Payment Processing Platform vs Payment Processing Software: What's the Difference?

Businesses have many options for payment processing. Whether you're launching an eCommerce store, building a subscription-based SaaS product, running a retail business, or scaling your international operations, the right payment technology can make all the difference.

Payment Processing Platform and Payment Processing Software are two terms that are often used interchangeably. However, they have a different meaning.

• Payment Processing Platform refers to a complete end-to-end payment processing infrastructure.

• Payment Processing Software is a software solution that helps businesses manage their payments.

Knowing the difference can help you choose the best option for your business.

In this guide, we'll discuss the key differences between Payment Processing Platform vs Payment Processing Software, their main features, and what to look out for when comparing payment processors.

What Is a Payment Processing Platform?

A Payment Processing Platform is the underlying infrastructure that allows businesses to collect and process payments electronically. It connects merchants, customers, payment gateways, acquiring banks, issuing banks, and payment networks to facilitate all types of financial transactions.

A payment processing platform is different from a standalone application in that it includes all the necessary technology, tools, and infrastructure needed to process payments securely.

Common Features of a Payment Processing Platform

• Credit/debit card processing

• Digital wallet processing

• ACH and bank transfers

• Recurring billing

• International payments

• Fraud prevention

• Routing and settlement

• Merchant account management

• Settlement and reconciliation

For merchants, the payment processing platform operates in the background and facilitates every transaction from authorization to settlement.

When comparing payment processors, it's important to keep in mind that each has different fees, supported methods, payout schedules, and more.

What Is Payment Processing Software?

While the payment processing platform handles all the infrastructure needed to collect payments, Payment Processing Software refers to the application that lets businesses manage their payments.

Payment processing software lets merchants:

• Manage their payments

• Monitor transactions

• Process refunds

• Generate reports

• Reconcile payments

• Track customers

Common Features of Payment Processing Software

• Payment dashboards

• Transaction management

• Customer payment history

• Refund processing

• Invoice generation

• Subscription management

• Financial reports

• Analytics

• APIs and permissions

Simply put, while the payment processing platform is responsible for facilitating payments, the payment processing software is the interface that lets businesses manage their payments.

Many payment processors offer both software and platform solutions bundled together. However, it's important to understand the difference between the two in order to choose the best option for your business.

Payment Processing Platform vs Payment Processing Software

Payment Processing PlatformPayment Processing SoftwareProcesses payment transactionsManages payment operationsConnects financial institutionsProvides merchant dashboardHandles authorization and settlementDisplays payment reportsSupports multiple payment methodsGenerates invoices and refundsFocuses on transaction infrastructureFocuses on business managementOperates in the backgroundUsed daily by merchants

As you can see, the two solutions serve different purposes and have different sets of features. However, they're both crucial parts of an end-to-end payment processing solution.

How Payment Processing Platform and Software Work Together

Every time a customer makes a payment online, several systems need to work together in order to authorize and settle the transaction.

For example, when a customer buys a product on your website:

1. The customer will enter their payment details on the checkout page.

2. The payment gateway will securely transmit the information to the payment processing platform.

3. The payment processing platform will then route the request to the acquiring bank and card network for authorization.

4. Once the transaction is approved, the payment processing software will record the payment and notify the merchant.

The entire process takes a matter of seconds, and it's designed to be as seamless as possible for the customer.

Who Needs a Payment Processing Platform?

Different businesses have different requirements when it comes to payment processing. eCommerce stores, SaaS companies, retail businesses, and high-risk merchants all have different needs.

Choosing the right payment processor depends on your industry, transaction volume, and growth plans.

eCommerce Businesses

Online retailers need a secure payment processing solution that offers robust fraud detection, powerful checkout, and integration options.

Important Features

• Hosted checkout

• Payment gateway

• Digital wallet support

• International currencies

• Mobile payments

Subscription & SaaS Companies

SaaS and subscription businesses have unique needs in that they rely on recurring billing to generate revenue.

Important Features

• Recurring billing

• Subscription management

• Dunning management

• Customer billing portals

• Revenue reports

Retail & Point-of-Sale Businesses

Physical businesses need to accept payments in person.

Important Features

• Card payments

• Contactless payments

• Mobile payments

• Inventory management

• Reporting and analytics

High-Risk Merchants

Some industries carry a higher risk of chargebacks, fraud, and payment disputes.

Important Features

• Chargeback management

• Fraud prevention

• Higher approval rates

• Risk management tools

• Flexible underwriting

International Businesses

International businesses often deal with complex financial operations, including multi-currency payments, local payments, and regional regulations.

Important Features

• Multi-currency support

• Local payment methods

• Settlement in different regions

• Tax management

• Regional compliance

Choosing the right payment processor ensures that your business has the tools it needs to grow its sales and scale its operations.

Key Features to Look For in a Payment Processing Platform

Not all payment processing platforms are the same. When comparing payment processors, it's important to look for solutions that offer the features you need to run and scale your business.

Security

Security should be your number one priority when choosing a payment processor.

Always go with PCI DSS compliant payment processors that offer:

• Tokenization

• End-to-end encryption

• Fraud monitoring

• Chargeback protection

• Multi-factor authentication

Integrations

Modern businesses rely on a variety of tools and applications to run their operations.

Choose a payment processor that offers powerful integrations with your existing tools and software.

Reporting & Analytics

To maximize your profits, you need to be able to track your payments and monitor your cash flow on a regular basis.

Look for a payment processor that offers detailed reporting and analytics features.

Multi-Payment Support

To stay competitive, you need to give your customers the payment methods they want.

A good payment processor should support:

• Credit cards

• Debit cards

• ACH

• Digital wallets

• BNPL

• And more

Scalability

As your business grows, you need a payment processor that can keep up with your increasing transaction volumes and support your expansion plans.

Look for a payment processor that offers enterprise-level features and tools.

How to Compare Payment Processing Platforms

When comparing payment processors, it's important to look at more than just the fees.

Consider:

• Pricing transparency

• Monthly costs

• Transaction fees

• Contract terms

• Payout schedules

• Customer support

• Supported payment methods

• Integrations

• Merchant reviews

• Fraud prevention

• Ease of use

• Scalability

By comparing these factors, you'll be able to choose the best payment processor for your business.

Common Mistakes Businesses Make When Choosing a Payment Processor

Many businesses make the mistake of choosing a payment processor based on advertised fees.

Some of the most common mistakes include:

• Prioritizing low fees over security and other features

• Failing to consider payout schedules

• Not accounting for international transactions

• Overlooking the importance of fraud prevention

• Choosing a software-only solution that doesn't support automation

• Failing to consider the long-term growth of your business

Avoiding these mistakes can save you time and money in the long run.

Why Independent Payment Processor Comparisons Are Important

When choosing a payment processor, it's important to look at more than just marketing copy.

Independent payment processor comparisons can help you choose the best option based on factors such as:

• Pricing

• Features

• Industries

• Payout schedules

• Integrations

• Merchant reviews

Conclusion

When choosing a payment processor, it's important to understand the difference between a Payment Processing Platform and Payment Processing Software.

While the former refers to the underlying infrastructure that facilitates payments, the latter is a software application that lets businesses manage their payments.

Both solutions are important parts of an end-to-end payment processing solution, and they're often used together.

When choosing a payment processor, it's important to look at more than just fees and consider other factors such as security, fraud prevention, integration options, reporting, supported payment methods, and more.

If you're looking for the best payment processors for your business, check out our guides on Payment Processing Platform, Payment Processing Software, Online Payment Processing, and Online Payment Gateway. You can also browse our detailed processor reviews and comparisons to find the best option for your business.