{"id":8759,"date":"2023-09-18T11:34:14","date_gmt":"2023-09-18T06:04:14","guid":{"rendered":"https:\/\/razorpay.com\/blog\/?p=8759"},"modified":"2025-04-03T15:13:50","modified_gmt":"2025-04-03T09:43:50","slug":"difference-between-payment-processors-and-payment-gateways","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/","title":{"rendered":"Payment Gateway vs Payment Processor: What is the Difference?"},"content":{"rendered":"<p dir=\"ltr\" data-pm-slice=\"1 1 []\">As a payment method, digital payments have become the &#8216;new normal&#8217; for the majority of people. While sending and receiving payments online has become a part of life in the digital age, businesses are actively looking for ways to simplify seamless payments by utilising a variety of digital payment solutions that boost customer satisfaction through seamless checkout.<\/p>\n<p dir=\"ltr\">If you want to increase your revenue in the future, you must offer a variety of <a href=\"https:\/\/razorpay.com\/learn\/digital-payments-india-definition-methods-importance\/\">digital payment methods<\/a> to potential clients. When looking for such payment solutions, you will come across two terms: payment processors and payment gateways. What are they, and how do we distinguish them? Let&#8217;s get started!<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d0bdc0cfaed\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d0bdc0cfaed\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#What_is_a_Payment_Gateway\" >What is a Payment Gateway?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#What_is_a_Payment_Processor\" >What is a Payment Processor?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#Payment_Gateway_vs_Payment_Processor_A_Deep_Dive\" >Payment Gateway vs Payment Processor: A Deep Dive<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#Constituents_of_Electronic_Payment\" >Constituents of Electronic Payment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#How_Does_a_Payment_Gateway_Function\" >How Does a Payment Gateway Function?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#When_to_Use_a_Payment_Gateway\" >When to Use a Payment Gateway?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#How_Does_a_Payment_Processor_Function\" >How Does a Payment Processor Function?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#When_to_Use_a_Payment_Processor\" >When to Use a Payment Processor?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#Key_Takeaways\" >Key Takeaways<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/razorpay.com\/blog\/difference-between-payment-processors-and-payment-gateways\/#Frequently_Asked_Questions_FAQs\" >Frequently Asked Questions (FAQs)<\/a><\/li><\/ul><\/nav><\/div>\n<h2 dir=\"ltr\"><span class=\"ez-toc-section\" id=\"What_is_a_Payment_Gateway\"><\/span>What is a Payment Gateway?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\">A payment gateway is the simplest way for a company to receive digital or online payments via its website or app. It is a platform that connects your bank account to the platform where you need to transfer money.<\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">A <a href=\"https:\/\/razorpay.com\/payment-gateway\/\">payment gateway<\/a> authorises 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. It plays the role of a third party that securely transfers your money from the bank account to the merchant\u2019s payment portal.<\/span><\/p>\n<p dir=\"ltr\" data-pm-slice=\"1 1 []\"><em><strong>Related Read:<\/strong> Explore in detail about <a href=\"https:\/\/razorpay.com\/blog\/different-types-of-payment-gateway\/\" target=\"_blank\" rel=\"follow noopener\" data-wpel-link=\"internal\">types of payment gateway<\/a>.<\/em><\/p>\n<h2 dir=\"ltr\"><span class=\"ez-toc-section\" id=\"What_is_a_Payment_Processor\"><\/span>What is a Payment Processor?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\"><span data-text-color-mark=\"black\">A payment processor is a payment system that manages your customers&#8217; transactions and allows them to purchase your goods and services. It acts as a go-between for the cardholder, merchant, acquiring bank, and issuing bank.<\/span><\/p>\n<p dir=\"ltr\">It is a system commonly used by a merchants that executes <a href=\"https:\/\/razorpay.com\/learn\/what-is-online-transaction\/\">online transactions<\/a> with customers from various channels such as credit cards and debit cards or bank accounts.<\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">When an online purchase is made, the payment gateway transfers the transaction data and provides the approval or decline information for 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.\u00a0<\/span><\/p>\n<p dir=\"ltr\"><span data-sheets-root=\"1\" data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Related Read: What is a Payment Processor &amp; How Does It Work?&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:332799,&quot;3&quot;:{&quot;1&quot;:0},&quot;4&quot;:{&quot;1&quot;:2,&quot;2&quot;:14277081},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;9&quot;:1,&quot;10&quot;:1,&quot;11&quot;:4,&quot;12&quot;:0,&quot;15&quot;:&quot;Calibri&quot;,&quot;19&quot;:0,&quot;21&quot;:0}\">Related Read: <a href=\"https:\/\/razorpay.com\/blog\/payment-processor\/\">What is a Payment Processor &amp; How Does It Work?<\/a><\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Payment_Gateway_vs_Payment_Processor_A_Deep_Dive\"><\/span>Payment Gateway vs Payment Processor: A Deep Dive<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>A payment gateway is a network that collects, verifies and performs fraud checks on customer&#8217;s credit card information before sending it to the payment processor.<\/p>\n<p>A payment processor is a service that routes a customer&#8217;s credit card information between the customer&#8217;s bank and the merchant bank.<\/p>\n<p>Here are the main differences between a payment gateway and a payment processor based on various parameters:<\/p>\n<table>\n<tbody>\n<tr>\n<td><span style=\"font-weight: 400;\">\u00a0<\/span><\/td>\n<td>\n<p style=\"text-align: center;\"><b>Payment Gateway<\/b><\/p>\n<\/td>\n<td>\n<p style=\"text-align: center;\"><b>Payment Processor<\/b><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p style=\"text-align: center;\"><b>How it works<\/b><\/p>\n<\/td>\n<td>\n<p style=\"text-align: center;\"><span style=\"font-weight: 400;\">Collects, encrypts and verifies credit card information<\/span><\/p>\n<\/td>\n<td style=\"text-align: center;\"><span style=\"font-weight: 400;\">Communicates between the cardholder, merchant, acquiring bank, and issuing bank.<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\n<p style=\"text-align: center;\"><b>Definition<\/b><\/p>\n<\/td>\n<td style=\"text-align: center;\"><span style=\"font-weight: 400;\">Payment gateway approves or declines transactions between the website and the customer.<\/span><\/td>\n<td>\n<p style=\"text-align: center;\"><span style=\"font-weight: 400;\">Payment processor is responsible for fund transfer by communicating between the merchant, the issuing bank, and the acquiring bank.<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p style=\"text-align: center;\"><b>How to Choose<\/b><\/p>\n<\/td>\n<td style=\"text-align: center;\"><span style=\"font-weight: 400;\">The PG offers different payment modes.<\/span><\/td>\n<td style=\"text-align: center;\"><span style=\"font-weight: 400;\">The PP ensures <a href=\"https:\/\/razorpay.com\/blog\/what-is-pci-dss-compliance\/\">PCI compliance<\/a>, software compatibility, and fraud prevention.<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\n<p style=\"text-align: center;\"><b>Use<\/b><\/p>\n<\/td>\n<td style=\"text-align: center;\"><span style=\"font-weight: 400;\">Acts as a terminal for card validation and fraud prevention<\/span><\/td>\n<td>\n<p style=\"text-align: center;\"><span style=\"font-weight: 400;\">Acts as mediator between merchants and financial institutions to facilitate credit card transactions.<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p style=\"text-align: center;\"><b>Best Suited For<\/b><\/p>\n<\/td>\n<td>\n<p style=\"text-align: center;\"><span style=\"font-weight: 400;\">E-commerce store and <\/span><span style=\"font-weight: 400;\">card-not-present (CNP) <\/span><span style=\"font-weight: 400;\">transactions<\/span><\/p>\n<\/td>\n<td style=\"text-align: center;\"><span style=\"font-weight: 400;\">POS and In-person transactions<\/span><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">\n<p style=\"text-align: center;\"><b>Does it Facilitate Payment<\/b><\/p>\n<\/td>\n<td style=\"text-align: center;\"><span style=\"font-weight: 400;\">No, it communicates the status of transactions.<\/span><\/td>\n<td>\n<p style=\"text-align: center;\"><span style=\"font-weight: 400;\">Yes, it facilitates payments.<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p dir=\"ltr\" data-pm-slice=\"1 1 []\">Related Read: <a href=\"https:\/\/razorpay.com\/blog\/what-is-merchant-account\/\">What is a Merchant Account: All You Need to Know<\/a><\/p>\n<h2 dir=\"ltr\" data-pm-slice=\"1 1 []\"><span class=\"ez-toc-section\" id=\"Constituents_of_Electronic_Payment\"><\/span><span data-text-color-mark=\"black\">Constituents of Electronic Payment <\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\"><span data-text-color-mark=\"black\">In the payment process, various parties come together to ensure a smooth and secure transaction:<\/span><\/p>\n<ul dir=\"ltr\">\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Customer<\/span><\/strong><span data-text-color-mark=\"black\">: Initiates the payment by providing payment information like credit card, UPI or bank details.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Payment Gateway:<\/span><\/strong><span data-text-color-mark=\"black\"> Acts as the intermediary, encrypting the customer&#8217;s data and authorising the transaction.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Acquiring Bank (Merchant&#8217;s Bank):<\/span><\/strong><span data-text-color-mark=\"black\"> Receives the <a href=\"https:\/\/razorpay.com\/learn\/what-is-authorized-transaction\/\">authorised transaction<\/a> and processes it for settlement.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Card Networks (e.g., Visa, MasterCard):<\/span><\/strong><span data-text-color-mark=\"black\"> Facilitate the transfer of funds between the acquiring bank and the customer&#8217;s issuing bank.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Issuing Bank (Customer&#8217;s Bank<\/span><em><span data-text-color-mark=\"black\">)<\/span><\/em><span data-text-color-mark=\"black\">:<\/span><\/strong><span data-text-color-mark=\"black\"> Verifies the customer&#8217;s payment information and ensures there are sufficient funds for the transaction.<\/span><\/p>\n<\/li>\n<\/ul>\n<p dir=\"ltr\"><span data-text-color-mark=\"black\">A payment gateway authorises an <a href=\"https:\/\/razorpay.com\/\">online payment<\/a> through different payment methods like credit cards, debit cards, net banking, UPI, etc. It follows encryption technology called Secure Socket Layer (SSL) for a safe and secure transfer of funds. The security of data is taken care of by the payment gateway.<\/span><\/p>\n<p dir=\"ltr\"><span data-text-color-mark=\"black\">The payment processor is responsible for making the payment reach your bank account, acting as a communication intermediary.<\/span><\/p>\n<p dir=\"ltr\"><span data-sheets-root=\"1\" data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Related Read: What Is a High-Risk Merchant Account? Factors to Determine High-Risk Merchant Account&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:332739,&quot;3&quot;:{&quot;1&quot;:0},&quot;4&quot;:{&quot;1&quot;:2,&quot;2&quot;:14277081},&quot;9&quot;:0,&quot;10&quot;:1,&quot;11&quot;:3,&quot;12&quot;:0,&quot;15&quot;:&quot;Calibri&quot;,&quot;19&quot;:0,&quot;21&quot;:0}\">Related Read: <a href=\"https:\/\/razorpay.com\/learn\/what-is-a-high-risk-merchant-account\/\">What Is a High-Risk Merchant Account? Factors to Determine High-Risk Merchant Account<\/a><\/span><\/p>\n<h2 dir=\"ltr\" data-pm-slice=\"1 3 []\"><span class=\"ez-toc-section\" id=\"How_Does_a_Payment_Gateway_Function\"><\/span><span data-text-color-mark=\"black\">How Does a Payment Gateway Function?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\">When you click &#8216;Buy Now,&#8217; the Payment Gateway steps into action with the following steps:<\/p>\n<ol dir=\"ltr\">\n<li>\n<p dir=\"ltr\"><strong>Data Encryption:<\/strong> The payment gateway&#8217;s first task is to turn your payment details (like card numbers and CVV) into an indecipherable code. This keeps your info safe during the online journey.<\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong>Secure Connection:<\/strong> The payment gateway creates a secure connection (usually with that familiar HTTPS) between your online store and your bank.<\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong>Authorisation Request:<\/strong> Once your info reaches the Payment Gateway, it sends an authorisation request to your issuing bank.<\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong>Bank Approval:<\/strong> Your bank reviews the request and checks your account. If your info is validated, it sends an &#8216;approved&#8217; signal back to the Payment Gateway.<\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong>Transaction Complete:<\/strong> With the bank&#8217;s green light, your payment goes through, and you receive that joyful &#8216;Transaction Successful&#8217; message<\/p>\n<\/li>\n<\/ol>\n<p>Read in detail about <a href=\"https:\/\/razorpay.com\/blog\/payment-gateway-101\/\">how payment gateway works<\/a>.<\/p>\n<h2 dir=\"ltr\" data-pm-slice=\"1 3 []\"><span class=\"ez-toc-section\" id=\"When_to_Use_a_Payment_Gateway\"><\/span><span data-text-color-mark=\"black\">When to Use a Payment Gateway?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\"><span data-text-color-mark=\"black\">As a business owner, it becomes necessary for you to use a payment gateway if you are accepting payments through following means<\/span><\/p>\n<ol dir=\"ltr\">\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">E-commerce Stores:<\/span><\/strong><span data-text-color-mark=\"black\"> If you run an online store, a payment gateway is a must-have. It enables secure and convenient transactions, fostering trust with your customers.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Small Businesses:<\/span><\/strong><span data-text-color-mark=\"black\"> Small businesses can benefit from payment gateways too, especially if they operate online or want to accept digital payments in-store. <\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Subscription Services:<\/span><\/strong><span data-text-color-mark=\"black\"> For businesses offering subscription-based services, Payment Gateways simplify <a href=\"https:\/\/razorpay.com\/blog\/what-is-recurring-billing\/\">recurring billing<\/a>, ensuring hassle-free payments from customers.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Donations and Fundraising:<\/span><\/strong><span data-text-color-mark=\"black\"> Nonprofits and charities can utilise <a href=\"https:\/\/razorpay.com\/learn\/accept-donations-without-website\/\">Payment Gateway to facilitate online donations<\/a>. This widens their reach and makes contributions more accessible.<\/span><\/p>\n<\/li>\n<\/ol>\n<p><span data-sheets-root=\"1\">\u00a0 Related Read: <a href=\"https:\/\/razorpay.com\/learn\/what-is-mass-payment\/\">What Is Mass Payment And How Does It Work?<\/a><\/span><\/p>\n<h2 dir=\"ltr\" data-pm-slice=\"1 1 []\"><span class=\"ez-toc-section\" id=\"How_Does_a_Payment_Processor_Function\"><\/span><span data-text-color-mark=\"black\">How Does a Payment Processor Function?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\"><span data-text-color-mark=\"black\">A payment processor is a system that handles online transactions. They serve as a go-between for the merchant and the financial institutions concerned. Here&#8217;s the lowdown on how payment processors work:<\/span><\/p>\n<ol dir=\"ltr\">\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Transaction Initiation: <\/span><\/strong><span data-text-color-mark=\"black\">The payment processor starts functioning when you have filled your cart, and clicked the payment tab.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Merchant to Processor: <\/span><\/strong><span data-text-color-mark=\"black\">The merchant (the online store) sends your payment details, including the purchase amount and your card information, to the payment processor. <\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Processor to Bank: <\/span><\/strong><span data-text-color-mark=\"black\">Next, the payment processor communicates with your card-issuing bank, enquiring whether you have sufficient funds for the purchase.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Bank Confirmation: <\/span><\/strong><span data-text-color-mark=\"black\">Your bank reviews the request and checks your account. If there is sufficient balance, it sends back an &#8216;approved&#8217; signal.<br \/>\n<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Transaction Complete: <\/span><\/strong><span data-text-color-mark=\"black\">The payment processor now tells the merchant, &#8220;Good to go!&#8221; and the purchase is complete. You get your <a href=\"https:\/\/razorpay.com\/learn\/order-confirmation\/\">order confirmation<\/a>.<\/span><\/p>\n<\/li>\n<\/ol>\n<p>Related Read: <a href=\"https:\/\/razorpay.com\/blog\/types-of-pos-systems\/\">What are the Different Types of POS Systems?<\/a><\/p>\n<h2 dir=\"ltr\"><span class=\"ez-toc-section\" id=\"When_to_Use_a_Payment_Processor\"><\/span><span data-text-color-mark=\"black\">When to Use a Payment Processor?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\"><span data-text-color-mark=\"black\">A payment processor oversees the credit card transaction process by serving as an intermediary for the merchant and the financial institutions involved. A credit card processor can authorise credit card transactions and help merchants get paid on schedule by enabling the transfer of payments. Here&#8217;s when you should consider using a payment processor:<\/span><\/p>\n<ul dir=\"ltr\">\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">High Transaction Volume:<\/span><\/strong><span data-text-color-mark=\"black\"> If your business deals with a high volume of transactions, such as a busy retail store or an e-commerce giant, payment processors handle the heavy lifting efficiently.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Credit Card Payments:<\/span><\/strong><span data-text-color-mark=\"black\"> Payment processors excel at processing credit card payments. If your business relies heavily on credit card transactions, a payment processor is essential for quick and secure processing.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Point of Sale (POS) Systems:<\/span><\/strong><span data-text-color-mark=\"black\"> Businesses using <a href=\"https:\/\/razorpay.com\/blog\/what-is-pos-point-of-sale\/\">POS systems<\/a>, whether brick-and-mortar stores or food establishments, benefit from payment processors for speedy and accurate payment handling.<\/span><\/p>\n<\/li>\n<li>\n<p dir=\"ltr\"><strong><span data-text-color-mark=\"black\">Global Expansion:<\/span><\/strong><span data-text-color-mark=\"black\"> When your business goes international, payment processors simplify the complexities of handling diverse currencies and payment methods, making global expansion smoother.<\/span><\/p>\n<\/li>\n<\/ul>\n<p><span data-sheets-root=\"1\" data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Related Read: How to make Credit Card Payment Through NEFT&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:332799,&quot;3&quot;:{&quot;1&quot;:0},&quot;4&quot;:{&quot;1&quot;:2,&quot;2&quot;:14277081},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;9&quot;:0,&quot;10&quot;:1,&quot;11&quot;:3,&quot;12&quot;:0,&quot;15&quot;:&quot;Calibri&quot;,&quot;19&quot;:0,&quot;21&quot;:0}\">Related Read: <a href=\"https:\/\/razorpay.com\/learn\/credit-card-payment-through-neft\/\">How to Make Credit Card Payments Through NEFT?<\/a><\/span><\/p>\n<h2 dir=\"ltr\" data-pm-slice=\"1 1 []\"><span class=\"ez-toc-section\" id=\"Key_Takeaways\"><\/span><span data-text-color-mark=\"black\">Key Takeaways<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p dir=\"ltr\">The roles of Payment Gateways and Payment Processors are distinct but interconnected, each playing a crucial part in ensuring your financial transactions happen smoothly.<\/p>\n<p dir=\"ltr\">Payment Gateway is ideal for businesses that need a secure path for processing card payments, especially in e-commerce. Payment gateways focus on encrypting your payment details, making the online purchase process secure. They typically charge fees per transaction, which can vary based on your provider and plan.<\/p>\n<p dir=\"ltr\">Payment Processor is essential for businesses looking to process a high volume of transactions. It interacts with banks to ensure funds are available and facilitate the transfer. Payment processors often charge fees based on transaction volume, sometimes including a fixed fee per transaction.<\/p>\n<p dir=\"ltr\">If you&#8217;re an online store looking for <a href=\"https:\/\/razorpay.com\/blog\/online-payment-security\/\">secure online payments<\/a>, start with a Payment Gateway. If you&#8217;re dealing with a high volume of transactions and need to process them efficiently, a Payment Processor might be your best bet.<\/p>\n<p dir=\"ltr\"><span data-sheets-root=\"1\" data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Related Read: Payment Gateway vs Payment Aggregator &quot;}\" data-sheets-userformat=\"{&quot;2&quot;:332543,&quot;3&quot;:{&quot;1&quot;:0},&quot;4&quot;:{&quot;1&quot;:2,&quot;2&quot;:14277081},&quot;5&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;9&quot;:0,&quot;10&quot;:1,&quot;12&quot;:0,&quot;15&quot;:&quot;Calibri&quot;,&quot;19&quot;:0,&quot;21&quot;:0}\">Related Read: <a href=\"https:\/\/razorpay.com\/blog\/payment-aggregator-vs-payment-gateway\/\">Payment Gateway vs Payment Aggregator <\/a><\/span><\/p>\n<h2 dir=\"ltr\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions_FAQs\"><\/span><span data-text-color-mark=\"black\">Frequently Asked Questions (FAQs)<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 dir=\"ltr\"><span data-text-color-mark=\"black\">1. How many payment processors are there?<\/span><\/h3>\n<p dir=\"ltr\">There are numerous payment processors available worldwide, ranging from well-known giants like PayPal, Stripe, and Square to smaller, specialised options. The exact number can change as new companies enter the market.<\/p>\n<h3 dir=\"ltr\"><span data-text-color-mark=\"black\">2. What are the five types of payment processors?<\/span><\/h3>\n<p dir=\"ltr\">Payment processors can be broadly categorised into five types: Traditional Merchant Account Providers, Payment Gateways, Aggregators, <a href=\"https:\/\/razorpay.com\/learn\/mobile-wallet\/\">Mobile Wallets<\/a>, and Cryptocurrency Payment Processors. Each serves distinct needs within the payment ecosystem.<\/p>\n<h3 dir=\"ltr\"><span data-text-color-mark=\"black\">3. Can a payment gateway function without a payment processor?<\/span><\/h3>\n<p dir=\"ltr\">No, a Payment Gateway cannot function without a Payment Processor. Payment Gateways serve as a secure bridge between the merchant and the Payment Processor, transmitting transaction data to the Processor for authorisation and settlement.<\/p>\n<h3 dir=\"ltr\"><span data-text-color-mark=\"black\">4. What role do payment processors play in risk management?<\/span><\/h3>\n<p dir=\"ltr\">Payment Processors play a critical role in risk management by assessing the validity of transactions and identifying potentially high-risk activities. They use security measures and algorithms to protect businesses from financial losses due to chargebacks and fraudulent transactions.<\/p>\n<h3 dir=\"ltr\"><span data-text-color-mark=\"black\">5. What is the difference between a payment gateway and a payment processor?<\/span><\/h3>\n<p dir=\"ltr\">A payment gateway and a payment processor are both essential components of <a href=\"https:\/\/razorpay.com\/blog\/electronic-payment-system\/\">electronic payments<\/a>, but they serve distinct roles.<\/p>\n<p dir=\"ltr\">A payment gateway acts as a secure bridge between the merchant&#8217;s website and the financial institutions, encrypting and transmitting payment data for authorisation.<\/p>\n<p dir=\"ltr\">On the other hand, a payment processor manages the behind-the-scenes operations of a transaction, liaising between the acquiring bank and the issuing bank, verifying the payment, and transferring funds.<\/p>\n<p dir=\"ltr\">In simple terms, the payment gateway facilitates secure data transmission, while the payment processor handles the technical and financial aspects of the transaction. Together, they ensure seamless and <a href=\"https:\/\/razorpay.com\/blog\/secure-electronic-transaction-set\/\">secure electronic payments<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you want to maximize your revenues going forward, you need to provide an array of digital payment options to potential customers that include a payment gateway and a payment processor. But what are they and how do we differentiate between them?<\/p>\n","protected":false},"author":67,"featured_media":16475,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[26],"tags":[83],"class_list":{"0":"post-8759","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-payments","8":"tag-payment-gateway"},"_links":{"self":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/8759","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/users\/67"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/comments?post=8759"}],"version-history":[{"count":11,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/8759\/revisions"}],"predecessor-version":[{"id":21800,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/8759\/revisions\/21800"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media\/16475"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media?parent=8759"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/categories?post=8759"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/tags?post=8759"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}