Article
What’s the difference between a payment processor and a payment gateway?
Understand payment processing as a whole and learn the difference between a payment processor and payment gateway.
The world of card payments is full of specific terms that overlap and can be difficult to understand.
‘Payment processor’ and ‘payment gateway’ are two examples that often get confused with each other. They fall into the black box of payments, somewhere between a customer making a payment and the money landing in the business’s bank account.
In this article you will learn about:
What is a payment processor?
What’s the difference between a payment gateway and a payment processor?
How payment processing works as a whole.
Where does Adyen fit in?
What is a payment processor?
A payment processor is a company that processes payments on behalf of a business’s bank. It usually operates in the background, making sure processed payments comply with rules and standards in the country that the business operates in. After receiving payment information from a payment gateway, the payment processor communicates it directly to the payment network and authorizes and clears/captures the transaction.
What’s the difference between a payment processor and a payment gateway?
On the other hand, payment gateways helps businesses initiate payments.
Payment gateway: What is it and how to choose one?
What’s the difference between a payment gateway and a payment processor?
Payment gateways help businesses initiate payments and payment processors handle the technical aspects of payment processing on behalf of an acquiring bank.
A payment gateway and payment processor are usually two separate systems. However, having both in one can increase efficiency and reliability of the payment process and improve speed of innovation.
How payment processing works as a whole
Although payment processing is over in a matter of seconds, quite a few steps happen during this time.
Let’s start from the beginning:
After a payment is initiated, the business sends the customers payment information (e.g. cardholder details) to the payment gateway.
The payment gateway transforms the information in adherence to proprietary standards and shares it with the local payment processor.
The payment processor shares the information with the card payment network, which shares it with the customer's bank, which performs several checks, e.g. if there are enough funds in the account.
Based on the outcome of the checks, the customer’s bank tells the card network whether the transaction is approved or declined.
The card network passes the message to the payment processor, which passes it to the payment gateway, which communicates it back to the business and customer to complete the purchase.
The transfer of funds goes from the customer’s bank account to the acquiring bank and then to the business’s bank account and is typically initiated before the end of the day.
Where does Adyen fit in?
At Adyen, we simplify and improve online payments and in-person payments for businesses and their customers in Singapore. Imagine a payment gateway, payment processor, and acquiring bank all in one platform. We consolidate a payment gateway, payment processor, and an acquiring bank in one platform for both online and in-person payments. Managing payments is easy when you only have one contract and one party to interact with to optimize your business performance.
Our direct connection to global and local card networks will allow you to benefit from local market conditions, improving authorization rates and lowering transaction fees.
Explore Adyen’s payment-related services and features, such as:
Access to all relevant payment methods globally
Donations through Adyen Impact
Want to learn more about how we can take your business to the next level with payments in Singapore? Get in touch here.
Payment processor FAQ
A payment processor is a company that processes payments on behalf of a business’s bank. It usually operates in the background, making sure processed payments comply with rules and standards in the country that the business operates in.
Payment processor companies act as the critical bridge between the merchant’s point of interaction and the complex global financial networks. The processor executes several high-stakes activities in a matter of seconds:
Data orchestration: Receiving encrypted transaction data from gateways and translating it into network-compatible formats.
Network communication: Directly interacting with card networks (Visa, Mastercard) and local payment schemes to facilitate money movement.
Authorization: Managing the real-time logic flow that determines if a transaction is approved or declined by the customer’s bank.
Clearing and settlement: Ensuring transactions are recorded and funds are prepared for transfer into the merchant’s account.