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The terminology in the payment’s industry can be confusing. Many terms are used interchangeably and most merchant service providers can’t be neatly allocated into just one category.
We’ll try to untangle some of the confusion and clarify how we define the similarities and differences between payment gateways and payment processors.
What is a Payment Gateway?
A payment gateway acts as the interface that collects and transfers payment information from a customer to a merchant acquirer (also known as an acquiring bank).
It then communicates whether a payment has been accepted or declined back to the customer.
You’re likely to come across a payment gateway whenever you try to complete a transaction online.
A payment gateway is a mid-point between a customer and a merchant. It collects and validates customer payment details, communicates with the customer’s bank to ensure the funds are available, and then transfers that information onwards to the payment processor and acquiring bank.
The following steps are a typical illustration of how payment gateways work:
Step 1: A customer enters their payment information on the checkout page of an online store.
Step 2: The payment gateway collects and encrypts that information, before sending it on to the merchant acquirer.
Step 3: The acquiring bank uses a payment processor to forward the request to the customer’s bank, which approves or denies the transaction.
Step 4: If the transaction is approved, the payment gateway confirms with the customer and finalises the sale. The gateway may also display a confirmation screen if the customer’s bank uses 3D Secure authentication.
Payment gateway providers often make it easy to integrate their solution into various e-commerce platforms, and may also provide an API for custom integrations.
Different payment gateways have their own distinctive ways of working, and you should carefully consider which solution will best suit your needs.
The most common types of payment gateways are:
There are plenty of important factors to consider when choosing between different payment solutions. While each provider offers a slightly different service, the best payment gateway for your business will be the one that most closely meets your needs.
Some of the most popular payment gateways in the UK include:
Visit our guide to the best payment gateways to find out more, or complete our short form to contact us for advice.
A payment processor is a company that transmits the information collected by a payment gateway between the acquiring bank and the customer’s bank.
Once a customer submits their details through an online store’s checkout, the payment gateway encrypts the data and forwards it to the payment processor. The transaction then proceeds through the following steps:
Step 1: The processor sends the information to the customer’s bank for approval or denial.
Step 2: The issuing bank approves or denies the transaction based on whether a) it is permitted and b) the customer has sufficient funds to make the payment.
Step 3: The issuing bank communicates the decision to the customer via the payment gateway.
Step 4: If the payment is approved, the processor will transfer the payment information to the acquiring bank.
There are many payment processors that provide their services to businesses based in the UK, and it’s worth considering your options before making an application.
Notably, some companies that offer payment gateways also offer payment processing services. Whether you should choose a separate payment gateway and payment processor or choose a combined solution will depend on your unique requirements.
Some of the most popular payment processors in the UK include:
Some major e-commerce platforms (such as Shopify and WooCommerce) offer their own payment processing capabilities, while businesses such as BitPay can process payments made with cryptocurrencies.
In a word, yes. There’s no payment processor vs payment gateway argument to be had, since you will need both to handle online and in-person transactions.
The question is whether you should use one company to do both or separate companies to carry out each function.
Payment gateways provide an interface that collects and secures customer data, confirming whether a transaction has been approved or rejected on the checkout screen or via an external site. Payment processors transmit this information between the customer’s bank and the merchant acquirer.
Transactions cannot be processed and completed without both elements.
When looking for a payment gateway or payment processor, businesses should review their options and match the features offered with their commercial needs.
Some of the most important features to look for when choosing a payment gateway include:
The following are some of the key things to consider when choosing between payment processing providers:
Whether you’re looking for a new payment gateway or a payment processing provider, the key to choosing the best option is to match the features offered with your business’s unique needs.
We are payment processing experts, and draw on a wide network of contacts and connections to help our clients find some of the market’s most effective and competitive payment solutions.
To find out more, contact us for help and advice or detailed quotes for services that will suit your business.
No. While they are conceptually similar, a payment gateway is an interface that sits on top of a website’s checkout to securely collect payment information and communicate whether transactions are approved or denied. Payment processors, on the other hand, transmit the payment details between the customer’s and merchant’s banks and execute any transactions that are approved.
Yes, you will need both a payment gateway and a payment processor in order to accept card payments online. Depending on your requirements, you may be able to apply for a packaged solution that encompasses both a payment gateway and payment processing services from the same provider.
Compare Payment Processor Fees
Compare preferential rates and card processing offers from the UK’s leading merchant account providers
You’ll only deal with our in-house payment experts
Your details will not be shared
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