According to Small Business Statistics , it is estimated that over 543,000 new businesses open every month.These businesses open their doors either physically, virtually, or most of the time, both.
While they differ from each other in the kind of services or products they offer, where they exist geographically or who they target, they all have one thing in common; the need to process payments from their consumer base.
This is the point where most business owners get confused while researching the different payment methods available these days. The confusing jargonsand the jibber-jabber involved is enough to repel the owners from online payment processing solutions and settle for the traditional payment methods.
Butwhy settle for less?
To make it easy for you to understand, we`ve dedicated this article to your understanding online processing solutions by focusing on online gateways and online payment service providers!
The online gateway connects your e-business to the payment processor by sending it a transaction request. Upon receiving this transaction request, the online payment processor takes the money from the customer and deposits it in the merchant account.
Whereas, online payment service providers are financial companies that make sure your transactions make it safely and securely from one point to another.
To understand the difference between the two terms better, let’s take a deep dive into the online gateway and online payment service provider individually.
An online gateway, in simple terms, is a digital tool that allows online credit card processing. They work best for online businesses as compared to businesses that exist purely in the physical realm.
Payment gateways are the online payment processing solutions equivalent of the physical point-of-sale terminals you see at your local stores or restaurants.
An online gateway authorizes credit card or direct payment processing for an online retailer and thus works as a middle manfor your online business and the payment processor.
The process of an online gateway is simple. When a customer enters their personal payment details on your website, upon making a purchase, the onlinegateway sends that data to the payment processors to get it authorized.
That is it. That is its entire job; To send data to the payment processor to get it authorized.
This data can be a customer’s credit card number or any other method of payment.
Online payment gateways are almost exclusively used for online businesses as the transaction information cannot route directly from a site to payment processors due to security and safety purposes.
Online businesses are vulnerable to cyberattacks due to the exchange of sensitive information on these websites. As a matter of fact, around 32.4% of cyberattacks are carried out on websites of online stores. The need for security is thus imperative and cannot be denied.
This is the very reason why payment gateways are popular. They are one the safest and most secure payment processing solutions.Online payment gateways provide security to online business owners and ensure that the payment is received as well as satisfies the consumers that their payments are processed.
In a nutshell, a payment gateway takes care of the sensitive aspects of a transaction while making sure that the funds reach their due destination safely.
The online payment gateway is considered to be one of the mostsecureonline payment processing solutions because it encrypts all data that it receives and sends it off via SSL.After that, it works with the payment processor to determine whether the payment is legitimate or not. Once it makes sure that the payment is valid, it authorizes the purchase.
An online payment service provider is exactly what the name suggests, a company that provides online payment processing solutions to business owners.
An online payment service provider (PSP) offers services for online business related toaccepting electronic payments. These payment methods include bank-based payments such as direct debit, bank transfer, and real-time bank transfer based on online banking.
It is essentially a third party that facilitates the merchants in accepting payments. Online payment service providers are also known as a Merchant Services Provider, PSP, payment processors, or merchant acquirer.
Online payment service providers bring everything together in a seamless fashion making the entire process stress-free for the merchants.
An online payment service provider offers a variety of payment gateways with different features and pricing. Paypal is an excellent example of an online payment service provider with a diverse set of online payment processing solutions such as PayPal Express Checkout and Payflow Pro.
Payment processors or online payment service providers handle the entire transaction from authorization to settlement to ensure the business owner gets paid. Therefore,
Online payment service providers facilitate the business owners with hassle-free online payment processing solutions.
There are onlinepayment service providers that offer just the basics while there are some that provide comprehensive and detailed services to their clients.
However, not all payment service providers process every type of payment.
There are some that only process the payments they specialize in, while others focus on all aspects. Think about what you may need in the future and select your payment service provider accordingly.
We are sure you understand the difference between online payment gateways and payment service provider by now.
The short and sweet version of the primary difference between the two is that an online payment gateway approves or declinesthe transaction by sending data to payment processors whereas, a payment service provider is the one that facilitates the electronic payments on behalf of merchants.
An online payment gateway vs. the online payment service provider is a choice of option. A physical store may only need the former while an online business requires the latter only.
However, many companies have started bridging the two, and you can too!Opt for our services, and get remarkable payment processing at the tips of your fingers!