Payment gateways and processors are necessary components to collecting payment information online. Knowing the differences between the two and how they work together can seem daunting, but understanding how they function is the first step in choosing solutions that work best for your company.

In a nutshell, a payment gateway is a service that authorizes credit card payments. Sensitive information, such as credit card numbers, can be passed securely with this tool using encryption.

Payment processors have a completely different set of capabilities. They handle credit card transactions with merchant acquiring banks (financial institutions that process credit or debit payments for a merchant). Through these partnerships, the payment processor verifies the card details with the issuing bank and carries out a series of anti-fraud measures. When confirmation or rejection is received, the information is relayed back to the merchant using the payment gateway.

In just two to three seconds, the following steps are taken when an order is submitted.

  1. A customer submits an order online, entering their credit card details.
  2. Multipub encrypts the information and sends it to the merchant’s webserver.
  3. The details are then sent to the payment gateway.
  4. The gateway forwards the transaction information to the payment processor.
  5. The payment processor forwards the information to the card association.
  6. The bank issuing the credit card does fraud and credit/debit checks. It then sends a response to the server – approved or denied.
  7. The processor forwards the authorization to the payment gateway.
  8. The payment gateway forwards the response to the website