In recent years it’s become apparent that the future of business depends on cashless payments. The wisest of entrepreneurs understand that offering clients a variety of digital payment options is the way to go if they want to optimize their earnings going forward.
With this in mind, many businesses, particularly online service providers, have to incorporate either a payment switch or a payment gateway. This pair lies at the core of every scalable payment mode that banks and companies implement for a particular client experience.
But many people often confuse these two terms, when they are really quite different. While a payment switch handles the details of a transaction, verifies accounts, and approves or rejects a transaction, a payment gateway‘s purpose is to make it easier for customers to make secure payments to businesses.
Let’s dive a little further into the details and differences between payment switch vs payment gateway.
Table of Contents
- What are credit card merchant services?
- What is a payment gateway?
- How do payment gateways work?
- How much does the payment gateway charge?
- Examples of payment gateway platforms
- What is a payment switch?
- Examples of a payment switch
- Payment gateway vs switch: Benefits
- Payment gateway vs. switch: Is it an either/ or scenario?
- Payment gateway vs. Payment switch: How they work together
- Curious about making your modern enterprise operate seamlessly? Get in touch with us for help with a payment gateway and a payment switch
What are credit card merchant services?
A credit card merchant account is a kind of bank account that enables your company to accept payments safely. A merchant account is required if you wish to take credit cards, debit cards, and other electronic payment methods. Before being placed into your bank account, payments are first authorized, established, and validated through this account. A merchant account can also protect your company from theft and declined payments.
What is a payment gateway?
A payment gateway is an instrument that safely verifies your clients’ credit card information, guaranteeing that funds are available for you to be paid. Payment gateways authorize credit card payments for both online and brick-and-mortar enterprises. It is a virtual counterpart to a physical point-of-sale (POS) terminal in a store or eatery.
A payment gateway allows clients to submit credit card details, which are then safely transferred from the client to the merchant and between the merchant and the bank. Your payment gateway presents your settlement charges and notifies you if the cardholder’s bank has authorized the payment.
Payment gateways protect your business by facilitating secure and easy transactions and minimizing losses from late payments.
How do payment gateways work?
Online transactions with a payment gateway often involve several stakeholders. The key stakeholders are as follows: customer, business, issuing bank, acquiring bank, issuer processor, card schemes network, and acquirer processor.
Below is an instance of how the payment gateway works:
- When a customer purchases something from a retailer’s website, they start the payment process.
- Representing the acquiring bank, the gateway on the merchant website transmits encrypted payment card data to the card network through the acquirer processor.
- The card network then transmits the transaction to the issuing bank through issuer processors based on the card information to ascertain users (in the case of 3D secure) and guarantee that the funds are obtainable. Based on the risk guidelines, the issuer processors will also determine whether the issuer authorizes the transaction.
- Through the issuer processor, card network, and acquirer processor, the issuer authorizes or rejects the transaction and transmits the response to the gateway.
- If the transaction is accepted, the card network transfers the money from the customer’s bank account to the acquiring bank to complete the settlement with that institution. According to the contract terms and the established rolling reserve, the acquiring bank subsequently transfers the funds to the merchant’s account.
How much does the payment gateway charge?
Of course, every business is concerned with costs which is why you should verify the pricing structure of any payment gateway service before signing a contract with them. Some of the costs might not be evident at first. The entire operating cost, which includes the transaction cost, set-up cost, and admin cost, is the most crucial factor to consider.
A payment gateway and merchant account often cost between $750 to $1,200 in set-up expenses, $0.10 to $0.30, including 2-3% for every transaction, and $0 to $25 monthly cost.
Typically, you will also be charged additional costs for any chargebacks. Endeavor to avoid monthly expenses and a high set-up if you only get a small number of online fees.
Examples of payment gateway platforms
Highlighted below are some of the payment gateway examples you might deal with from time to time:
- GETTRX: GETTRX’s best-in-class gateway efficiently and safely handles all transactions. Its software assists clients in monitoring security and selecting the best integration for their enterprise. GETTRX has the essential system and experience to oversee payment processing for enterprises of any kind.
- Stripe: Due to its simple setup and customizable features, merchants prefer Stripe. Additionally, Stripe implements strategies like one-click checkouts that simplify the purchasing experience.
- Apple Pay: Apple Pay is widely used by brick-and-mortar businesses due to its simplicity. A suitable credit card handles the processing of Apple Pay transactions.
- PayPal: PayPal is a well-known redirect payment channel with a robust anti-fraud team. Merchants favor PayPal’s adaptability due to its currency and cart compatibility.
- Square: This is a favored payment processor for online and offline transactions. The payment processing solution platform has assisted thousands of entrepreneurs in operating their enterprises, from secure credit cards to point-of-sale solutions.
What is a payment switch?
A payment switch allows you to integrate several payment methods, including credit cards, debit cards, and mobile payments, by acting as a middleman between the payment gateway and financial institutions.
A payment switch handles all the transaction details since it is an online transaction process task. If a founder – the payment gateway – manages the transaction, the switch is the executive who really processes payments.
Numerous merchant accounts are registered with their bank (acquirer bank) in a payment gateway. As a result, when a payment request is received from a merchant selling outlet, switch efficiently determines the acquirer bank (connected with that merchant) and the issuing bank of that particular request using BIN allotment and then approves the transaction to take place safely.
The payment switch has a variety of ways to route the transaction, including BIN allotment. Moreover, routing by amount and routing by the time of day is supported. It forms and transmits to the acquirer after receiving the communication from the issuing bank.
The payment switch is a versatile entity that starts the transaction processes after receiving the payment request from the payment gateway.
Examples of a payment switch
Highlighted below are some of the top payment switch alternatives:
- GETTRX: GETTRX outranks some other merchant service providers as it’s committed to providing solutions designed for the client’s needs.
- PayPal: PayPal is a popular payment processing solution. PayPal for business has everything your company needs to make transactions online and offline. Its payment solutions can help you grow your company.
- Payoneer: This is another well-known payment processing solution platform. Payoneer connects businesses, professions, nations, and currencies with cutting-edge cross-border payment technology, enabling worldwide trade.
- Stripe: Stripe offers a couple of centralized APIs and mechanisms that immediately help enterprises to receive and handle online transactions.
- Authorize.net: This payment processing solution platform helps small-sized to medium-scale businesses save time and funds. Authorize.net lets enterprises accept credit cards and electronic checks from deposit funds and websites mechanically into the client merchant account.
Payment gateway vs switch: Benefits
This section will highlight the benefits of payment gateway and payment switch.
Benefits of a payment gateway:
- More instantaneous and safe transactions: The security and speed that a payment gateway brings to your payment processing environment are its two main benefits. Clients and merchants do not have to wait all day to complete the transaction because the payment approval process takes a few moments.
- Keep up with current trends: Payment gateways undoubtedly cover practically all of the potential payment methods, and this is still true in the future since they provide secure, quicker, and more streamlined transactions. You can stay in the lead in the payment processing industry since payment gateway providers have their systems updated.
- Better customer experience: Buyers prefer websites that provide a good selection of payment choices, as well as quick and safe transactions. You can elevate your client experience by using the best payment gateway.
- Reduces declined transactions: Payment gateways examine the availability of funds as soon as users fill in their banking details. This helps reduce declined transactions. The request is only ever authorized or rejected at its initial stage. There is no need to pursue clients to redo their unsuccessful transactions as a result.
- Fraud detection: In providing the highest level of protection for you and your clients, the finest payment gateways have features like online fraud detection, PCI-DSS compliance, and data encryption.
- Accept international payments: Online payment gateways enable you to take payments in many currencies through various payment methods, allowing you to expand your client base internationally without any restrictions.
Benefits of a payment switch
Highlighted below are some of the benefits of payment switch:
- Getting rid of the middleman: To save money, some businesses utilize a payment gateway or a middleman processor. Using a payment switch to send transactions directly to processing endpoints, these intermediary processing structures and associated processing expenses can be removed.
- Internal check verification: Before requesting external approval, the merchant might verify against an internal database. This provides a sort of synergy and builds trust in the payment switch
- Specification modifications: Processors and card institutions frequently modify their payment processing specifications. This is visible from the POS terminal thanks to the payment switch.
- Options for generating revenue: Accepting new payment methods, floating merchant-branded prepaid cards, and accommodating client payment preferences lead to increased income prospects.
- Consolidated reporting: A payment switch allows a merchant to consolidate the whole settlement procedure, relieving a load of batch settlement on in-store workers and the difficulties associated with reconciliation.
- Transaction speed: Merchants can accelerate transactions to sub-seconds (compared to a dial scenario) by routing transactions over a WAN, via a payment switch, and out to the processor. This enhances the consumer experience.
- Eliminates fraud risks: The encrypted BIN allotment allows it to secure and eliminate fraud risks.
Payment gateway vs. switch: Is it an either/ or scenario?
Payment switch and payment gateway are the two entities that have joined banks to all online and offline enterprises in the payment system. Both are simple to conflate and take for one, yet they are not. The fundamental intricacy in the activities involved in processing payments separates payment gateway from payment switch, even though their operations appear to be similar from a distance.
While not entirely different from each other, payment switch vs payment gateway are also not the same, specifically in the payment processing task. To minimize downtime and outages, they are integrated into one another. While payment switch safeguards the numerous payment-processing service providers engaged in several transactions simultaneously, payment gateways safeguard both the merchant and the client during a transaction.
Payment gateway vs. Payment switch: How they work together
Quicker, more secure, and more dynamic transactions are made possible by the smart collaboration of the payment switch and payment gateway. The flexible switch allows the payment gateway to perform beyond a million transactions in a split second. The payment switch directs the transaction technique to the appropriate acquirer.
Curious about making your modern enterprise operate seamlessly? Get in touch with us for help with a payment gateway and a payment switch
Payment processing could be tedious for businesses that are yet to integrate payment gateway and payment switch into their payment system. However, this article should enlighten you on the numerous benefits you are missing from being outdated and further clarify the right payment gateway and payment switch to choose when opting for a payment solution system.
Incorporating the right payment processing into your businesses gives your customers a better experience, eliminates fraud risks, and allows you to keep up with updated trends, among other benefits.