Two payment technologies step into the ring. Only one can come out on top! Learn about the difference between payment aggregators and payment gateways, and find out which one is best for your eCommerce business.

The Ultimate Bout—Payment Aggregators vs Payment Gateways

It’s the eCommerce fight of champions! In one corner, we have Grendel the Payment Gateway, and in the other, Arnold the Payment Aggregator.

As the bell rings, who do you bet on?

Like many other parts of online retail, the answer isn’t that simple. It’s not a binary choice, and it’s based on far more than who has the most dazzling array of features. In fact, making the right decision will depend on exactly what your needs are as an online merchant.

Not sure which team you want to join? Don’t worry, we’re here to coach you through finding perfect choice for you.

Seconds out, round one!

A Strong Start from the Payment Aggregator

Arnold the Aggregator comes out of the corner fast, ready to explain exactly what he can do for your eCommerce business.

First off, if you use a payment aggregator, you do not need a merchant account—which happens to be a big deal. A merchant account is a facility that you create with your bank that allows you to accept credit cards and other payments from customers.

If you use a payment aggregator, they can take payments on your behalf, collect them together, and deposit them straight into your regular business bank account (minus fees.) There are plenty of popular payment aggregators out there—think Stripe, Paypal, Square, and similar businesses.

Arnold is flexing now, wanting to show you how these aggregators work. Essentially, an aggregator groups your business with other merchants behind the scenes, but tracks your payments individually. The aggregator takes payments on your behalf and accepts the money into their own merchant account. They can then transfer the money to your account on request, or on a regular schedule.

Bouncing Back, Here Comes the Payment Gateway

Grendel the Gateway is not to be outdone, but he’s a more basic fighter than Arnold. You see, a payment gateway mechanism is great at doing one thing really well—sending information between your payment system and the payment processor for forwarding onto the card payment networks. The card payment network and issuing bank then authorize or deny the transaction and let the payment processor know. The payment processor forwards the information to the payment gateway that lets the customer know if their payment method has been accepted or denied.

Phew! Grendel’s furrowing his brow just thinking about all those steps.

Payment gateways are typically offered by your bank or a separate payment gateway provider like Authorize.net, Securepay, or PayLine. Some payment aggregators, like PayPal, also offer payment gateways.

Should You Team Up with a Payment Aggregator?

Arnold the Aggregator is desperate to tag you into the ring, but is it a wise choice? Well, a payment aggregator could be right for you if:

• You want to start accepting online payments quickly—it’s typically much faster to get authorized through a payment aggregator than going through the account opening and validation process when opening a merchant account at a bank.

• You want easy integration with your website—taking payments with Stripe, Square, PayPal, or another aggregator is typically as easy as pasting some code into your shopping cart or payment processing software. Many payment providers already have deals with the more popular payment aggregators.

• Fees are simple—you’ll typically pay fairly straightforward fees, a percentage of the total transaction amount plus a small, fixed price. Most payment aggregators charge around 2.9% plus 30 cents per transaction, although this can change depending on your volume of sales.

Will a Payment Gateway Help You Win the Bout?

On the other hand, Grendel the Gateway shouldn’t be underestimated. A payment gateway does have several advantages of its own:

• More freedom with your money—here’s a little secret. Payment aggregators are notorious for putting holds on merchant funds, as the result of irregular activities, chargebacks, and similar issues. They can freeze your account without notice, making it difficult for you to process payments or withdraw your funds. Payment gateway mechanisms don’t have that problem, as you’re bearing the risk as a merchant.

• Lower fees—if you’re processing more than a few transactions a week, and taking in a decent amount of money, the fees for a payment gateway and merchant account are likely to be lower than for a payment aggregator. That means more cash in your pocket.

• Fewer limits—payment gateways and merchant accounts have more relaxed limits to the number and value of the transactions you process. 
• Easier access to funds—you can typically withdraw your money from a merchant account as soon as its cleared, rather than waiting a couple of days, as per a payment aggregator.

Deciding on the Right Payment Option

Alright, you’ve watched the fighters battle it out, which one should you choose?

A payment aggregator is likely best for you if:

• You’re a new eCommerce merchant, just starting out in online retail
• You’re only processing low volume, low value transactions
• You don’t mind potentially paying slightly higher fees
• You want to get authorized for an account very quickly
• You want an easy integration with your online store
• You don’t mind waiting a few days for your money

You should consider a payment gateway if:

• You’re processing larger volumes and values of transactions
• You want more control over your money, including the option to withdraw it faster
• You don’t mind a little more coding and development work
• You want to flex your muscles to get better rates with payment service partners like banks
• You want to pay lower fees

You Have a Third Choice—An Integrated Payments Stack

What if you could bet on both fighters? Or try out multiple payment gateways at once? Well, you can. Put the right payments stack technology in place, and it can integrate your website, shopping cart, payment processor, payment gateway, and payment aggregator together. You can try processing money in several different ways so you can work out what’s best for you. You can route payments to an aggregator or a specific processor based on the criteria you set.

Yes, it’s truly the best of both worlds.

Whatever you decide, remember you’re not locked in. You have a choice of aggregators and gateways, so why not give them both a try and see what works best for you?