A couple of decades back, if businesses wanted to take payments, cash or check were the only choices available, but with the introduction of electronic payment methods the whole world of finance changed. Technologies like payment gateways and payment switches further changed the face of monetary transactions. Each of these technologies comes with their own strengths and weaknesses. So, which one is the best choice for your business? Let’s take a closer look.

Difference between Payment Gateway and Payment Switch

Both payment gateways and payment switches are important parts of the electronic payment infrastructure. While they both handle electronic payments, their functions, complexities and applications differ.

Payment Gateways

Payment gateways are the processors of payment information securely passing on from customer's devices to banks. They act as a negotiator between the customer's bank and the merchant website, encrypting payment data for transmission. Such gateways enable users to process payments in a variety of ways like credit cards, debit cards or online wallets.

In addition, they offer payment processing in real time as well as easy integration with other systems for fraud-detection and recurring billing at regular intervals. Payment gateways are generally simpler than switches, so they are most suitable for small businesses or companies that just need to take limited range of payments.

Payment Switch

Payment switches are like a routing system which links different banks with payment methods worldwide giving merchants and customers’ wider choices in payments. They supply a flexible and expandable payment infrastructure, and can often support multiple payment methods and functions like fraud detection and prevention as well as real-time payment processing. Payment switches may also have tools for transaction management and reporting.

A payment switch is more complex and needs more management and maintenance than a payment gateway. It is suitable for larger enterprises or financial institutions that need to support various payment methods and cope with high volumes of transactions.

Payment gateways are mainly about how to process payment and guarantee that information stays secure on both ends between a customer bank account and the merchant's e-commerce site. Banking switches on the other hand serve as a routing platform which connects a range of payment methods with several banks, thereby forming its own flexible payment network.

Which is a Better Choice – Payment Gateway or Payment Switch?

Here are the key differentiators between the two:

• Payment Volume /Options: Choosing a payment gateway or a payment switch depends on how big and complicated your business is. If you are a small business or have only a small volume of payments, then probably a payment gateway will suffice. Payment gateways are generally more streamlined than banking switches and suitable for business wanting only to receive a few different payment methods. If you want to offer a wide array of different payment methods, including credit cards, debits cards, online wallets and bank drafts, then payment switch might be a better option.
• Safety: When it comes to protecting your business and customers against fraud and stolen data, payment security is crucial. Both payment gateways and payment switches undergo undergone extensive security testing, such as encryption keys and fraud detection features built in for this purpose. However, payment switches have an edge over payment gateways as it offers advanced security features as compared to the latter.
• Integration: If you use third-party sites such as e-commerce platforms or accounting software, the payment infrastructure needs to be integrated with these platforms. Payment gateways and payment switches offer varied integration capabilities, but you need to make sure that the platform you choose is compatible these third-party platforms.
• Cost: The price of a payment gateway or payment switch will vary with your needs and the vendor providing the service. Payment gateways are typically cheaper than payment switches but they may not be as functional or flexible in terms of service.

In conclusion, both payment gateways and payment switches are an indispensable part of the financial space. While payment gateways are fairly simple to use, payment switches are much more complicated and demand more technical expertise. Businesses can choose from the two that suits them best depending on their requirements and payment processing capabilities.