The growth of the e-commerce business has resulted not just in an increase in online financial transactions but also resulted in the creation of digital payment options such as a digital wallet. It has also given rise to new terms like Payment processors and payment gateway.
As an e-commerce business owner, it is mandatory for you to provide a good shopping experience by ensuring the safety and security of the online payment transactions made by the customers of your business.
To ensure a hassle-free online payment experience to the customers, one must be aware of the basic terms and technologies like Digital Wallet, Payment Gateway and Payment Processor to get a grip on them for choosing the best payment option for you for the smooth running of your business.
The more established the e-commerce sector gets, the more merchants will turn to the digital realm to grow their enterprises. However, starting an e-commerce business may be difficult at times, especially when it comes to deciding on the best payment methods to utilise for the online store.
So, if you too are very confused with all such jargon, why not shed some light on them to have a firm grip and better understanding of them.
In this blog, we will discuss the definitions as well as the fundamental distinctions between Digital wallet, payment gateway and payment processor. So, just hop in and enjoy your reading!!!
What is Digital Wallet?
A Digital wallet is also known as an electronic wallet or e-wallet. It can be easily considered a digital alternative to a physical wallet. It is a computer programme that allows users to deposit or store their money in an online wallet to conduct online purchases without having to fill out card data again.
Digital wallets are like prepaid solutions which means the users need to deposit money in their wallet account if they want to use it. It is considered one of the most convenient methods for making instant online payments.
A user can easily top up his digital wallet or e-wallet which enables him to quickly transfer the money to another user’s account. Digital wallets can be used for making online payments as well as for evaluating user authentication.
Digital wallets have changed the whole landscape of the digital payments business, owing to their simplicity of use and security. Instead of sending comprehensive financial information to the merchant, digital wallets can deliver one-time tokens to e-commerce platforms.
Data suggests that allowing payments through digital wallets has resulted in reduced cart abandonment and improved conversions for e-commerce firms. Integrating with well-known digital wallets further boosts the e-commerce platform’s reputation and appeal.
PayPal, Samsung Pay, Apple Pay, and Android Pay, are a few examples of the most popular digital wallets.
What is Payment Gateway?
Payment gateways are a type of E-commerce solution that allows customers’ banks to authorise credit/debit card payments to online shops. In other words, payment gateways permit the transmission of payments from the client to the website over a secure interface.
Payment gateways can also be called the online version of a point-of-sale system. In simpler terms payment gateway serves as a link between a website and the card owner or banks, offering them the technological solution that approves the card payments. The business owners must enter into contractual agreements with banks, card issuers, and the gateway provider for using the payment gateway.
A payment gateway is a service that e-commerce business owners can incorporate directly into their websites to receive client payments. Customers utilise the payment gateway to enter their financial data for the transaction throughout the checkout process. Following that, the gateway service is in charge of interacting with the payment processor and the issuing bank in order to authorise the transaction.
Payment gateways, in a nutshell, are software systems that allow and offer access to payment services. They can be linked with numerous payment service providers in that capacity.
What is a Payment Processor?
A payment processor is in charge of providing all payment processing services, acting as a go-between for the e-commerce store and the card acquirers or banks. It functions as both a payment gateway and a payment intermediary.
When functioning as a payment intermediary, the payment processor offers a comprehensive service that includes both technical payment processing and money collection. In this situation, the payment processor is in charge of all contracts with card issuers and banks, as well as the settlement of monies collected, significantly decreasing the amount of paperwork for merchants.
The payment processor is in charge of completing the transaction between the merchant, the issuing bank, and the acquiring financial institution after receiving the customer’s financial information from the gateway.
Following successful verification and fraud checks, the issuing institution sends the money (from the client) to the processor, who subsequently distributes it to the acquiring bank (to the merchant). In certain circumstances, the payment gateway and processing service are supplied by the same firm, which simplifies the process for merchants.
It is easy to distinguish between a payment gateway and a processor. While the former enables the transaction, the latter is in charge of communication amongst the parties involved in order for the transfer to be approved.
Digital Wallet vs Payment Gateway vs Payment Processor: Which One to Choose?
The most challenging question for business owners is how to choose the best payment method?
For online transactions, processing services are just not enough as the business owner needs to incorporate a gateway provider to interact with the consumers and their banks. Therefore, it is critical to select a payment gateway provider that also includes a processing solution.
e-commerce businesses can take advantage of e-wallet services’ low costs, quick transfers, and simple checkout procedures while accepting transactions from their customers. Generally, digital wallets are stored on the client-side and are fully compatible with most e-commerce websites. However, businesses can create a server-side digital wallet to store their customers’ details on their servers.
Business owners would profit the most if they select a digital wallet service provider that allows merchants to take payments online on their platforms. Customers can pay using a digital wallet, but the website will still require the gateway or payment processor to complete the transaction.
To integrate the best online payment system into your e-commerce website you can take the expert services of a reputed e-commerce website development company to offer you the best digital solutions for your business.