A payment processor and a payment gateway are two different services that work together to enable online payments. A payment processor is a financial institution that handles transactions between a buyer’s bank and a seller’s bank. A payment gateway is a technology that authorizes and processes payments between a buyer and seller by securely transmitting payment data.
To understand the difference between a payment processor and a payment gateway, you can think of them as the virtual equivalents of an in-person point-of-sale (POS) terminal and a chip reader. When you pay with your card at a physical store, you insert or tap your card on the chip reader, which collects and verifies your card information. The chip reader then sends the data to the POS terminal, which communicates with the card networks and banks to transfer the funds from your account to the merchant’s account.
Similarly, when you pay online, you enter your card details on the website, which uses a payment gateway to collect and encrypt your card information. The payment gateway then sends the data to the payment processor, which communicates with the card networks and banks to transfer the funds from your account to the merchant’s account.
A payment processor and a payment gateway are both essential for online payments, as they ensure that the transactions are secure, fast, and accurate. Without a payment gateway, you wouldn’t be able to verify your card information online. Without a payment processor, you wouldn’t be able to request and receive payment from your bank.
