FIS Modern Banking Platform
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June 29, 2019
No matter what type of business you run or whether you want to , in-store, remotely, or a combination of all three, you have two primary options for credit card processing: via a payment gateway or a direct integration. There are pros and cons to both, and the one you choose depends on the needs of your business now and into the future.
When searching for a payments provider, merchants sometimes get hung up on the difference between a gateway and a direct integration, and the difference between a merchant gateway provider and a merchant account provider. Let's define some terms to make it easier to understand.
: that allows a business to accept credit and debit card payments. Payment gateways can be used for both in-store and online transactions. Businesses that use a gateway are able to sidestep the implementation of much of the payment related equipment and security requirements, because the merchant gateway provider takes care of these things. The right payment gateway can make it possible for a merchant to use a payment solution and a payment processor that aren’t compatible with each other, because the gateway serves as the middleman connecting the two.
Direct integration solution: a direct payment processing interface that is built into a merchant’s point of sale system to enable card payment acceptance. A direct integration sends credit and debit card transactions directly from the POS to the payment processor. Direct payment integrations offer more customizable features and services than gateways, but also usually require additional time and resources to develop and implement. Businesses that have complex processing requirements often prefer a direct integration over a one-size-fits-all payment gateway.
Acquirer (or merchant bank): a bank or financial institution that processes credit and debit card payments for a merchant.
Payment processor: a company appointed by the merchant to handle card transactions for their merchant acquiring bank. Sometimes the same company serves as both the acquirer and the processor.
A merchant account with an acquirer is not the same thing as an account with a third party gateway not owned by that acquirer. However, some acquirers do have third party payment gateway offerings, and some integrated solutions use a built-in gateway.
Merchant acquiring accounts require an approved merchant application. If a merchant is using a payment gateway through an acquirer they're already working with (Worldpay, for example), they likely won’t need to complete a separate application and approval process. If a merchant is working with a third party gateway provider, they will need to sign a contract with that provider agreeing to the pricing, terms and conditions. The will then set up the merchant with their gateway account to send the transactions to the merchant’s designated acquirer.
Gateways can support multiple acquirers, and make it possible for a merchant to connect to their processor of choice. Still it’s important to note that not every gateway is compatible with every processor.
Merchants that use gateways always have two relationships: one with their acquirer and another with the merchant gateway solution provider. However, there are exceptions. If the gateway is owned by the acquirer, one agreement can often cover both. An example of this is the Element Express gateway through Worldpay. Merchants using Element Express have a single relationship and contract with Worldpay that includes the gateway solution and a merchant account.
Ultimately, when it comes to selecting a , it’s up to you. In addition to learning about all your options by reading articles like this one, consulting with your trusted point of sale dealer and industry colleagues for their recommendations can also be helpful. In the end, by weighing your own unique business needs against providers’ offerings, you’re sure to come to the right decision.
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