Payment gateway vs payment processor vs merchant account

What is a payment gateway?

A payment gateway is the secure service that takes card details from your checkout or payment portal and sends them for approval. It returns approved or declined, and it can store cards as tokens for future payments. Authorize.Net, CyberSource and Heartland’s gateway are examples.

What is a payment processor?

The payment processor moves the transaction between the card networks (Visa, Mastercard, Discover, American Express), the customer’s bank and your bank. It handles authorization and settlement behind the scenes.

What is a merchant account?

A merchant account is the account that lets your business accept cards and receive the money. Approved card payments settle into it and are then deposited into your business bank account. Providers such as International Bancard set these up and underwrite your business.

How a card payment flows

From the customer’s click to money in your bank:

• The customer enters their card in secure fields on your checkout or customer payment portal.
• The gateway encrypts the details and sends them to the processor.
• The processor asks the card network and the customer’s bank to approve the charge.
• Approved or declined comes back through the gateway to your page in seconds.
• Approved payments settle to your merchant account and are deposited to your bank, typically within a few business days.

All-in-one providers

Stripe and PayPal combine the gateway, processor and merchant account into a single account. That is quicker to start, but your business processes under their account rather than having its own merchant account. See our Authorize.Net vs Stripe comparison for how that plays out.

Which do you need?

Every business taking cards online needs all three functions. The choice is whether you get them separately (a gateway like Authorize.Net plus a merchant account) or bundled (Stripe or PayPal). On top of that you need the part customers see: a checkout, invoice payment link or customer payment portal.

Frequently asked questions

Is Authorize.Net a payment processor?

No. Authorize.Net is a payment gateway. It works with a merchant account and processor, such as one set up through International Bancard.

Is Stripe a gateway or a processor?

Both. Stripe bundles the gateway, processing and merchant account functions into one account.

Do I need a merchant account to accept credit cards?

You need merchant account functionality. You either open your own merchant account or use an all-in-one provider like Stripe or PayPal that provides it.

Does Mobilize Pay process payments?

No. Mobilize Pay builds and hosts the payment pages and portals and connects them to your gateway and processor. We never hold your funds; payments settle from your processor to your bank.