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Accepting Online Payments: Gateways vs. Processors
If you're like most people, you have no idea what a Gateway or a Processor is, much less which one is the best choice for your store. But this is an important decision that you'll need to make before we can get started on your e-commerce site.
What is a Gateway?
A Gateway is a service that works behind-the-scenes of your site to instantly process credit card transactions. Without ever being directed away from your site, your customer's transaction information is sent to the Gateway, the transaction is approved or rejected, and the Gateway sends information back to your site to either complete the transaction or not. If you've ever shopped at any large retailers, such an Amazon.com or Target.com, you've witnessed a Gateway at work. Your payment was processed without you ever having to leave the store's site.
Gateways require a merchant account. This is a commercial bank account that accepts money transferred to and from your customer's credit card bank. Once your customer's transaction is complete, money is transferred from your merchant account to your business banking account. Opening a merchant account requires a credit check.
What is a Processor?
A Processor is a service that works outside of your site to process transactions, and your customers have to be directed to the outside site to complete their shopping experience. Payments are processed independently of your site, and you find out later whether the customer's credit card was approved or not. If you've ever shopped online, and then been directed to PayPal or Google Checkout to pay, you've experienced a transaction done with a Processor.
Which one is right for me?
It depends on your store, and your preferences for how the site appears to your customers. Here's a side-by-side comparision to help you decide.
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Gateways |
Processors |
| Brand Names |
Includes services like Authorize Net and Verisign |
Includes services like PayPal and Google Checkout |
| Shopping Experience |
Doesn't intrude on your site - works invisibly behind-the-scenes to process your transactions. Gives a more professional look to your site. |
Intrudes on your customer's shopping experience - they are directed away from your site to pay. A less professional look. |
| Transaction Approval |
Provides instant feedback - the transaction won't be completed if the credit card isn't approved or if incorrect information is entered |
Provides delayed feedback - your site accepts the order and you find out later whether the payment was approved, or if there was a problem with the information provided |
| Deposits |
Fast money - funds are deposited directly into your bank account |
You have to log into your account and request that funds be transferred to you - a process that could take a day or more |
| Cost |
More expensive to set up, but usually has lower per-transaction fees. Best choice for a larger store with a lot of transactions. |
Less expensive set up, but charges higher per-transaction fees. Best choice for a smaller store with just a few transactions. |
| Set-Up Considerations |
Requires that you open a merchant account. This requires a credit check. |
Easy to set up. No merchant account or credit check required. |
Still not sure which way to go? Contact us to discuss which option is best for your store.
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