Confused about payment processors and payment gateways? Learn how they differ and determine which one is best for your business.

For many businesses, navigating the differences between payment gateways and payment processors can be challenging. It's crucial to select the right solution as it can significantly impact operations and profitability, including costs, efficiency, and customer satisfaction.

By understanding payment gateways and payment processors clearly, businesses can make informed decisions that align with their goals and requirements. Read on to discover the various types of payment processors in Malaysia and why they are essential to e-commerce businesses.

*Read till the end to see our best recommendations for most e-commerce businesses.

What is a Payment Processor?

A payment processor is a financial institution or company that handles the back-end processing of payments. It focuses on verifying and authorizing payments, transferring funds to the merchant's account, and ensuring secure transaction settlements. Acting as an intermediary between merchants, banks, and payment networks like Visa and Mastercard, payment processors play a crucial role in facilitating payment transactions.

To learn more, check out our article on whether your business needs a payment processor.

What is a Payment Gateway?

Payment gateways act as a bridge between merchants' online stores and payment processors, facilitating the flow of payment data and ensuring that transactions are processed securely and accurately.

Payment gateways serve as a bridge between merchants' online stores and payment processors. They facilitate the flow of payment data and ensure secure and accurate transaction processing. Payment gateways manage the front-end checkout process, securely transmitting customers' payment information to the payment processor. They establish trust with customers and provide a seamless online shopping experience with features like tokenization, customizable checkout pages, and multi-currency support.

Check out What To Look For In A Payment Gateway to learn more about payment gateways.

The Different Roles between Payment Processors and Payment Gateways

To illustrate the roles of payment processors and payment gateways, let's use a retail store analogy. In this analogy, the front cashier helps customers with the checkout process, while the clerk checks product stocks and availability. Together, they ensure a pleasant experience for customers.

Similarly, in the online payment system, the payment processor's role is to handle the transaction process, ensuring it goes smoothly. On the other hand, the payment gateway interacts with customers to ensure a satisfactory shopping experience. Customers primarily interact with the payment gateway rather than the payment processor.

That said, the customers usually interact with the cashier in the store and not directly with the clerk. In the context of online payment, customers will communicate with the payment gateway rather than the payment processor.

Payment processor:

The payment processor's role is akin to the clerk in a retail store. Just as the clerk checks product availability and communicates with the cashier, the payment processor handles the technical aspects. It verifies payment details, confirms sufficient funds, and initiates the transfer from the customer's bank account to the store's bank account.

Payment gateway:

The payment gateway can be compared to the cashier of a store. It assists customers throughout the shopping experience, ensuring they are satisfied with the buying and payment process.

In a nutshell, the payment processor works behind-the-scenes to handle the payment transaction, while the payment gateway takes care of the front-end communication between the customer and the payment processor. Together, they enable e-commerce businesses to receive payments in a seamless and secure manner.

The best option for most businesses? Payment gateway + payment processor.

For most businesses, the ideal choice is a payment gateway that includes a payment processor. This integrated solution offers several benefits:

Time efficiency

Payment processors solely focus on financial aspects like authorizing and settling transactions. They lack features and tools that help businesses manage payments and reconcile transactions. On the other hand, payment gateways often offer tools such as a comprehensive merchant dashboard, payment links, invoice payments, and plugin integration. These valued added services and tools often come part of the package.

Seamless integration

Selecting a payment gateway with an integrated payment processor guarantees seamless integration between the two services. This simplifies the payment processing workflow and eliminates the need for manual data entry and reconciliation.

Straightforward pricing

By choosing a payment gateway with a payment processor, you will also be able to take advantage of a straightforward fee structure. Some payment gateways may offer lower transaction fees or bundle their fees together.

By utilizing both services, merchants can ensure that their payment processing is efficient, secure, and reliable, providing a seamless experience for their customers.

As a business owner, you want to provide your customers with a seamless checkout experience while ensuring the security and success of your transactions. However, relying solely on a payment processor may not be enough to achieve this goal. Instead, it's important to choose a reliable payment gateway with a stable background and a high transaction authorization rate.

By selecting the right solution, you can maximize your transaction success rate and offer a seamless checkout experience that meets your customers' expectations.

At Opn Payments, we understand the challenges that come with implementing the right checkout solution for your business in Malaysia. That's why we're here to provide you with a reliable and easy-to-use solution. Our payment gateway is trusted by thousands of businesses across Southeast Asia and Japan.

Opns’ team of payment experts based in Kuala Lumpur is available to answer any questions you may have, and can guide you through the process. Don't hesitate to contact us today and let us help you take your e-commerce business to the next level.