Payment gateway vs. payment processor

Gateways and processors power almost every digital payment, yet people often mix them up. A payment gateway captures and secures the buyer’s payment details. A processor authorises the transaction and moves the funds. Both are big businesses—USD 26.7 billion for gateways and USD 66.8 billion for processing in 2024—so choosing the right stack matters for security, reliability, and total cost.

What is a payment gateway?

A payment gateway is the customer-facing layer that takes card (or wallet/bank) details at checkout and passes them to the acquiring bank, securely. Think of it as the online checkout surface: it encrypts the data, runs basic fraud and format checks (e.g., CVV/AVS when available), then hands a well-formed authorisation request to the processor.

Most gateways support multiple methods—card payments, e-wallets, and bank transfers—so merchants don’t have to wire up each option separately. Integrated gateways bundle these methods into one interface or API, which simplifies rollout and can reduce direct handling of sensitive data. For online businesses, that means secure authorisation without storing raw card numbers and a smaller compliance footprint.

What is a payment processor?

A payment processor is the service that authorises card transactions and moves the money to your merchant account.

What it does when a customer pays:

1. Receives the transaction from the gateway.
2. Sends the authorisation request through the card network to the customer’s issuing bank.
3. Returns the bank’s decision (approve/decline) to your checkout.
4. If approved and later captured, records the transaction for funding.

What it does after authorisation:

• Clearing: packages approved transactions and routes them for funding.
• Settlement: transfers funds to your merchant account on the agreed payout schedule.
• Exceptions: handles reversals, refunds, and chargebacks; updates transaction status.
• Reporting: provides reconciliation files and statements.

Processors support both credit and debit cards. Without one, you could collect card details but you wouldn’t get an authorisation or receive the funds.

Payment gateway vs. payment processor: key differences

Pros and cons

How payment gateways and processors work together

The payment process relies on both a payment gateway and a payment processor working in sequence. Here’s how a typical card payment works:

1. Customer selects payment option and enters card information.
2. The payment gateway encrypts and transmits details.
3. The payment processor communicates with the card network and issuing bank.
4. The issuing bank approves or declines the transaction.
5. The processor relays the response back through the gateway to the merchant.
6. Funds are settled into the merchant account.

Both are essential parts of the ecosystem, which also includes merchant accounts, acquiring banks, card issuers, and card networks. Some payment service providers offer integrated payment solutions that combine both gateway and processor functions, reducing complexity for merchants. For example, Antom provides a combined solution that supports end-to-end payment processing across multiple payment methods.

Choosing the right provider

The decision on whether you need a payment gateway, a payment processor, or a full payment service provider (PSP) depends on your business model and goals:

• When to choose a payment gateway: If your business is primarily online and you already have existing banking and processing arrangements, a standalone gateway may be sufficient. It gives you control over the customer experience at checkout and helps you securely capture card information.
• When to choose a payment processor: If your operations include both online and in-store sales, or if you already have a gateway in place, a processor is essential to manage communication with card networks, acquiring banks, and issuers. It ensures funds are authorised and settled into your merchant account.
• When to choose a PSP: A payment service provider like Antom combines the roles of both gateway and processor in one solution. This is ideal if you want to reduce complexity, manage costs with a single contract, and gain access to a wide set of payment methods and settlement options across multiple markets.

Key factors to evaluate include:

• Coverage: Does the solution support the payment methods and regions your business targets?
• Costs: Are the pricing structures clear across gateway, processor, or PSP models?
• Integration: How well does the solution fit into your existing systems and workflows?
• Risk and compliance: Does the provider offer strong fraud protection and compliance features?

Conclusion

The terms payment gateway and payment processor describe two different but complementary parts of the payment process. Gateways manage the secure transfer of customer payment details, while processors manage the movement of funds through banks and card networks. Both are critical for accepting credit card payments, debit card payments, and other payment options.

By understanding how gateways and processors work together, you can make better decisions for your business. Providers like Antom bring both capabilities into a single payment solution, helping you simplify the payment process while supporting growth across markets.