Payment Method
A payment method is the way that a customer chooses to pay for goods or services. It’s the means by which the payment transaction occurs between the customer and the merchant.
Examples:
- Credit/Debit Cards (Visa, MasterCard, American Express)
- Digital Wallets (Apple Pay, Google Pay, PayPal)
- Bank Transfers
- Cash
- Cryptocurrency (Bitcoin, Ethereum)
- Buy Now, Pay Later (Klarna, Afterpay)
- Gift Cards
- Checks
Characteristics:
- Customer-focused: payment methods are chosen by customers based on their convenience, trust, and any incentives provided.
- Variability: different regions and industries may prefer or require different payment methods.
- Transaction types: some payment methods may be better suited for one-time payments, while others are ideal for subscriptions or recurring charges.
Payment gateway
A payment gateway is a technology used by merchants to accept debit or credit card purchases from customers. The gateway acts as a middleman between the merchant and their bank, securely transmitting payment data for authorization and settlement.
Examples:
- Stripe
- Authorize.net
- PayPal
- Worldpay
- Adyen
- Braintree
Characteristics:
- Merchant-focused: payment gateways are chosen by merchants based on factors like fees, ease of integration, security features, and supported payment methods.
- Security: payment gateways use encryption and other security measures to protect sensitive financial data during the transaction process.
- Transaction handling: they handle tasks such as transaction authorization, payment processing, and anti-fraud checks.
Key differences
- Scope: payment methods are the options available to customers for making a payment, while a payment gateway is the service that processes those payments.
- Role: payment methods are part of the “what” in a transaction (what method to use to make a payment), whereas payment gateways address the “how” (how to securely process that payment method).
- User interaction: customers choose payment methods. Merchants, on the other hand, choose payment gateways.
- Technical complexity: payment gateways involve more technical layers, including encryption and security checks, whereas payment methods are simply different forms of currency or credit.