What’s the Difference Between Integrated & Non-Integrated Payment Processing?
Online transactions are a fact of life. From online shopping to online banking, we rely on digital transactions in our day-to-day lives. These days, two main ways of processing these digital transactions are integrated and non-integrated.
Integrated payment processing is when the merchant and the various banks work together to process the transaction from start to finish; that includes aspects like registration and approval, card issuance, fraud monitoring, refunds, etc. Non-integrated payment processing is when one bank takes care of all these functions for their clients; it can involve multiple levels of payment processors or even manual data entry by an individual bank employee.
Credit card processing has two main systems: open and closed. Open payment processing is when a merchant uses two different processors to process the credit card data – the merchant’s processor and one provided by the acquiring bank. The acquiring bank’s processor is known as an “acquirer” or “Merchant Service Provider (MSP).” Closed payment processing allows a merchant to use only one of these processors.
What is integrated payment processing?
Integrated payment processing means that with certain types of credit card service providers – American Express, Discover, JCB International Card Association, MasterCard Worldwide, and Visa U.S., Inc. – a merchant can bypass the acquirer and use the card associations’ processor. This saves a merchant money because there is no longer an intermediary, but it does not reduce the interchange fees paid by the merchant.
Imagine that you want to go to the mall and buy something from Puma. You look at two stores: one where you pay the cashier directly and one where you pay first and then get a slip of paper, which you take to a person behind a counter who then tickets you. You would find that in the second option, where an intermediary manages your credit card payment, you also have higher costs for your merchandise because that individual or third party has to be paid somehow.
What is non-integrated payment processing?
Non-integrated payment processing is a closed payment processing system. In a nutshell, if you go with a merchant service provider to accept credit cards and they provide their processor and gateway, then you have non-integrated payment processing. When a payment processor is considered non-integrated, they do not use any third-party acquirer. Instead, they provide their proprietary processor and gateway for credit card transactions.
Non-integrated payment processing is a system in which a merchant uses only one processor to process credit card data. The processor handles the routing and processing of the credit card data and sends funds to the merchant’s bank account. This system is more common than open payment processing because it allows merchants more control over their processors, reduces costs, and avoids the hassle of opening (and managing) another account with another processor.
How do these systems work?
A company must decide if they want to be integrated, depending on the benefits they are looking for. For example, an integrator uses one system to process payments, while a non-integrator uses two systems.
An integrator has more benefits than just one single system. This includes accepting all forms of credit cards, handling refunds automatically, and accessing risk management tools. Integrators are also less expensive because they can integrate with providers like Visa and MasterCard at low rates.
When processing your customer’s credit card, the integrated payment processor sends the sale total from your retail account to the card reader or terminal. The billing type (e.g., credit card, cash, check, debit) and amount are recorded in your retail reporting once the payment has been captured and the sale has been completed.
During a sale in a non-integrated system, you manually update the sale total at your card machine or terminal when charging the customer’s card. Following that, you must select the customer’s payment method and specify the amount billed to their card.
Integrated payment processing VS Non-Integrated payment processing
There are some significant differences between these two types of payment processing.
– Merchants can use integrated processors to process a transaction in real-time; non-integrated processors may require a manual approval step, and the transaction may take days to go through.
– Integrated processors allow a merchant to offer their customers multiple payment methods; non-integrated payment gateways limit a merchant’s options as they are often linked to specific banks or credit unions.
– Integrated gateways allow merchants to accept offline payments (such as checks and money orders) online; non-integrated payment gateways generally do not support such transactions.
– Integrated payment processors often come with a recurring billing solution; non-integrated payment gateways do not.
– Integrated processors are often more expensive to implement than non-integrated payment gateways.
– Large e-commerce merchants only use integrated processing systems. Non-integrated payment gateways are the preferred solution for smaller sites due to their lower cost and ease of setup.
– In addition, non-integrated payment gateways generally have lower transaction processing fees than integrated ones.
– Integrated payment processors are more secure than non-integrated ones because they require the customer and merchant ID and payment information to be passed through a secure connection. Non-integrated gateway security is dependent on the security of the merchant’s website.
While there are many benefits to integrated payment processing, using a non-integrated payment gateway may be more cost-effective and allow merchants to offer their customers options they wouldn’t otherwise have.
Your customers need accessible, secure, and competitively priced processing services that will provide the best customer experience possible. The right business credit card processing company will help you meet these goals. In addition, working with a knowledgeable merchant service provider can help you optimize your bottom line and keep you competitive in an increasingly complex marketplace.
The payment integration system you choose for your business depends entirely on your needs, budget, and what works best for you. We hope this article has given some insights into the type of payment processor your business would need.