Payment Gateway vs. Payment Service Provider: What’s the Difference?

If you’re thinking of adding payments to your platform, you have probably heard about the need for payment gateways. But you might also have heard the term payment service provider. Are they the same thing? And if not, what’s the difference?

Many times, the same payments industry function can legitimately be referred to with different terms. At the same time, people within the payments business often use terms casually and interchangeably, regardless of whether or how those terms are actually used or defined by the card networks, such as Visa or Mastercard. All of this can make navigating the system more challenging before you’ve mastered the language.

In this case, it’s straightforward to separate the two.

Payment service provider is a much broader term than payment gateway. It is often used to refer generally to any number of providers (including gateways – we’ll get to that in a minute) involved in enabling and supporting payments.

If you want to offer payments or payments-related services, you must be registered with a card network as a service provider of one kind or another. The networks dictate how each type of service provider is defined, and providers are permitted to offer only the services they’ve been registered to perform.

The networks’ rules define many distinct types of payment service providers. These include payment gateways, as well as companies like ISOs and payment facilitators. They also include companies that provide related, specialized services, such as merchant monitoring or cryptographic key management for point-of-sale PIN entry devices.

A payment gateway is an entry point into the payments system. A gateway sits between the merchant and the processor to capture and encrypt card and transaction data. The gateway packages that data and submits it on the merchant’s behalf to the processor for routing to the card networks and to the issuing bank.

A variety of companies offer gateway services. Some firms such as Authorize.net offer standalone payment gateways. Processors and merchant acquirers such as Worldpay from FIS also provide payment gateways as part of their suite of acquiring services. You can read more about gateways here and here.

Within their definitions of service providers, Visa and Mastercard categorize payment gateways as two different things. According to Mastercard’s rules, a payment gateway would be required to register as a “Third Party Processor.” According to Visa, gateways are categorized as “Merchant Servicers.”

So, each payment gateway should be a registered payment service provider, but not every payment service provider is a payment gateway.

Resources to learn more:

Visa Global Registry of Service Providers

Mastercard Rules (see the section titled “Service Provider Categories and Descriptions”)