications create their own gateways and every bank used to access that particular gateway. However, there are differences between payment processors and gateway.

To know about the notable differences, first, you must thoroughly gather information about the payment gateway.

What is Payment Gateway?

Online payment takes place instead of using the physical exchange of cash or even swiping the credit card when a payer is willing to pay the seller to purchase something. The payer’s bank server and payee’s bank server are used to connecting through a gateway during online payment. It is known as a payment gateway.

This complete digital method of payment is a good alternative to POS (Point Of Sale). Usually, people who like to make online payments by selling a product must enter into the online payment option. Besides, when a payer also likes to pay a charge through an online payment method, he must also take part in the gateway.

During online shopping, it plays an important role. Actually, this gateway acts as a connector between two financially active parties. Due to the advancement of technology nowadays, there are so many payment gateways invented. Some of the popular ones are PayPal, Square, Stripe, etc.

Steps to Operate Through Payment Gateway

If the term Payment Gateway is new to you, then you must learn how it operates. Therefore, here we will discuss necessary steps that include operating a payment gateway.

  • Step 1

Make sure you have given the card details at the third-party payment application. You can easily utilise the payment gateway after providing valid card details. However, after selecting the goods you want to purchase, you need to select the ‘place your order button.

  • Step 2

When you press ‘place you order’, the payment gateway starts working. At this point, the main task of a payment gateway is to transmit data safely to the payment processing authority, i.e. bank.

  • Step 3

Now, it is the duty of a payment processing authority to transfer confidential data to a bank’s secure server. Then the payer’s bank must approve that transaction. Only after that, the payee will get the money. However, payment may decline due to a lack of funds.

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After the approval of payment, the payment gateway again starts waiting for other payments. Sometimes, the payment gateway cancels payment. In most of the cases, such a situation takes place just because of a server issue. Also, there may have no money inside the payer’s account, and for this reason, the bank declines the payment.

Difference Between Payment Gateway and Payment Processor

Although both of them may sound synonymous, they have some differences. While the payment gateway initiates the payment, the processing authority passes that confidential information.

Point of Comparison Payment Gateway Payment Processor
Function There is a huge difference in the function of the payment gateway. Becoming a bridge between the payer’s bank and the payee’s bank is the primary function of the payment gateway. On the contrary, its primary function is to process the transaction. Being a processing authority, the network passes on the confidential details to another server. The processor must work properly to ensure no error takes place.
How to works A payment gateway needs to capture data from star marked fields and pass them to the processor. In this way, it takes place in the transmission of data during a financial transaction. As a processing body, its main work is to receive credit or debit card information. Usually, it does not receive data directly. Instead, it receives through the gateway.
No question of judging result There is no question of judging information even if the payment gets declined. Actually, it has nothing to do with denial or approval from the payer’s bank. Moreover, it relies on every piece of information received from the payer. Although this payment processor has nothing to do with approval or denial but the processing authority remains responsible for any result. This is because it must carry on an analysis of data during confidential encoding data. Only after that, the processor may understand whether the provided data are right or wrong.
Mode of transaction A payment gateway is essential only when there takes place online transactions. Whereas, payment processor is such a medium that is important for both online transactions and general banking transactions.

Should You Require a Payment Gateway?

Basically, to pay someone money online, you must require a payment gateway. Unless you enter into the gateway, it is challenging to complete an online payment. But prior to making payment, you must ensure that there is enough money in the bank account. If you suffer from a financial crisis, apply for easy loans online from direct lenders.

There are lots of facilities for using online transaction mode instead of offline. You must get those benefits to understand the ease of payment.