We often get asked, "How does a Payment Gateway work?" or "How is a payment gateway different from a merchant account or a credit card processor?"
Most clients asking these questions are ecommerce merchants with online stores who are in need of some type of online payment integration. This means that they have certain software or shopping carts in mind and are trying to find a way to integrate credit card processing.
Below is an explanation of payment gateways and how they fit into the ecosystem of credit card processing.
Payment Gateway vs. Virtual Terminal
The difference is simple: One is used by computer programs, the other is used by humans. Both have the same purpose: to accept an incoming credit card transaction and process it.
A Virtual Terminal is a user-interface (often web-based) that allows merchants to log in to enter their customer's credit card number and manually process a credit card payment. It is great for humans, but not made for programs to interact with.
A payment gateway (sometimes referred to as a payment API or RESTful API) is a specific URL that has no user-interface but is designed to receive an incoming transaction message.
Merchant Account + Payment Gateway = Most Credit Card Processors
Most payment processors, including Helcim, offer their ecommerce clients both the merchant account and the payment gateway service together. The few processors that don't have their own solution will often resell a third-party payment service as part of their bundle. That's because an ecommerce merchant account without payment functionality is useless, as the merchant account has no means of receiving transactions.
What is a Payment Gateway-Only Service?
Some companies such as Authorize.NET and CyberSource are referred to as "payment gateway-Only" service providers. This means that they offer their payments solution without the merchant account portion. So why would you pay for this service? There are some instances that require it:
The software or shopping cart you are using is not compatible with your processor's payment offering but is compatible with a payment gateway-only service. This is a common usage of Authorize.NET, being the most commonly integrated payment option.
No Processor Payment Gateway
The provider does not have their own payment gateway. These merchant account providers will rely on reselling third-party options instead of developing their own solutions.
The built-in payment gateway offered by your credit card processor does not have all the features you need. Some payment gateway-only service providers offer features such as card-tokenization and advanced fraud-protection that are beyond what most regular payment gateways offer.
The main downside of using a payment gateway-only service is that the merchant incurs fees from both the credit card processor and the payment gateway company. However, for some merchants, the benefits of the seamless payment integration warrant the additional costs.
Why isn't Payment Integration Simpler?
Everyone wants to do things their own way. There are dozens of acquiring banks, hundreds of credit card processors and thousands of various software and shopping carts, each with their own unique API formats.
The message structures are different (e.g. XML vs POST array), the required fields are different and even the variable names vary greatly. With no standardized formats, it is the payment gateway's mission to navigate these waters and properly translate the data.
Is my Software or Shopping Cart Compatible with my Credit Card Processor?
The easiest way to find out is to search for the software name followed by the words payment gateway, such as "Mal's E-commerce payment gateways". Most software providers will have a web page dedicated to listing all the payment processing solutions they've integrated. If your desired credit card processor isn't listed, look for generic payment solutions such as Authorize.NET and find out if your processor supports these.
Helcim comes already integrated with the most popular shopping carts, you can find a list of our available integration options on our website.