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Understanding the difference between a payment gateway and a payment processor

Category: Growth

understanding-the-difference-between-a-payment-gateway-and-a-payment-processor

Businesses now need to deal with online transactions more than ever. For this, you need to set up an online payment processing system that is safe as well as efficient. Such a system can comprise of several service providers. So, it is important to know the precise services provided by each provider. For starters, you need to distinguish between a payment gateway and a payment processor. While both of them provide online payment related services, they have very distinct areas of operations. So, read on to better understand their differences and run your business with confidence.

What is a payment gateway?

A payment gateway is a tool that helps process the payment between the client’s bank account and the business’s bank account. The main function of a payment gateway is to secure the transmission of online payment data from one end to another. These service providers are also responsible for authorizing payments for card-not-present transactions. A gateway is mainly useful for processing online credit card payments.

In simple terms, a payment gateway is a like a middleman between a client and an online business. When a client provides their payment details to an online business, then the gateway sends this data to the payment processor for further action.

For an online business, a payment gateway can provide a wide range of services such as ensuring the safety of personal data, uninterrupted services, and the ability to accept multiple payment options. Furthermore, a payment gateway may also enable your business to accept different currencies, thus enabling international transactions. While selecting a gateway for your business, you should pay proper attention to the service offered as well as the various fees and commissions charged.

Also Read: What are the benefits of working with a payment processor?

What is a payment processor?

A payment processor is generally a financial institution which carries out payment processing services for online businesses. Such payment processors generally enjoy collaboration with other companies, which have direct interaction with merchants or consumers. A processor acts as a connecting node between a payment gateway and a merchant’s account.

The main task of a payment processor is to facilitate the transfer of payment related information and to keep the data secured. A processor collects the data pertaining to the transaction, validates and executes the instructions, and then deposits the money into the merchant account. It concludes the cycle by informing the payment gateway about the final outcome of the transaction.

There are a wide range of payment processors available in the market today. It is important to pay attention to different criteria while selecting an appropriate payment processor for your business. A processor should not only provide swift and smooth transfer of funds, but it should also be able to ensure that sensitive data transferred remains safe and secure.

Also Read: The 4 Step Procedure for an Easy Payment Gateway Integration

Integration of payment gateway and payment processor

For an online business, it is important to engage the services of both a payment gateway and a payment processor. In order to complete the cycle of online payments, the services of both are required in conjunction with a merchant account.

Essentially, a payment gateway is required to receive the payment related details from the client. Then pass the information on to the payment processor, which carries out the rest of the transaction and sends the status back to the payment gateway.

These service providers should be chosen carefully after taking your business’s specific requirements into account.

the-most-popular-online-payment-methods

Online payment methods have become increasingly popular due to widespread use of internet-based shopping. Efficient payment solutions not only ensure that your business retains its liquidity but also endeavors to provide smooth services to the clients. The right payment method helps you attract more customer and address a larger market. However, before choosing one for your business, it is important to keep certain facts in mind. The selected methods should be flexible yet robust. To make things easier, here is the list of the top online payment methods.

  1. Credit Cards:

    Credit cards have emerged as one of the most frequently used online payment methods. These cards usually have international acceptability, making them highly useful for online transactions. If you want to offer this feature to your customers, you need to decide whether you want your own dedicated merchant or an intermediary holding account. It is important determine the best option as selecting one over the other can result in different business processes and funding times. This method is highly flexible as the client may choose to make payments in installment. Further, these cards also offer high level of transaction security.

 

  1. Internet Banking:

    This is an upcoming online payment method. Internet banking comes with various payment options, which are tailored to meet different requirements of clients. This electronic payment system is considered safe and secure. The client may be required to pay certain charges to their bank for using these services. However, this method is still relatively cheaper than most of the other online payment methods.

 

  1. Mobile Payments:

    Mobile payment methods are regulated transactions that is performed from your mobile device. This payment method has become widely popular as people consider contactless payment to be the safest option. It is secure, fast and convenient. Mobile may be used for processing payments made by a chip card or a credit card. This payment option is highly flexible as it incorporates several methods such as typing the credit card number or simply dipping a chip card to process a payment. There has been development of mobile payment hardware as well for the purpose of swiping physical cards and processing the payment. This method of online transaction will likely to gain more traction in the coming times.

 

  1. Online Payment Gateway:

    You can offer this payment method to your clients by simply adding an online payment solution. It is the simplest way for organizations to collect online payments from their website or an app. This solution is swift and convenient. Choosing a reliable online payment gateway is an important decision as several options are available in the market. However, it is vital to check out all the options and pick the one that best suits your business as many gateways offer one stop solution. These gateways not only allow you to expand your market but also to offer security and safety to your clients.

 

  1. Click to Pay Email Invoicing:

    Email invoicing is amongst the most user-friendly methods of online payments. It is a fully integrated and intuitive to use. It also allows your clients to generate their payment by producing an invoice. Businesses can streamline their process with this method. With increasing number of people making online purchases, the payment solution has become quite popular. It is also fast as when a customer clicks the link and pays the invoice, it is automatically updated in the system as paid, saving both your time and energy.

 

Also Read:5 Emerging Trends In The Mobile Payments Space

here-is-everything-you-need-to-know-about-merchant-accounts

Have you always dreamt of running your business smoothly and efficiently? What do you know about merchant accounts? Well, proper management of cash flows is an integral part of it. If you are looking to set up a new business or even if you are already running one, you need to look at your cash flows to ensure that you maintain proper liquidity at all times. Opening a merchant account can help you in streamlining your cashflows and get proper control over your finances. There are several merchant account solutions available these days. In order to choose the right one for your business, here are some tips you can follow.

Know what a merchant account is:

In order to obtain the best merchant account to meet your business requirements, first make sure that you are knowledgeable about the different features of a merchant account. A merchant account is a type of bank account which enables a business to accept payments through debit and credit cards in addition to several other types of electronic payment solutions. You will need to collaborate with a payment processor for this purpose. However, you should also note that not all merchant accounts are created equally. Shop around to see what type of merchant account is able to meet your specific requirements. You should pay attention to your business size, growth rate and future plans to pick the right kind of payment partner.

            Also Read: Merchant Account Vs. Payment Gateway: What’s The Difference?

Pay attention to fees and costs:

While a merchant account will help you in keeping your business financially efficient, you should be aware that these services come at a cost. Hence, it is important that you pay proper attention to all the fees. Generally, these costs may be divided into two categories, which are upfront or setup costs and operating costs. There are many merchant accounts which may come with nil set up fees too. However, before making any decision, focus on operating costs as well since these are the costs you will have to pay for the entire duration of your merchant account. If the costs are charged on the basis of volume, then keep your growth rate in mind, since these costs tend to add up real fast.

Pay attention to hardware and software:

Every merchant account deals with both hardware and software. It is vital that you gauge the efficiency and security of these services. Hardware generally includes payment terminals, which are required for payment processing. Such hardware may be leased or given to you outright. Make sure that you fully understand all the charges involved and that there are no surprises. For software, you should ensure that the system can seamlessly integrate with your existing business setup. Pay attention to the fine print in terms of cancellation, withdrawals and other charges.

            Also Read:5 Common Myths about Merchant Accounts Processing That Can Lead You Astray

Customer service and support:

When you decide to engage an online payment processor, you should look into the customer service and support provided by them. Payment processing is complex and there will be times when you will require urgent customer care. You should ensure that your provider is able to process your grievances promptly. There should also be provision for self-service so that you are able to fix minor issues and minimize the potential damage. The customer service should be available through different channels such as emails and telephone. However, in some cases, you may also arrange for a dedicated account executive.

Flexibility and customization:

Your online payment processor should be able to provide you customizable features so that your system can be adapted to accommodate the requirements of your business. It should be tailor-made to ensure that you are able to offer the best possible services to your clients. It should also be flexible so that it can provide for your expanding business. You may want to offer diverse payment options to your clients too and your payment processor should be in a position to accommodate such changes.

            Also Read: Top 7 Most Common Merchant Account Complaints that Can be a Red Flag

Merchant accounts are extremely important for online businesses and should be chosen carefully after due deliberation. And by following the above guidelines, you can bring positive changes to your online business.

what-are-the-key-components-of-a-custom-payment-gateway

Choosing the right payment gateway is crucial for an online business as these gateways can complete online transactions quickly, safely and efficiently. A robust payment gateway not only provides efficiency but also maintains integrity of the operations. There are several ways to incorporate a payment gateway into your system. You can choose to deploy a third-party payment gateway for processing your transactions or go for a personalized payment processing system. Each system has its own unique features, but a custom payment gateway can provide you with flexibility and efficiency which is unparalleled. Here are some of the key components of a custom payment gateway you should know about, to make informed decisions.

  1. Great Customer Experience:

    A custom payment gateway should be designed in such a manner that it maximizes the customer experience. The payment process should ideally have minimal number of steps to follow. It should also be intuitive so that the transaction proceeds in a smooth manner. You can also enhance the consumer experience by using well-known logos for different processes. The process should also be transparent so as to foster a sense of security and reliability in the clients. You can also enhance user experience by offering a wide range of payment options. Such flexibility will allow your users to maximize their utility and create brand loyalty.

  1. Sufficient Security:

    While speed and simplicity are desirable qualities in a custom payment gateway, it is equally important to ensure the safety factor of the transactions There are several security certifications available which will be helpful in providing a sense of safety to your clients. Ideally, your system should be PCI compliant. Further, you should also constantly upgrade your technology to effectively counter new spam and cyber-attack threats. End to end encryption of the transactions will ensure that the data transmitted remains safe and secure. Additional precautions should be undertaken to further secure personally identifiable information such as social security number and date of birth.

  1. Freedom of Customization:

    One of the biggest features of a custom payment gateway is that you can design it the way you want. You can add features while taking out some of the other complexities which you do not require. If you have a mainly subscription based business, you can allow for recurring payments on select dates. This feature will take away the hassle of recurring billing and will make the process more efficient. If your business deals with overseas clients, then it will make sense for your payment system to accept a wide range of foreign currencies. You may also want to display your payment system in different languages for making it easy to follow for your clients.

  1. Sensible Fees and Charges:

    Most payment gateways are able to provide their services at affordable rates due to economies of scale. However, the various benefits provided by a custom designed payment system can justify its higher costs. If planned properly, you might be able to reduce these expenses on a custom payment gateway as well. You should carry out extended and informed deliberation with various financial service providers to ensure that you optimize various charges and fees. Further, you should also pass down some of the benefits to your clients so as to build a solid customer base.

  1. Modular Feature:

    Setting up a custom payment processing system can be a daunting task. There are several variables to be taken care of, including the number of processors to collaborate with. Ideally, you should work with multiple processors to minimize the possibility of outages. This setup will also provide you with leverage in terms of negotiation. If you are building a custom payment system, then you should pay adequate attention to security features as well. Further, a foolproof process should be set up for handling arbitration, chargebacks and disputes. The process should be such that your clients do not face unnecessary hurdles while getting their grievances addressed.

All in all, custom payment gateways can indeed help you optimize your business processes. You can also ensure that your clients have the smoothest possible experience by incorporating features specific to your business. The process should also be flexible so that it can handle any changes in your business model.

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The-Psychology-of-an-Online-Shopper

In order to reap the full benefits of your online business venture, it is important to understand the psychology and the motivation behind the process of online shopping. Online shopping behaviorism is a relatively new yet a powerful concept. Understanding the psychology of your online customers is vital for boosting the traffic to your website and for controlling various metrics, such as the rate of cart abandonment and failed checkouts. There are several factors which drive a consumer to make purchasing decisions. While many of these factors are conscious, some of them may be unconscious as well. So, let’s take a look at how your business can benefit by understanding the psychology of an online shopper.

  • Create a sense of belongingness: Since online shopping lacks the tactile experience offered by offline shopping, it is imperative that you take extra steps to ensure that your customers are able to mimic their real-life shopping experience online as well. There are several initiatives you can take to ensure this kind of experience. If your catalog uses models, then ensure that you select your models in such a manner that your customers are able to relate to them. Some of the factors to keep in mind are age and gender. Make sure that your models are in line with the demographics of your target market.
  • Reciprocate the gesture: Online shopping is all about instant gratification. You can further boost this feeling by offering something in return to your customers. Apart from providing them with their desired goods and services, you can also offer discounts or free gifts on their purchase. With this strategy, you can provide value to your customers, which is over and above their requirements. This is also a foolproof method to encourage customer loyalty and ensure repeat business. You can also do so by making their shopping process easier and convenient. With the growing use of mobile phones, you should ensure that your website is optimized for smaller screens as well.
  • Spruce up your online store: Just like an offline store, the aesthetics of your online store may have a strong impact on your customers’ buying decisions. It is highly recommended that you choose an appropriate theme for your online store and then manage its overall presentation on the basis of that theme. The visual appearance of your online store is one of the most important factors that can impact the purchasing decision of your clients. You should pay special attention to the differentiating features of your target market and then design your store accordingly. Apart from the curation of items that are to be featured for shopping, the color schema of your store should also be pleasing.
  • Guide your clients: You can lead your clients to the right kind of products and services in your store by offering visual and psychological cues. You should make sure that your online store has a simple navigation process. It should also be intuitive in nature so that the entire journey feels natural to your clients. You can also integrate links and suggestions to direct your customers to certain sections and products. Online stores also follow quite a few guidelines which are applicable to offline stores. Like, you should place your high priced and high margin items in the line of sight of your clients so as to ensure that these items get the proper attention.
  • Be transparent: It is important that your customers are provided complete and accurate information. Such information is important for building trust. Unlike offline shopping, e-commerce lacks the personal touch and the ability to test goods beforehand. In such situations, it is vital that you provide extra incentive to your clients to ensure a sale. The importance of transparency cannot be overemphasized in such cases. All the expenses related to purchase, including taxes and shipping charges etc. should be explicitly stated, so as to minimize the chances of cart abandonment. Similarly, shoppers should also be made aware of the expected delivery time and possible issues.

The e-commerce has already gained widespread acceptance with the masses, and is growing at a fast pace. In order to fully optimize the benefits of this trend, you can keep these simple tips in mind and make your online business more user-friendly and efficient.