Payment gateway or full-service payment platform: what’s the difference?

Payments and the new finance frontier

Over the past few decades, technology has revolutionised almost every aspect of our lives. The financial sector is no different, with traditional banking norms being disrupted by a new generation of fintech firms offering something new to consumers and businesses. The relationship between these older and newer worlds is built on mutual respect and knowing that cooperation is ultimately better for everyone.

Today, modern fintech firms aim to offer innovative services and connect their customers to banks seamlessly. Most companies doing this within the payments realm are payment service providers (PSPs), which enable entrepreneurs, businesses and online stores to accept payments on their websites, apps, etc.

Basic PSPs provide simple connectivity services, while more advanced firms will allow companies to collect and disburse – or pay out – funds. Given the variety of services offered by PSPs, you might find it challenging to understand which provider fits your needs. So, here we’ll highlight the differences between the two ends of the spectrum: gateways and full-service PSPs.

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What is a payment gateway?

For businesses, a payment gateway allows secure payment data to flow between you, your customer and your bank. It ensures a customer has the funds to make a purchase and makes sure you get paid. In-person, it’s the software that powers a point-of-sale device or card reader, and online it is a cloud-based system that connects a customer to the merchant.

As a business owner, gateways allow you to connect to several payment solutions (such as Klarna or Visa). However, you still need to sign contracts and manage the relationship with the solution providers yourself. This is something that many businesses don’t want to handle or find complicated and time-consuming to maintain.

Using a payment gateway provides some benefits, including:

– Faster payments – as banks and other providers transfer funds directly to your business bank account after the gateway processes the data.

– Better terms – when using a bank for gateway services, they might offer more competitive rates or other benefits.

– Reconciliation via standard banking – reconciling payments via common banking formats – such as mt940 or CODA – is typically available when contracting with a bank. This usually allows you to feed information into your accounting system easily.

All of these can be beneficial to your business. But some of these benefits also come at a cost. One drawback is the need to connect with more than one provider. Having to pay multiple providers for their services increases the complexity of reconciliation and can cause costs to spiral out of control.

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What is a full-service payment service provider?

A full-service PSP negotiates all the connections and relationships with payment solution providers for you. It acts as a one-stop solution aggregating all your payment methods and services.

What are the benefits of using a full-service payment service provider?

– You don’t need a contract with each payment provider

– They take care of the entire electronic payment transfer process

– You can manage all your payments in one place

– Using a single provider reduces costs

– It’s easier to add new payment methods

– They process all fund transfers, including refunds and reversals

– Support to help with payment queries or issues

Most of these benefits speak for themselves. Essentially, you save time and money by receiving all payments and invoices in one place. This also gives you a much more straightforward overview of your payments.

To increase your checkout conversion rate, you need to offer your customers their preferred ways to pay. Offering the correct payment methods is also crucial when expanding internationally.

Partnering with a full-service PSP allows you to add new payment methods quickly. It also means you don’t spend time and effort setting up contractual relationships with all the individual payment providers. A good PSP should even proactively offer advice about the payment methods you can use to grow your business.

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Choose the right payment provider for your business

When choosing a provider, you can think of each of the two we’ve covered as entry tickets to an amusement park. A gateway is similar to a pay-as-you-go ticket price: you get into the park, but you pay to go on each ride. In contrast, a full-service PSP is more similar to a single-price ticket, where a single payment gives you access to all the rides. The first approach grants more control, as you can decide which attractions to ride, while the second offers more flexibility and cost control, as you pay just one price for all services.

A gateway can be a suitable option for businesses that might want to offer only a small number of payment methods, aren’t planning to expand, or are keen to handle all contracts and negotiations in-house.

A full-service PSP is the right partner for you if you want to offer multiple payment methods without the hassle of managing them and are looking for an innovative tool to help you drive growth. A gateway follows you on your business journey, while a full-service PSP can act as an expert that guides you into the payments realm.

Grow your way with Mollie payments

At Mollie, we help businesses drive growth with a full-service payments solution that offers a conversion-optimised checkout and multiple payment methods. Easily integrate Mollie with your website and onboard quickly with no minimum costs, no lock-in contracts, and no hidden fees. Find out more about payments with Mollie.

Are you still looking for a helping hand with your payments strategy? Check out five tips to increase ecommerce conversion or our guide about what a PSP can offer your business.

Get better payments now.