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The difference between a payment gateway and a bank

A payment gateway and a bank are both essential parts of the payment processing infrastructure, but they serve different purposes and have different roles to play in the overall process.

Payment gateway

A payment gateway is a software solution that allows businesses to accept payments from customers online. It works by encrypting customer payment information and sending it to the merchant’s bank for authorization. Once the payment is authorized, the gateway sends a notification back to the merchant’s website, and the transaction is complete.

In simple words, it is a secure intermediary between your business and your customers’ banks. When a customer makes a payment on your website, their payment information is sent to the payment gateway. The gateway then encrypts the information and sends it to the customer’s bank for authorization. If the payment is authorized, the gateway sends a confirmation back to your website and your customer is good to go.

Bank

A bank is a financial institution that provides a variety of financial services, such as checking and savings accounts, loans, and credit cards. Banks also process payments for merchants. When a customer makes a payment with a credit or debit card, the merchant sends the payment information to the customer’s bank. The bank then authorizes the payment and sends a confirmation back to the merchant.

In simple words, a bank is a financial institution that holds your money and allows you to make payments and withdrawals. When you make a payment with a credit or debit card, your bank authorizes the payment and sends the money to the merchant.

Here is a table summarizing the key differences between a payment gateway and a bank:

FeaturePayment gatewayBank
PurposeAllows businesses to accept payments from customers online.Provides a variety of financial services, such as checking and savings accounts, loans, and credit cards.
Role in the payment processing processEncrypts customer payment information and sends it to the merchant’s bank for authorization.Authorizes payments and sends money to the merchant.
FeesTypically charges merchants a fee for each transaction.May charge merchants a fee for each transaction, but also offers other financial services.
SecurityEncrypts customer payment information to protect it from fraud.Holds customer money in secure accounts.
AvailabilityAvailable to businesses of all sizes.Typically only available to businesses with a merchant account.

in conclusion, a payment gateway and a bank are both essential parts of the payment processing infrastructure, but they serve different purposes and have different roles to play in the overall process. A payment gateway allows businesses to accept payments from customers online, while a bank provides a variety of financial services, such as checking and savings accounts, loans, and credit cards.