Payment Service Provider vs Payment Gateway

Payment being made by someone to a merchant for a breakfast item

Each month, more than 500,000 new businesses open their doors, whether it’s online or in actual brick and mortar reality. And almost every single one of them needs the same thing: a payment service provider or a payment gateway.

Unfortunately, the payment processing industry can be filled with a lot of jargon and mumbo-jumbo that few people outside of its bubble have the patience to understand. When new merchants are presented with package options such as a payment service provider vs payment gateway, for example, the first question usually is: What’s the difference?

Credit card payment service providers are, in general, the financial companies that make sure your transactions make it safely and securely from point A to point B. They’re the ones who might provide you with your point-of-sale technologies, your credit card machines, your financial tracking information, as well as customer support and help with Payment Card Industry Data Security Standard (PCI) compliance.

A payment gateway, on the other hand, is a digital tool that allows for online credit card payment processing. They’re almost exclusively used for e-commerce, since security and safety regulations don’t allow transaction information to route directly from your business site to any credit card payment processors. If your business exists purely in the physical realm, you may not require a payment gateway package at all.

That said, the payment service provider vs payment gateway issue isn’t so much a debate as it is a choice of options. A physical retail store may only need the former, while an e-commerce business only requires the latter. However, more and more companies are increasingly bridging the two and operating in both worlds.

Sure, you could shop around for two separate business merchant services — one for your physical sales and one for your digital sales — but you’re more likely to pay twice as many fees in the process, too. Just as global commerce is changing, so too are the payment options behind it. When you need to bridge the digital and physical realms, find a merchant processing company that can give you the tools to take your business anywhere.