Do I Need Both a Payment Gateway and a Payment Processor?

Yes, in most cases, businesses need both a payment gateway and a payment processor to accept credit card payments online. These two components work together to authorize, process, and settle transactions securely and efficiently. While they are often bundled together by providers, they serve distinct functions.

What Is a Payment Gateway?

A payment gateway is the technology that captures and encrypts customer payment information at the point of sale. In online transactions, this happens on your website or mobile app. The gateway sends the encrypted data to the payment processor for approval.

Key functions of a payment gateway include:

• Collecting card data from the customer
• Encrypting and securely transmitting data
• Performing fraud checks and tokenization
• Connecting to the payment processor

Without a gateway, businesses cannot securely collect card information online. Gateways also provide tools for recurring billing, chargeback management, and reporting dashboards.

What Is a Payment Processor?

A payment processor is the system that communicates with the card networks (Visa, Mastercard, Amex) and the customer’s issuing bank to authorize and settle the transaction. The processor ensures that the funds are moved from the customer’s account to the merchant’s account.

The what is a payment processor article explains that processors handle the full flow of payment approval, batching, clearing, and deposit. They also manage compliance with card network rules and help detect fraudulent transactions.

Processors are responsible for:

• Authorizing transactions
• Clearing and settling funds
• Managing fees and interchange costs
• Enforcing risk controls and chargeback thresholds

How Do the Gateway and Processor Work Together?

The gateway and processor work in sequence:

1. The customer enters payment details on your website.
2. The gateway securely captures and forwards the data.
3. The processor checks with the card issuer for authorization.
4. If approved, the transaction is completed and settled.

Think of the gateway as the front door to payment collection, and the processor as the internal engine that moves the funds. Both are essential to complete an online sale securely.

RevitPay’s payment integration solutions help businesses set up and manage these components seamlessly. Their systems ensure real-time communication between gateways and processors with built-in fraud detection and settlement optimization.

Are There All-in-One Providers?

Yes, some providers offer combined gateway and processing services. Examples include Stripe, Square, and PayPal. These platforms are popular with startups due to their simplicity and quick onboarding.

However, bundled providers often charge higher fees and may impose limitations on customization, integration, or risk tolerance. High-risk merchants typically require standalone gateways and processors tailored to their business model.

Can You Choose Different Providers for Gateway and Processing?

Absolutely. Many businesses use a third-party gateway (like Authorize.net or NMI) and connect it to a separate payment processor. This offers more control over:

• Transaction routing
• Risk management settings
• Integration with CRM and ecommerce platforms
• Custom checkout experiences

Using separate systems also provides flexibility in switching processors without overhauling your entire payment infrastructure.

Do In-Person Businesses Need a Gateway?

Not necessarily. Brick-and-mortar businesses that use a POS system with an integrated terminal typically don’t need a separate gateway. The terminal acts as both the collection and transmission tool, directly connecting to the processor.

But for omnichannel businesses, those selling online and in-store, a payment gateway is still required for the ecommerce portion.

How Do Gateways Support Risk Management?

Modern gateways offer built-in fraud tools, including:

• AVS (Address Verification System)
• CVV checks
• IP geolocation filters
• Velocity checks (limits on rapid purchases)

These features help reduce fraud and chargebacks. When paired with a compliant processor, they give merchants a powerful defense against revenue loss.

RevitPay’s payment integration solutions come with customizable fraud filters and seamless API support to keep risk low without disrupting customer experience.

Conclusion

A payment gateway and payment processor serve different roles, but both are essential for most online businesses. While all-in-one providers are suitable for some, many merchants benefit from more control and flexibility by using standalone tools. With payment integration solutions and a clear understanding of how payment processors work, businesses can optimize every transaction from checkout to settlement.

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