Gateway, processor, acquirer and connection method: the parts of a payment set-up

Four parts, four questions

Sellers of payment services often use gateway, processor and merchant account as if they meant the same thing. They do not. Each part answers a different question about your set-up: what your customer’s card details travel through, who runs the approval and settlement messages, which bank signs you and pays you, and how your own store is wired in.

The card networks’ rules and the guidance written for US bank examiners define the bank and processor roles closely. The gateway and the connection method are mostly a matter of what your provider’s contract and technical documents say, which is why they are worth asking about by name.

The parts, in the words of the sources

Visa’s rules also define a third party agent: an entity, not defined as a VisaNet processor, that provides payment-related services, directly or indirectly, to a member or its merchants. Whether a company in your set-up is registered in that way is a question for your provider.

How a card payment moves through them

The OCC’s handbook describes authorization as the process of approving or declining a transaction before a purchase is finalised: the merchant obtains approval from the card-issuing bank or from a third party acting for it. The transaction information goes to the acquiring bank or its processor, which forwards it through the card network to the issuing bank; the decision comes back the same way.

Clearing, in the same handbook, delivers the final transaction data from acquirers to issuers and includes the calculation of certain fees and currency conversion. Settlement then moves the money: from the issuing bank, through the card network, to the acquirer, and finally to you. The handbook adds that outsourcing some or all of the processing to third parties complicates both the transaction flow and the flow of funds.

Scroll the table to see all columns.

The handbook notes that card companies running three-party networks issue their own cards and settle with merchants themselves, so the card issuer and the merchant acquirer are the same entity. The four-part picture above describes the four-party networks of Visa and Mastercard.

Why the difference matters for a high-risk business

Visa’s rules define a merchant agreement as a direct contract between a merchant and an acquirer, or between a sponsored merchant and a payment facilitator. The gateway company is not named in that definition. A gateway that works with your store does not by itself mean an acquirer has agreed to sign your business.

The reverse also holds: an acquirer that accepts your business may support only some gateways, and a gateway may support only some connection methods. If your shop platform needs a plugin and the proposed gateway offers only a direct API, someone has to build and maintain that link before you can take a payment.

What to confirm before you accept an offer

• Which bank is the acquirer that signs your agreement and settles your transactions?
• Which company processes the transactions for that acquirer?
• Which payment gateway is proposed, and what does it cost to set up and run?
• Which connection method is included: a plugin for your platform, a direct API or a hosted checkout?
• Who builds and tests the connection, and how long does the provider expect it to take?
• Who do you contact when a payment fails, and who handles disputes?

Ask for the answers in writing and keep them with the offer, together with any technical documents your developer needs.

Where Zolution shows it

Every offer on Zolution records the payment gateway and the connection method as two separate fields, beside the provider type, the contracting company and its country, the fees, the reserve and the payout terms, so you can compare complete set-ups rather than gateway names.

These fields are provider-declared: Zolution does not verify them, does not process payments or hold funds, and the provider decides whether to offer you an account. Zolution Standard membership costs nothing.

Questions, answered