Payment Processor vs Payment Gateway

Payment processor list
What is a payment gateway?
What is a merchant account?

What is a Payment Processor?

Payment processors are the financial institutions that provide the core payment processing services used by an online merchant. These core processing services include authorization, capturing and refunding of transaction requests. Payment processors usually have partnerships with other companies, such as payment gateways, who deal directly with merchants to handle all processing needs.

A payment processor is a company appointed by a merchant to handle credit cards and debit cards transactions for merchant acquiring banks.

In an operation that will usually take a few seconds, the payment processor will both check the details received by forwarding them to the respective card’s issuing bank or card association for verification, and also carry out a series of anti-fraud measures against the transaction.

Additional parameters, including the card’s country of issue and its previous payment history, are also used to gauge the probability of the transaction being approved.

Once the payment processor has received confirmation that the credit card details have been verified, the information will be relayed back via the payment gateway to the merchant, who will then be able to complete the payment transaction. If verification is denied by the card association, the payment processor will relay the information to the merchant, who will then decline the transaction.

What is a Payment Gateway?

Payment gateways are used to facilitate online transactions and help them get approved. A payment gateway is the first place the transaction goes when a customer submits an order online. The transaction flows through the payment gateway, to the payments system, where the transaction details are submitted for approval, and will eventually make its way into the merchant account.

With a payment gateway, transactions can occur either via a hosted page, their API, or an integrated shopping cart.

A payment gateway enables merchants like you to process credit, debit and alternative payments online. Since retailers are prohibited from sending a customer’s payment information directly to a payment processor, the payment gateway acts as the go-between, ensuring customer data is PCI compliant, encrypted and secure.

Once customers submit their payment on your checkout page, the payment goes through the payment gateway, then to the payment processor, then through the credit card network and finally to the customer’s credit card issuer (Visa, Mastercard, American Express) for authorization. If the transaction is approved, the funds will be transferred from the customer’s credit card to the merchant’s account.

What is a Merchant Account?

Merchant accounts are for reconciling the funds to be sent to the merchant on successful sales. These are the funds that were approved through the payment system. All approved payments are paid out to you, the merchant, through your merchant account. This is the last stop before you receive the funds in your normal business bank account.

A merchant account functions similar to a regular bank account. After a successful sale, money is transferred into the merchant account. A merchant account can accept many forms of payment, including credit and debit cards as well as alternative payment methods such as wire, ACH and more.

A merchant account is like an online storage account for all of the sales you will make online. Once the funds have been deposited into your merchant account they are transferred to your business bank account.

A couple of features you should consider when choosing a payment processor are, would you like to host your own checkout pages with your your own design and have full control over the payment process, keeping your customers on your site, and would you like to be able to accept credit cards via phone, fax, and mail (Virtual Terminal)?

The Top Payment Processor List

  • Authorize.Net
  • PayPal
  • Stripe
The processing fees seem to be standardized across the board for all of the payment processors listed above ...
  • Domestic processing fee: 2.9%
  • Authorization fee: $0.30 per transaction

All of the gateways listed above are well known and reliable payment gateways. However, not all gateways provide the same functionality. Of these, Authorize.net stands out as the clear winner for solid businesses that would like trouble free payment processing packed with time and money saving features. The monthly gateway fee provides you with a number of premium benefits.

Authorize.Net’s payment gateway offers a variety of options available for its users so they can accept and process payments. Its online payment system accepts credit cards and electronic checks from websites and deposit funds automatically into your bank account, saving time and money for small to medium sized businesses.

For retail locations, you have the option to use either Authorize.net's Virtual Point of Sale (VPOS) solution or choose from dozens of pre-integrated, third party POS systems.

Authorize.Net's virtual terminal enables you take mail and phone orders from your customers.

Mobile transactions are also accepted via its free mobile app.

For check payments, there is the exclusive, fully integrated electronic check payment method which accepts and processes payments from bank accounts directly through the your website or the Authorize.Net Virtual Terminal.

With Authorize.net, you also get the following additional features included free:

Customer Information Manager

Authorize.net's Customer Information Manager (CIM) enables you to tokenize and store your customers’ sensitive payment information on Authorize.Net’s secure servers, simplifying the PCI DSS compliance as well as the payments process for returning customers and recurring transactions.

Advanced Fraud Detection Suite

Identify, manage and prevent suspicious and potentially costly fraudulent transactions with the Advanced Fraud Detection Suite™ (AFDS).

Automated Recurring Billing™

Automated Recurring Billing™ (ARB) is a convenient and easy-to-use tool for submitting and managing recurring, or subscription-based, transactions.

Sync for QuickBooks™

Save valuable time and money by automatically importing your settled Authorize.Net transactions directly into your existing QuickBooks account.

Simple Checkout

Create "Buy Now" and "Donate" buttons for your website simply by copying/pasting simple code. Simple Checkout is a perfect solution for donation sites and merchants that typically sell one catalog item per order.

Easy to use and well documented API(Application Programming Interface)

Authorize.net's API is complete and scalable, which enables you to accept any type of payments, anywhere, from food cart to storefront, website to app. By using their API, your customers stay on your website and you have complete control over every aspect of the payment process.

When you are ready, we are Certified Authorize.net developers that have worked extensively with Authorize.net's API and will able to help you get setup quickly ...