The payment gateway vs payment processor conversation is key for any business looking to accept credit and debit card payments online. This is especially true if you’re setting up mobile payment solutions like text-to-pay.
So, what is a payment gateway? And how do they differ from payment processors?
In short, payment gateways collect card information from shoppers and verify their authenticity. Payment processors liaise between clients’ and businesses’ banks, meaning they authorize fund transfers, move funds out of clients’ accounts and deposit those funds into business accounts.
These technologies are essential to text-to-pay systems and online point-of-sale infrastructure. In this guide, we’re breaking down both concepts in detail to help you create a robust customer payment platform.
Whether you’re setting up your first eCommerce site or looking to implement text-to-pay, a payment gateway will be crucial to your digital infrastructure.
Payment gateways perform two important tasks on the client-facing side:
Behind the scenes, payment gateways confirm that customers’ card information is correct and transmit this information to payment processors. Payment gateways don’t move funds but they initiate the transaction process and provide an interface clients can use to complete purchases.
Payment gateways don’t move funds, but payment processors do. Payment processors:
Payment processors aren’t client-facing, and customers are highly unlikely to use their interfaces. On the other hand, businesses work closely with payment processors to ensure that clients’ funds are requested and deposited correctly and securely.
It’s important to note that most payment processors are third parties: entities separate from a business’s internal structure.
Without a third-party processor, businesses would have to set up a secure digital method for locating customers’ digital accounts and requesting funds from these accounts. While this doesn’t sound complex, payment processing must be:
Since developing a digital interface that’s both highly secure and compliant with regulations requires substantial technological, financial and legal expertise, the work of payment processing is largely left up to third-party experts.
Now that we’ve defined each entity in the customer payment process, let’s break down the payment gateway vs payment processor comparison in more detail by exploring some key differences between them.
Payment gateways and payment processors have distinct functions.
Payment gateways:
Payment processors, on the other hand, use information transmitted by gateways to:
Both of these players are key to the transaction process, but they play very different roles.
Since payment gateways are client-facing, they’re typically integrated into brands’ websites, mobile apps and other digital channels. Third-party payment processing infrastructure, on the other hand, isn’t connected to a business’s platforms. While businesses may interface with a processor’s digital system, customers typically don’t.
Integration is an important consideration for brands, and they must determine how, when and where customers will interact with the payment gateway when they make purchases via:
For tech-savvy brands with digital payment experts on staff, integration might be a simple process. But, companies outside of the tech space might consult with contractors or other third parties to build and implement gateways.
Sometimes, a third party will offer both gateway and processing services, or a business’s gateway partner will connect a brand to one of their trusted processing partners.
In the world of online payments, text-to-pay is emerging as a powerful payment gateway for online transactions. For today’s businesses, it’s important to understand that text-to-pay is a payment gateway not a payment processing method.
With SMS mobile payment solution providers like Textedly, businesses can:
These functions can make purchases more streamlined, simple and accessible for customers looking for easier and more intuitive ways to shop. Plus, text-to-pay can be integrated seamlessly with other SMS functions, like:
Whether or not a business is already using SMS for other functions (like payment reminders or marketing), text-to-pay offers a variety of advantages for brands as well as customers.
Simply put, text-to-pay is as convenient for businesses as it is for clients. There are two reasons why SMS payments are so seamless:
Security
With today’s powerful message encryption technology, customers and businesses can make SMS purchases with confidence.
Since messages are encrypted, and text-to-pay is its own payment gateway, the process is highly secure. Clients can easily comply with cybersecurity regulations, and customers can enjoy the same security they would when making a traditional online payment.
Like other online payment methods, text-to-pay offers nearly instant transaction processing. And confirmation messages are instant, too. When customers make SMS purchases, they’ll receive real-time confirmations in the platform they’re already using. There’s no need to leave the browser shopping window to check their email for a purchase confirmation.
Real-time shopping helps both customers and businesses. When all their purchases are processed in real-time, brands can:
While fast processing is always a plus for customers, businesses can use real-time data to tweak marketing strategies at a moment’s notice, check on the progress of a recent sale or promotion and make decisions that reflect current sales metrics.
If you’re considering implementing text-to-pay, it’s critical to understand the difference between payment gateway vs payment processor concepts and integration.
And, if you’re looking for an SMS provider who can do it all, turn to Textedly. We offer streamlined text-to-pay (with built-in payment gateway services), SMS marketing, automated customer service functions, and so much more. If you’re ready to embrace the future of SMS in ecommerce, we can help.
Sign up for a 14-day free trial to send messages that will boost your sales and connect you with your growing customer base.