Payment gateway vs. shopping cart

If you are building an online presence to sell your goods or services and you are ready to begin accepting credit cards, all of the options, terms, and programs available may be confusing. Two common components of an eCommerce credit card processing platform are a payment gateway and a shopping cart — but what’s the difference and how do they work together?

Payment gateway – What is it?

Think of a payment gateway as an online point-of-sale terminal for your business. The most common use of a gateway is to authorize payments for an eCommerce store on the internet; however, today’s gateway technology enables businesses to also accept payments in a brick-and-mortar retail environment using a credit card reader, POS system, or integration with accounting or CRM software.

Here’s how a payment gateway works:

• Credit card information is swiped or dipped at a terminal or manually entered into an online hosted payment form or shopping cart.
• The payment gateway encrypts the customer’s credit card information and forwards it to the payment processor.
• The payment processor routes the payment details through the credit card network to the card-issuing bank.
• The card-issuing bank approves or rejects the transaction based on funds available.
• The payment processor communicates the authorization or decline back to the payment gateway.

The gateway notifies the merchant and the customer of the decision.

What is a shopping cart?

The functions of a payment gateway and a shopping cart are very different. A shopping cart is a virtual equivalent to the grocery cart you wheel through the local big-box store. You put your goods into the cart and drive it to the cash register that then tallies your order and gives you a total amount due.

Here’s what an online shopping cart does:

• It totals the costs of your goods.
• It adds in applicable sales tax and delivery fees.
• It subtracts discounts via coupon codes and applicable credits.
• It then displays a total amount due.

The online shopping cart is integrated to a payment gateway, usually via an API, to complete the payment process.

An alternative to a shopping cart integration is a hosted payment form. This approach is ideal for businesses where each transaction typically has just one item or charges the same amount consistently. A secure hosted payment form is designed to match the look and feel of your eCommerce website, yet is hosted on a third-party secure server to help reduce liability and PCI scope.

Why are payment gateways and shopping carts often confused?

It’s easy to understand how a business owner could be confused by all this terminology. Many components of eCommerce and credit card processing work together. In some cases, they’re integrated as part of an all-in-one solution. Some websites and companies use these terms interchangeably, which doesn’t ease the confusion.

So which do you need? Is a payment gateway a necessity for your business? Does your eCommerce site need a shopping cart? What about other components like a merchant account? Where should you begin?!

Do you need an eCommerce solution?

From merchant accounts to payment gateways to software integrations, we can help you accept payments the way your business needs to. To learn more, schedule a free appointment with a payments expert today.