You can think of a payment processor as a communication intermediary. It’s the service responsible for sending messages between your business, your customers, the customers’ bank accounts and your bank account.
You’ll need a payment processor no matter which type of business you operate. As a bonus, if you operate a brick-and-mortar store, a lot of payment processors provide POS systems that help you collect credit card information during transactions.
Many businesses use a payment processor that’s connected to their merchant account, meaning all of their payments are delivered directly to them. However, you can also use a third-party payment processor that stores payments for many different businesses. The benefit is a more streamlined experience with lower fees.
When To Use a Payment Processor
All businesses, whether online or brick-and-mortar, will likely need some form of payment processor if they plan on accepting credit card or ACH payments. Here are some examples of when using a payment processor makes sense:
- You have a brick-and-mortar store that also operates an e-commerce website
- You have a pop-up shop that travels to different venues
- You have a dedicated storefront where you can install a permanent POS system
Top Payment Processors
There are several different kinds of payment processors, including credit card processors and ACH processors. Since most businesses collect credit card payments, here are our top picks for credit card processing companies.
- Square delivers funds to your account in one to two business days with fees ranging from 2.6% to 3.5%.
- Payment Depot uses a subscription pricing model based on your monthly transaction volume, making it good for businesses with lots of transactions.
- Stripe offers rates between 2.7% to 2.9% per transaction and accepts all types of mobile wallets as well as ACH debit payments.
$0.08 per swipe; $0.15 per keyed-in transaction
Starting at $59
From 0.3% plus $0.08 per transaction
Starts at $69 / month
When comparing a payment gateway versus a payment processor, you can see they each play different roles. Payment gateways are vital for verifying a customer’s credit card information, while payment processors handle the behind-the-scenes communication that eventually lands payments in your account. Some companies, such as Stripe, provide both services.
Overall, online stores will likely need both solutions, while brick-and-mortar shops typically just require a payment processor.