A payment gateway<\/a> is basically a merchant service that accepts payments from various modes. These modes can be credit cards, debit cards, or any other payment methods. Recently QR based and customized link-based payments have also become a big part of the payment gateway system.<\/p>\n\n\n\n It is called an online version of the Point Of Sale method. Merchants can get payment gateway service from either their bank or a specialized fintech company. PayPal<\/a>, PhonePe, PaytM, and GooglePay are fintech companies that provide payment gateway services<\/a>.<\/p>\n\n\n\n Here we discuss the three major types of payment gateways.<\/p>\n\n\n These payment gateways host the payment page separately from the e-com checkout page. So when you click the \u2018buy\u2019 or \u2018proceed to pay\u2019 icon, it redirects to the payment hosting company. Once the payment is complete, it automatically brings you back to the shopping checkout page.<\/p>\n\n\n\n These companies offer a high level of security, easy to set up, and come with flexibility. PayPal is a popular hosted payment gateway that is used by merchants worldwide along with other international payment gateway like PayPal<\/a><\/p>\n\n\n\n Self-hosted payment gateways offer to integrate payment processing on the same shopping site. It doesn\u2019t redirect you to any external page for payment.<\/p>\n\n\n\n The benefit is that complete payment data is stored <\/strong>on the merchant website itself. On top of that, it is more convenient and reduces the chances of payment failure. On the downside, technical support will be less available for this gateway.<\/p>\n\n\n\n Shopify<\/a> and Stripe<\/a> are the two most popular self-hosted payment gateways.<\/p>\n\n\n\n These payment gateways use the Application Programming Interface to process payments. Right from storing customer payment data, initiating payment, and completing a payment, everything happens within the merchant website. Merchants can even customize payment processing for different users.<\/p>\n\n\n\n Sounds great! Right?<\/p>\n\n\n\n But the downside here is the merchant is completely responsible for security and data protection. They even have to comply with local payment regulations.<\/p>\n\n\n\n A payment gateway initiates the transaction by transferring the payment information between the payment portal of the merchant side and the acquiring bank. These payment portals could be a website, a mobile phone, or an interactive voice response service.<\/p>\n\n\n\n When customers want to check out after selecting a product on the shopping site, they have to enter their payment details on the checkout page. That\u2019s where a payment gateway comes in for taking the information further to complete the payment.<\/p>\n\n\n\n These are the basic steps showing how a typical payment gateway works.<\/p>\n\n\n\n Customers click the Checkout or equivalent button on the shopping website.<\/p><\/li>\n\n\n\n Customers are redirected to a payment gateway page.<\/p><\/li>\n\n\n\n They enter the payment details like card details or bank details.<\/p><\/li>\n\n\n\n Next, the payment gateway takes the user to the issuing bank\u2019s page to authorize the transaction.<\/p><\/li>\n\n\n\n Once the transaction is approved, the bank checks for the sufficient balance.<\/p><\/li>\n\n\n\n If the balance is sufficient, the payment transaction is complete and the customer gets a message about the successful order placement.<\/p><\/li>\n\n\n\n If the balance isn\u2019t sufficient, customers get an error message about the failure of the possible transaction.<\/p><\/li>\n\n\n\n For successful transactions, the bank and payment gateway settle the amount and the merchant receives the payment.<\/p><\/li>\n<\/ul>\n\n\n\n A payment processor is basically a mediator between the merchant and the banks involved in the process. It transmits the transaction data between the merchant, the issuing bank, and the recipient bank.<\/p>\n\n\n\n It can also process card-based payments such as credit card payments. For this, the processor has to comply with the Payment Card Industry Data Security Standard. Furthermore, it should have the underlying technology to read EMV encryption during card payment transactions.<\/p>\n\n\n\n Suggested Read: List of Best International Payment Gateways in India<\/a><\/strong><\/p>\n\n\n\n There are typically two types of payment processors: online and offline payment processors.<\/p>\n\n\n\n Online payment processors are integrated with the online stores and e-com websites. They work completely in the digital platform where merchants don\u2019t need any other hardware support. The merchant and the customers both need to be online for this payment processor to work.<\/p>\n\n\n\n These payment processors enable the merchants to collect payment through offline platforms. They include a POS like card-swiping machine<\/a> to facilitate card payment. It checks and validates payment transactions without the need for merchants and customers to be online.<\/p>\n\n\n\n The payment processor works almost in the same way as the payment gateway. Here is how a payment processor works:<\/p>\n\n\n\n Customers go to the checkout page and click to pay by credit or debit card.<\/p><\/li>\n\n\n\n Customers submit their card details.<\/p><\/li>\n\n\n\n The information is relayed to the payment gateway.<\/p><\/li>\n\n\n\n The payment gateway then passes on the transaction information to the payment processor integrated with the merchant.<\/p><\/li>\n\n\n\n The payment processor then transfers the transaction details to the card network.<\/p><\/li>\n\n\n\n The card network finally relays the information to the customer\u2019s bank, which checks for sufficient funds in the customer\u2019s account.<\/p><\/li>\n\n\n\n If there is sufficient funds available, the bank approves the transaction. Then it relays the fund deduction information back to the customer and merchant via the payment processor and gateway.<\/p><\/li>\n\n\n\n The fund is simultaneously deposited in the merchant account.<\/p><\/li>\n<\/ul>\n\n\n\n Payment gateways and payment processors are like front-end and back-end in any system.<\/p>\n\n\n\n Payment gateway relays the card details and other necessary payment details to the payment processor. This processor then interacts with the involved financial institutions to complete the payment.<\/p>\n\n\n\n A payment gateway initiates the transaction and the payment processor completes it. A processor also helps in fraud prevention by the gateway in your e-commerce business.<\/p>\n\n\n\n Suggested Read: What are eCommerce Payment Systems in India: Types, Examples & Advantages<\/a><\/strong><\/p>\n\n\n\n In other words, a payment gateway is essentially a tool or an online mode of POS service. By integrating it, merchants can provide a wide range of payment options to the customers.<\/p>\n\n\n\n And payment processors, on the other hand, execute the transactions and collect the payment on behalf of the merchant.<\/p>\n\n\n\n Any online business needs both a payment gateway and a payment processor. They both work together to complete payment processing. Without one, the other one can\u2019t complete the transaction.<\/p>\n\n\n\n For example, if you don\u2019t have a payment processor, the payment gateway only initiates the payment process. However, the process will not go through and result in a failed payment.<\/p>\n\n\n\n Similarly, the payment processor can\u2019t process the payment if it doesn’t receive the initiation from the gateway. So, for this reason, you can\u2019t have an online store without a gateway. Also, without a gateway, you can\u2019t offer various payment modes to the customers, which might impact your sales.<\/p>\n\n\n\n Choosing the right payment gateway will simplify collection of payments from customers. Some of the important factors to keep in mind include:<\/p>\n\n\n\n Costs incurred: <\/strong>A payment gateway usually collects setup fee, transaction fee, and monthly fee from its users. You must consider your user base, the value and volume of your annual transactions, and upcoming expansion plans to determine what payment gateways offer the services you want within your budget.<\/p><\/li>\n\n\n\n Payment and currency support: <\/strong>Your gateway must support multiple payment methods to enable customers to pay through whatever mode they want. It must also have currency support for all the countries in which most of your customers reside.<\/p><\/li>\n\n\n\n Integration options: <\/strong>Your payment gateway must offer integration with your existing accounting and invoicing software<\/a> to streamline the entire process. Otherwise, you will have to keep track of all payments and update them manually in the system. This feature will avoid manual errors and save time.<\/p><\/li>\n\n\n\n Holding time: <\/strong>Payment service providers usually take 1-7 days of time before settlement of payments. Depending on your cashflow, select a payment gateway that has a holding time within your acceptable limit.<\/p><\/li>\n\n\n\n Limit: <\/strong>Some gateways have a monthly transaction limit. You must have a buffer between the number of transactions processed usually and what your payment gateway offers to avoid losing potential clients.<\/p><\/li>\n<\/ul>\n\n\n\n Payment processors must be chosen after utmost research. Major factors to consider while selecting are:<\/p>\n\n\n\n<\/span>Common Types of Payment Gateways<\/span><\/h2>\n\n\n\n
![\"what](\"https:\/\/cdn.techjockey.com\/blog\/wp-content\/uploads\/2022\/02\/18182730\/what-is-the-difference-between-payment-gateway-and-processor-1024x536.jpg\")
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<\/span>Hosted Payment Gateways<\/span><\/h3><\/li>\n<\/ul>\n\n\n\n
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<\/span>Self-hosted Payment Gateways<\/span><\/h3><\/li>\n<\/ul>\n\n\n\n
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<\/span>API-hosted Payment Gateways<\/span><\/h3><\/li>\n<\/ul>\n\n\n\n
<\/span>How Does a Payment Gateway Work?<\/span><\/h2>\n\n\n
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<\/span>What Is a Payment Processor?<\/span><\/h2>\n\n\n\n
<\/span>Common Types of Payment Processors<\/span><\/h2>\n\n\n
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<\/figure><\/div>\n\n\n<\/span>Online Payment Processors<\/span><\/h3>\n\n\n\n
<\/span>Offline Payment Processors<\/span><\/h3>\n\n\n\n
<\/span>How Does a Payment Processor Work?<\/span><\/h2>\n\n\n
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<\/span>Payment Gateway Vs Payment Processor: What’s the Difference<\/span><\/h2>\n\n\n\n
<\/span>Difference Between Payment Gateway Vs Payment Processor<\/span><\/h2>\n\n\n\n
Payment Gateway<\/strong><\/td> Payment Processor<\/strong><\/td><\/tr> Payment gateway is a tool\/service to accept payment.<\/td> A payment processor is an intermediary that completes the payments and collects funds.<\/td><\/tr> No need for any merchant account for integrating a payment gateway within a website or online store.<\/td> A merchant needs a merchant account where the payment processor collects funds and deposits.<\/td><\/tr> It initiates the payment process.<\/td> It completes the payment process.<\/td><\/tr> It interacts between the customer and the payment processor.<\/td> It interacts between the merchant and the financial parties involved in the transaction.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n <\/span>Payment Gateway Vs Payment Processor: Which One Do You Need<\/span><\/h2>\n\n\n\n
<\/span>How to Find the Right Payment Gateway?<\/span><\/h2>\n\n\n
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<\/span>How to Find the Right Payment Processor?<\/span><\/h2>\n\n\n\n