Online sales are increasing. After the pandemic, companies have started selling more digitally and looking for ways to accept in-store digital payments. The future of business is cashless transactions. According to Statista, the total value of digital payments worldwide in 2020 was $5.2 trillion. Additionally, that number is anticipated to double by 2026 due to increasing growth. This increase is due to convenience, shifting consumer behavior, and health-related concerns brought on by COVID.
You must provide customers with digital payment choices if you want to maximize your earnings in the future. Moreover, when searching for payment solutions, you will come across the terms “payment processor” and “payment gateway” when searching for payment solutions.
Although they may have similar names, processors and gateways are not equivalent. Both are essential for online payments but play very distinct functions.
Table of Contents
What is a payment processor?
A payment processor is a service that manages transactions for your clients and makes it possible for them to purchase your goods and services. It communicates the cardholder payment data to the issuing and acquirer banks.
Moreover, the payment processor is responsible for rectification if a business charges a consumer mistakenly. As a result, you (the merchant) pay a small fee for a refund or an error during checkout. Money will be moved from your account to the payment processor and returned to the consumer after paying this fee.
The payment processing business also follows security protocols for secure transactions. They lessen the likelihood of fraudulent transactions by doing this.
The payment processor solution will give you access to the point of sale (POS) interface for offline transactions. They usually provide the infrastructure for payment collecting. Card machines and other types of equipment are examples of this.
What is Payment Gateway?
A payment gateway, on the other hand, sends the payment information to the processor. It links the merchant account, card issuers like Visa or MasterCard, and the payment processor. Consider it as a transaction agent who has finished the transaction lifecycle.
eCommerce websites typically use a payment gateway for card-not-present transactions. Essentially, it functions as an online POS terminal.
The payment terminal verifies the validity of the customer’s actual card. Like this, the payment gateway confirms the digital credentials before sending the payment information to the payment processor. However, the process of online transaction authentication is time-consuming and complex.
Difference between Payment Gateway and Payment processor
|Payment Gateway||Payment Processor|
|The technology or service known as a payment gateway allows or denies transactions between your website and your customers.||A financial institution conducting the transaction to get your funds from the customer correctly is called a payment processor.|
|Payment gateways can be connected to your eCommerce store or business accounting software, enabling you to process credit cards inside your existing software.||Your firm can accept credit cards thanks to the merchant account that the payment processor will set up.|
|Online payment processing is made simple by integrating a payment gateway.||Using a payment processor guarantees that credit card transactions will be funded properly. The sum is transferred from the customer’s bank account to the merchant bank account with the assistance of the payment processor.|
Top Payment Processors
This list will begin with a top choice made for freelancers and small business owners. Due is a service that not only aids in payment processing but also offers features like time management, cross-border payments, and invoicing. If you work with many clients located overseas, it is an excellent solution because it can handle a wide variety of languages and tax systems.
A contactless chip reader, a magstripe scanner, and a convertible stand are just a few of Square’s useful point-of-sale capabilities if your company wants to accept payments in person. You may accept payments directly from your smartphone due to all of these components. For smooth transactions, the system also links with your online business presence.
You should provide Apple Pay to your customers if many of them are fans of Apple products. Using contactless technology, they can pay you right from their iPhone or iPad. Apple Pay also supports cryptocurrencies, bank transfers, and credit and debit card purchases from its digital wallet.
Top Payment Gateways
Here are the 5 best payment gateways in India
Global payment system PayPal is accessible in more than 200 nations. PayPal asserts that has processed 4 billion payments in 2014, including 1 billion via mobile. Regular users of Paypal total over 173 million.
This is why PayPal must be incorporated into your eCommerce Store if you anticipate receiving orders from customers outside your country. With a fund withdrawal option in your bank accounts in 57 currencies and holding balances in their PayPal accounts in 26 currencies, PayPal supports more than 100 different currencies.
Only Razorpay offers a product suite that enables businesses to accept, process, and distribute payments in India.
All payment methods are available to you, including credit card, debit card, net banking, UPI, and well-known wallets like JioMoney, Mobikwik, PayUmoney, Airtel Money, FreeCharge, Ola Money, and PayZapp.
A cloud-based technology called Stripe makes it easier to collect and manage internet payments anywhere in the globe. It offers comprehensive solutions for processing online payments and offers fantastic features like a custom UI toolkit, embeddable checkout, aggregated reporting, and more.
With the help of an application interface that connects to Stripe, a reliable payment gateway, you can monitor revenue, prevent fraud with high levels of security, and increase sales across the globe. It also offers a free open API that facilitates integration with your company’s ecosystem.
One of the biggest full-stack SME platforms is Instamojo. The simplest method to start an online business is with Instamojo, which offers to function online stores, built-in payments, integrated marketing tools, and more. With its online stores and payment options, Instamojo helps more than 15 lakh independent enterprises in India.
With the help of Instamojo’s web platform, you may create your store and link a simple payment gateway. Your CRM, analytics and shipping are all handled by Instamojo.
Cashfree is one of the top payment gateways in India, that helps businesses to collect online payments and bulk payouts. More than 10 lakh businesses use cashfree to send and accept money. It also offers features such as instant refunds, card-preauthorization and more. Cashfree is integrated with major platforms like shopify, paypal, google pay and so on.
Although accepting payments for goods and services online is the most frequent gateway usage, in the modern payment landscape, the technology has significantly advanced to offer customers a smooth purchasing experience across all sales channels and devices. To process online payments, an e-commerce company must select payment services (payment gateway and payment processor).
Most importantly, it should be noted that the Payment Gateway serves as the authenticator instead of the Payment Processor itself. Therefore, it’s crucial to use the correct payment gateway to protect the sensitive information of your customers.