Payment gateway and processor may sound intimidating at first, but understanding their roles is crucial for safe and reliable online transactions.
An easy way to understand what a payment gateway does and what’s the role of a payment processor is to think of them as a team of two superheroes who work together to save the day.
How Does Payment Gateway Work?
The payment gateway superhero has an impressive arsenal of tools to ensure the transaction is safe and legitimate. It starts by encrypting sensitive information, such as credit card details, to prevent it from falling into the wrong hands.
It also checks the data for errors, verifies that the customer’s card is valid and has sufficient funds, and performs various other security checks to make sure the transaction is safe and legitimate. It performs various security checks, such as fraud detection and address verification, to prevent unauthorized transactions and reduce the risk of chargebacks.
For example, let’s say you’re making a purchase on an online store. When you enter your credit card information, it is the payment gateway that encrypts this information and sends it to the payment processor for verification. If there’s an issue with your card or the transaction, the payment gateway will block it and prevent the transaction from going through.
How Does Payment Processor Work?
Once the payment gateway has done its job, it sends the information to the payment processor, who is ready to take action. This superhero is lightning-fast and can process transactions in a matter of seconds. It communicates with banks and credit card networks to verify the transaction and ensure that everything is in order.
If all goes well, the payment processor superhero can then swing into action, debiting the customer’s account and crediting the merchant’s account. This is where the magic happens, and the transaction is completed successfully.
The payment processor also handles refunds and chargebacks, which are disputes between the customer and the merchant over a transaction. If a customer requests a refund, the payment processor will reverse the transaction and credit the customer’s account.
If there’s a chargeback, the payment processor will investigate and determine if the transaction was legitimate. If not, the payment processor will reverse the transaction and debit the merchant’s account.
For example, if you receive a faulty product and request a refund, the payment processor will reverse the transaction and credit your account. If the merchant refuses to issue a refund, you can initiate a chargeback, and the payment processor will investigate the transaction and determine if the chargeback is valid.
Importance of Payment Gateway & Processor in online payments?
Understanding the roles of payment gateway and processor can give you confidence in your transactions, knowing that your personal and financial information is being handled with care.
Both payment gateway and processor are needed to enable consumers to make purchases online from anywhere in the world, using their preferred payment method (which can be credit cards, debit cards, vouchers, cryptocurrencies etc).
It is this convenience and accessibility of e-commerce that has transformed the way we shop and do business. Now, payment gateway and processor may not wear capes, but they are truly the unsung heroes of e-commerce!