What is the difference between a Payment Processor and a Payment Gateway?

17 / 11 / 2022



Today digital payments have become the new norm for people in India to do any transactions. Businesses are constantly evolving to find ways to provide seamless payments by using multiple digital payment solutions to increase customer experience. To grow your business, providing a range of digital payment options across multiple touchpoints to your potential customers is of utmost importance.

And when you evaluate payment solutions, you will come across these two common terms – payment processors and payment gateways.

Although they are the crucial parts of digital transactions, their functions are distinctly different – let us have a look at them.

What is a Payment Processor?

A payment processor is a service that handles your customers’ transactions and enables them to buy your products and services. It acts as a mediator between the cardholder, business, acquiring bank, payment gateway, and issuing bank.

When an online purchase is made, the payment gateway transfers the transaction data and approves or declines the payment based on various parameters. However, it does not deal with the processing of the payment itself. That is where the payment processor comes in.

Moreover, the payment processing company follows security measures for safe transactions. Through this, they reduce the chances of fraudulent transactions.

In offline transactions, the payment processor service will provide a point of sale (POS) interface to you. They will typically provide the payment collection infrastructure. For instance, card machines and other equipment.

What is a Payment Gateway?

On the other hand, a payment gateway is a technology that allows you to process transactions on your website or app. it authorizes you to conduct an online transaction through different payment modes like net banking, credit card, debit card, UPI, or the many online wallets that are available these days.

Payment Gateway basically transmits the payment data to the processor. It authenticates the digital credentials before forwarding the payment details to the payment processor. It acts as a facilitator to connect the payment processor to the merchant account and schemes.

Payment Processor and Payment Gateway – The difference

A payment processor makes the transaction between two parties possible.

However, a payment gateway (PG) captures the customer’s payment details and relays them to the processor. Thereafter, the PG communicates the transaction status between the customer and you. (The merchant)

Worldline India is a one-stop shop for all payment needs offering – In-store payments, Online payments, Omnichannel Payments, and Issuance and Acquiring solutions. Know more>

Related Articles