For small businesses that need to accept payments online or in person, a payment gateway is a must-have. But what exactly is a payment gateway, and how do you incorporate it into your business?
A payment gateway is a service that enables your business to accept card and electronic check payments from websites, POS terminals, or mobile devices. Gateways process payment transactions and move money from customers’ accounts into your merchant bank account.
Payment gateways vs. merchant accounts
Payment gateways are not the same as merchant accounts. A merchant account is a type of bank account that allows businesses to accept payments via debit or credit accounts. You need a merchant account to get paid.
The bank where you have your merchant account is referred to as a merchant acquiring bank (sometimes just referred to as an acquirer). It accepts and processes your customer’s payments through the payment processor and credit network.
When you apply for a merchant account, the underwriter will look at your industry, your processing history (if any), your personal credit, your business’ creditworthiness, and other factors. Once approved, your business can start accepting payments.
By contrast, a payment gateway authorizes and processes your customers’ transactions—from the time they click “Buy” until the money appears in your bank account. Every payment gateway performs three functions:
- Authorizes the transaction: The payment gateway checks to make sure your customer has sufficient funds in their account—and then authorizes the purchase.
- Captures the transaction: As soon as the purchase is authorized, a hold is placed on the money. At this point, you can confidently ship goods to your customer.
- Settlement: The payment gateway transfers funds from your customer’s bank or credit card account to your merchant account. This typically takes a couple of days.
Payment gateways vs. payment processors
A payment processor is the entity that actually authorizes the transactions like credit cards and debit cards for merchant acquiring banks. A payment processor is like a mediator between your business and any banks involved and can authorize transactions so that you get paid, by facilitating the transfer of funds.
The difference is that payment gateways capture and send credit card data to the payment. Authorize.net (payment gateway) supports connections to these major credit card processors:
Chase Payment Solutions
Tampa Processing Platform
First Data Merchant Services (FDMS)
Omaha and Nashville Processing Platforms
East Processing Platform
|Heartland Payment Systems|
TSYS Acquiring Solutions (SM)
Choosing a payment gateway
There are many considerations when choosing the right payment provider for your small business. For example:
- What kinds of payments will they help you accept?
- Do they offer fraud protection?
- Is there a way to accept recurring payments?
- Is there a digital invoicing feature?
These are just some features you might consider when thinking about a payment gateway.
Authorize.net offers both merchant accounts and payment gateways as an all-in-one plan or separately, along with all the features mentioned above. In other words, whether you need to set up a new merchant account through us or your own bank, we can help your business accept payments.
Check out our plans or give us a call at 1-888-323-4289 to discuss your options.