If you’ve ever been involved in managing online payments for a business, you know how complex and confusing it can be.
Payment processors, payment gateways, payment orchestration platforms… the learning curve is real!
But understanding the uses of and differences between each is critical to your company’s success and bottom line.
Do you know the distinctions?
Samantha, the new director of a hypothetical small nonprofit, had to begin navigating this confusing world when she joined the organization.
She was excited about its recent growth and increasing online donations—that is, until she found herself buried under a mountain of payment processor and gateway options–all with different complexities and costs.
Samantha quickly learned that to keep her organization’s finances healthy and ensure smooth donation processing, she needed to educate herself on integrated payment systems, their options, their distinctions and uses, and how to navigate them.
Understanding Payment Gateways and Payment Processors
Samantha understood that streamlining operations and enhancing security would be essential to ensuring smooth transactions and maintaining customer trust.
Understanding the distinctions between payment gateways and payment processors was the first step.
Let's break down these critical components of payment processing using the analogy of a restaurant:
Payment Gateways
A payment gateway is a software interface that collects credit card information from customers.
The gateway can be a web-based virtual terminal or connected to a merchant’s eCommerce platform or ERP software via API integration. The gateway ensures that the transaction data is securely transmitted to the processor for approval.
Think of the payment gateway as the waiter at a restaurant who takes your order (e.g., credit card details) and ensures it gets to the kitchen staff.
Features of payment gateways include:
Real-Time Transaction Monitoring: Merchants can view transactions as they occur.
Automated Batch Settlement: Transactions are automatically grouped and settled at the end of the day.
Security Measures: These include CVV, AVS, and velocity filters to prevent fraud and other hidden dangers.
PCI compliance is critical for payment gateways to ensure transaction data security. Some examples of PCI-compliant gateways include:
Stripe
Cybersource
Payflow Pro (Paypal)
Paytrace
CardPointe
Payment Processors
A payment processor, also known as a clearinghouse, handles transactions involving major credit card networks, such as Visa, Mastercard, Discover, and American Express.
As the intermediary between the merchant and the cardholder’s bank, they ensure the transaction is authorized, processed, and settled.
Circling back to our restaurant analogy, the payment processor represents the kitchen staff who receive your order from the waiter, prepare the meal (process the transaction), and ensure it’s delivered to your table (completed transaction).
Some of the major payment processors include:
Fiserv (formerly First Data)
Worldpay/Vantiv
TSYS
Global Payments
Paymentech
ELAVON
These processors facilitate millions of transactions daily, ensuring compliance and financial accuracy.
Use Cases of Payment Gateways vs. Payment Processors
Payment gateways are ideal for eCommerce platforms and real-time transaction monitoring. They’re essentially merchants' command centers, regulating automated batch settlement processes and managing security controls.
Payment processors are necessary for handling bulk transactions and ensuring compliance with major card networks. Like the central ledger for credit card transactions, they perform daily financial reconciliations between the issuing and acquiring banks.
Both a payment gateway and a payment processor are involved in all credit card transactions.
The gateway collects the data and sends it to the processor, which then authorizes and settles the transaction.
Payment Orchestration Platforms
If you’ve heard of payment orchestration platforms, you may wonder where they fit in.
A payment orchestration platform connects with multiple PCI-compliant gateways, allowing a business to handle various payment methods through a unified interface.
This is especially beneficial for businesses managing multiple currencies or legal entities.
To complete our restaurant comparison, the payment orchestration platform is like the restaurant manager. It coordinates the waiters (payment gateways) and the kitchen staff (payment processors) and ensures that orders are processed smoothly, efficiently, and accurately. The manager (orchestration platform) also handles any special requests or issues, ensuring the customer experience is seamless and pleasant.
Payment orchestration platforms introduce the advantages of integrating with multiple gateways through a single platform and reducing the need for extensive IT development by using a single API integration.
Choosing the Right Gateway and Processor
When choosing a payment gateway or processor, here are five key factors to keep in mind:
Security: Robust security measures and PCI compliance are crucial.
Compliance: Ensure adherence to industry standards and regulations.
Transaction Fees: Carefully evaluate the costs associated with each option.
Integration Capabilities: Check compatibility with your existing systems.
Support: Don’t underestimate the importance of reliable customer service and technical support.
Like a head chef who understands the roles of servers and kitchen staff to keep a restaurant running smoothly, Samantha's newfound understanding of the differences between payment gateways and processors helped maintain her organization's financial health and ensure efficient transaction processing.
The main takeaway?
Doing your homework and choosing the right solutions to streamline operations, enhance security, and reduce costs can make a meaningful difference in your company’s success.
Microsoft Dynamics 365 Business Central Integration
Choosing solutions that seamlessly integrate with Microsoft Dynamics 365 Business Central can put you ahead of the game. Business Central’s unified, central platform is a game changer for managing transactions, reducing fees, and enhancing security.
With over 120 gateways to choose from, your business can find the perfect fit for your needs.
USTPay can help businesses choose and integrate the right payment solutions.
With their expertise, USTPay offers secure and efficient payment processing solutions that integrate with Microsoft Dynamics 365 Business Central—a single platform with over 120 gateways to choose from, reduced fees, and top-notch security.
If your business is struggling due to the overwhelming number of payment processors and gateway options, USTPay can help. We can revolutionize how you handle payments, providing the freedom to choose and reducing your payment processing fees. Reach out—USTPay would love to hear from you.
Learn more at https://www.ustranscorp.com/ustpay or contact at https://www.ustranscorp.com/support.