In the world of online payments, two terms that often come up are "payment processing platform" and "payment gateway." While these terms are sometimes used interchangeably, they refer to two different things. Understanding the difference between a payment processing platform and a payment gateway can help merchants make more informed decisions about the payment solutions they use.
What is a Payment Gateway?
A payment gateway is a service that facilitates the transmission of payment data between a merchant's website or point-of-sale system and the merchant's acquiring bank. The payment gateway securely encrypts the customer's payment information, such as credit card details, and sends it to the acquiring bank for processing. Once the payment has been processed, the payment gateway sends a response back to the merchant's system indicating whether the payment was successful or not.
A payment gateway is essential for merchants who want to accept payments online, as it provides a secure and reliable way to transmit payment data between the customer and the merchant's bank. Examples of popular payment gateways include PayPal, Stripe, and Authorize.net.
What is a Payment Processing Platform?
A payment processing platform is a more comprehensive solution that includes payment gateway services as well as other payment processing capabilities such as fraud detection, payment analytics, and payment reconciliation. A payment processing platform typically provides merchants with a range of tools to manage their payment processing, including reporting and analytics, chargeback management, and integrations with other business systems such as accounting and inventory management.
A payment processing platform is ideal for merchants who want to streamline their payment processing and have access to advanced features like fraud detection and chargeback management. Examples of popular payment processing platforms include Fable Fintech, Square, Adyen, and Braintree.
Differences Between Payment Gateway and Payment Processing Platform
While a payment gateway and a payment processing platform both enable merchants to accept online payments, there are several key differences between the two:
Functionality: Payment gateways primarily handle the transmission of payment data between the customer and the merchant's bank. Payment processing platforms, on the other hand, provide a more comprehensive suite of payment processing features and tools.
Integration: Payment gateways are typically designed to be integrated into a merchant's website or point-of-sale system. Payment processing platforms often provide integrations with a range of business systems, including accounting, inventory management, and more.
Security: Both payment gateways and payment processing platforms prioritize security, but payment processing platforms often provide more advanced security features like fraud detection and chargeback management.
Cost: Payment gateway fees are typically based on a per-transaction basis, while payment processing platforms often charge a flat monthly fee or a percentage of the transaction amount.
Which is Right for Your Business?
The choice between a payment gateway and a payment processing platform will depend on your business's specific needs and requirements. If you are just starting out with online payments and need a simple and straightforward solution, a payment gateway like PayPal or Stripe may be the right choice for you. If you need more advanced payment processing features like fraud detection and chargeback management, a payment processing platform like Fable Fintech, Square or Adyen may be a better fit.
While payment gateways and payment processing platforms are often used interchangeably, they refer to two different things. Payment gateways handle the transmission of payment data between the customer and the merchant's bank, while payment processing platforms provide a more comprehensive suite of payment processing features and tools. Understanding the differences between the two can help merchants make more informed decisions about the payment solutions they use.
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