Understanding processing models for integrating new payment methods

Deciphering online payment methods: Gateway-Only vs. Collecting models

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Emily Renny
March 17, 2024
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Understanding processing models for integrating new payment methods

Navigating the complexities of online payments, especially when it comes to processing models, can feel overwhelming.

However, understanding these financial models is crucial. They define how transactions flow, who's involved, and how funds are settled within a payment system.

This guide delves into the two main models – Gateway-Only and Collecting – and the role payment service providers (PSPs) play in facilitating these.

What is a processing model?

Think of a processing model as the blueprint for managing and settling online payments. It outlines the roles of various players, including payment gateways, PSPs, merchants, and the different payment methods offered. Understanding this model is key for:

  • Transparency in fund flow: Knowing how and when you receive your funds.
  • Streamlined authorization: Ensuring smooth transaction approvals.
  • Efficient reconciliation: Simplifying the process of matching payments with your records.

Learn more: Payment Methods - Direct integration vs PSP

Gateway-only vs. collecting: Understanding the differences

Different processing models offer varying levels of control and automation. Here's a breakdown of the two most common ones:

Collecting Model

The collecting model allows the merchant to simply integrate with a PSP like Checkout.com without the need to manage a separate relationship with any alternative payment methods (APMs). Transactions are processed by the PSP, and the funds are settled back into a PSP bank account, and then paid into the merchant bank account.

Think of the collecting model as a streamlined payment solution. You sign up with a PSP like Checkout.com, and we handle everything related to the payment methods, from integration to settlements. This will require a special contractual agreement that allows Checkout.com to manage the APM relationship on your behalf.

In summary:

  • Single contract with Checkout.com: No need to manage separate agreements with each Payment Method.
  • Simplified operations: Checkout.com handles all operational tasks, reducing your workload.
  • Consolidated funds: We collect funds from the Payment Method and settle them directly into your bank account.
  • Potential cost savings: Checkout.com may negotiate better rates with Payment Methods, benefiting you.

Gateway-Only Model

Conversely, a gateway-only processing model is where a merchant has a direct contractual agreement with a payment method and Checkout.com simply acts as the technical provider on behalf of the merchant. Merchants simply use Checkout.com for gateway services that communicate directly with the APM. In this use case, we don't settle funds. Instead, settlements are managed directly between the merchant and the particular APMs in question. In this configuration, merchants are only charged an APM Gateway Fee (Local Payment Reconciliation Fee). To summarize, using Checkout.com as the example PSP:

  • Checkout.com acts as the technical provider: We handle the technical integration, ensuring smooth communication between your store and the payment method.
  • Fees: You'll pay a Payment Method Gateway Fee (Local Payment Reconciliation Fee) to Checkout.com
  • Direct settlement from the payment method: You receive payments directly from the payment method, not through Checkout.com.
  • Direction relationship: The merchant has a direct relationship with the payment method, usually a contract, giving you more control over terms and fees.
  • Additional responsibilities: The merchant is responsible for reconciliation, refunds and risk underwriting guided by the contract with the specific payment method

Notably, some payment methods may only be accessible through the Gateway-Only model, limiting your choices.

Integrate more payment methods with Checkout.com

At Checkout.com, we can connect your business with various payment methods under the gateway-only processing model, including:

  • Paypal
  • Tamara
  • WeChat Pay
  • STC Pay
  • SeQura
  • Knet
  • Alma
  • Qpay

We can also hook you up with various payment methods under the collecting processing model, including:

  • Paypal
  • AliPay (China and Hong Kong)
  • giropay
  • Kakaopay
  • Multibanco

For a full list of payment methods, please refer to the Checkout.com payment methods directory.

In conclusion, understanding the nuances between the Collecting and Gateway-Only models is essential for merchants navigating the dynamic realm of online payments. Whether you prioritize streamlined operations or desire more control over your payment methods, Checkout.com provides flexible solutions to meet your business needs.

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March 17, 2024 16:00
March 17, 2024 16:00