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Payment Gateway vs. Payment Processor: What is the Difference?

Payment Gateway vs. Payment Processor: What is the Difference?Payment gateways and payment processor are two key links in the payment processing chain. As a business owner, you’ve probably heard these terms and wondered what the difference is.

Let’s start here: There are four parties involved with every credit card transaction:

  • The merchant
  • The customer
  • The acquiring bank that provides the merchant’s processing services
  • The issuing bank that issued the customer’s credit card or debit card

The role of payment processors and payment gateways differ, yet each is a vital component in accepting credit card payments online.

What Is a Payment Processor?

A payment processor executes the transaction by transmitting data between you, the merchant; the issuing bank (i.e., the bank that issued your customer's credit card); and the acquiring bank (i.e., your bank). The payment processor also typically provides the credit card machines and other equipment you use to accept credit card payments. To accept credit cards at your business, you'll set up an account with a merchant service provider like BluePay.

Watch Now: One Merchant's Success with the BluePay Gateway

What Is a Payment Gateway? 

A payment gateway is a tool that securely transmits the online payment data to the processor to continue the lifecycle of the transaction. It also authorizes payments for card-not-present transactions, mostly e-commerce websites. Think of it as an online point-of-sale terminal for your business. 

The difference?

The difference is a payment processor facilitates the transaction and a payment gateway is a tool that approves or declines transactions between you and your customers. 

Payment Processor vs. Payment Gateway:

Which Do I Need?

The most common use of a gateway is an e-commerce store on the Internet.  If you’re not an e-commerce business, you may not need a payment gateway. A basic merchant account may be best; look for a merchant account that has reasonable payment processing rates, 24/7 customer service, and PCI-compliant processing.

On the other hand, a payment gateway is probably in your future if you’re an e-commerce site. Not all merchant account providers have a payment gateway. Some providers use a third-party payment gateway, which can be a hassle when you have a dispute. Who should you contact when you have a problem?

BluePay makes it simple: A merchant account and a payment gateway from a single provider. Since BluePay is an all-in-one provider, we have our own payment gateway that is available to our merchant account holders. The BluePay Gateway can be used in a retail environment with a chip or swipe reader. It's integrated into many POS systems and can process PIN debit transactions. Using a payment gateway to securely process integrated payments can reduce errors, speed up transaction processing, and ease reconciliation.

If you don't want to invest in terminals, of if you don't have an e-commerce website, you can use the BluePay Gateway's Virtual Terminal to process transactions, as long as you have an Internet connection.


Topics: E-Commerce and Online Payments, Payment Technology, Small Business Tips, Getting Started with Payments, Awareness

Welcome to the BluePay Blog!

Whether you're a small business, an enterprise corporation, a financial institution, or a software partner, we have created a series of blog posts to help you and your customers, learn more about the complex nature of payments. Take a look to learn how payments can help to simplify your business operation, and may even help to grow your revenue.

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