Why Payment Gateway vs Payment Processor Matters for ERP Implementations
“We need a payment gateway for our Dynamics 365 implementation.”
This line comes up early in almost every ERP project. It gets added to the requirements list, nodded through in meetings, and revisited later, usually when timelines are tight.
The challenge is that “payment gateway” is often used as shorthand for several very different components. Sometimes you need a gateway. Sometimes you need a processor. Sometimes you need both and sometimes neither.
In ERP environments, understanding the payment gateway vs payment processor distinction matters. Payment decisions touch accounting, reconciliation, reporting, and customer workflows.
When the terminology is unclear, teams end up paying for technology they don’t need or discovering integration gaps late in the project.
Let’s clarify the difference and how it applies in Dynamics 365 implementations.
Payment Gateway vs Payment Processor: The Core Difference
A single payment transaction involves multiple players. Understanding who does what helps you avoid unnecessary cost and integration surprises.
Payment Gateway
What it does: Securely captures payment data and transmits it to the processor.
Key point: A gateway moves data, not money. It encrypts card details and passes approval or decline messages back to your ERP.
Examples: Authorize.Net, Braintree, Stripe (when used only as a gateway)
Payment Processor
What it does: Routes the transaction through card networks, handles authorization, fraud checks, and settlement.
Key point: The processor is responsible for moving money through the banking system.
Examples: Fiserv (First Data), Worldpay, Adyen, Chase Paymentech
Acquirer (Acquiring Bank)
What it does: Provides the merchant account where funds settle before being deposited into your business bank account.
Key point: Acquirers are regulated banks that assume financial risk.
Issuing Bank
What it does: The customer’s bank, which approves or declines the transaction.
Why the Distinction Gets Confusing
Many providers play multiple roles. Stripe can act as both gateway and processor. Adyen combines processing and acquiring. Chase can be all three.
When someone says “we’ll use Stripe” or “Microsoft recommends Adyen,” the important follow-up question is: in what role?
Understanding the payment gateway vs payment processor distinction helps you ask the right questions before committing to a solution.
Why the Distinction Gets Blurred in Dynamics 365 Projects
Most Dynamics partners are experts in ERP architecture — not payment infrastructure. Payment processing sits at the intersection of finance, banking, and compliance, which makes it easy for details to get glossed over.
A few common contributors:
- Inconsistent terminology in Microsoft documentation (gateway, processor, connector, service are often used interchangeably)
- Risk avoidance — teams default to the easiest or most familiar option.
- Late involvement from finance, even though payment decisions affect rates, contracts, and reconciliation
None of this is malicious, but it does increase implementation risk when the payment gateway vs payment processor decision isn’t clearly defined early.
Payment Gateway vs Payment Processor: When You Need Each
What you need depends on transaction volume, payment methods, and which Dynamics 365 modules you’re implementing.
D365 Commerce (High-Volume Retail)
Typically need: Gateway + processor (or an all-in-one solution)
Why: Omnichannel retail requires secure data capture and high-throughput processing.
Watch out for: Paying for gateway features you don’t actually use or duplicating tokenization.
D365 Finance (B2B / ACH-Heavy)
Typically need: Processor or direct bank integration
Why: Many B2B environments rely on ACH, wire transfers, or invoiced payments where a traditional gateway adds little value. D365 Finance implementations often process recurring payments where processor-direct integration makes more sense than adding a gateway layer.
Watch out for: Card-centric solutions recommended for ACH-dominant revenue models.
D365 Business Central (Lower Volume, Simpler Needs)
Typically need: All-in-one provider
Why: Flat-rate pricing and bundled services make sense when transaction volumes are modest. BC implementations benefit from simplified payment setups that don’t require separate gateway and processor relationships.
Watch out for: Over-engineering with enterprise-grade platforms built for global scale.
D365 Customer Engagement (Sales, Field Service, Customer Service)
Typically need: Lightweight payment integration or invoicing
Why: Customer Engagement apps typically handle quote-to-cash workflows where payment processing happens outside the system—through invoicing, external payment portals, or integrated billing platforms. When payments do happen in-app (like field service deposits or customer service refunds), requirements are usually low-volume and transaction-specific.
Watch out for: Over-investing in payment infrastructure for occasional use cases. Most Customer Engagement implementations don’t need dedicated gateway/processor relationships—they need integrations to existing payment systems.
Questions That Clarify Payment Infrastructure Early
If a partner recommends a “payment gateway,” these questions help uncover whether the solution fits your environment:
1. Is this a gateway, a processor, or both?
You’re looking for a clear architectural explanation.
2. How does this interact with our acquiring bank?
Whether you keep your current relationship or replace it should be explicit.
3. Can you walk through the data flow from checkout to settlement?
A clear explanation signals real understanding.
4. What does the D365 connector handle out of the box — and what doesn’t it handle?
This avoids late-stage custom development in your D365 Commerce, D365 Finance, or Business Central implementation.
5. What happens if we change processors in the future?
This surfaces lock-in and long-term cost implications early.
The Cost of Getting Gateway vs Processor Selection Wrong
When payment gateway vs payment processor decisions aren’t clearly defined, teams often see:
- Redundant fees for services already covered by a bank or processor.
- Late discovery of missing functionality during UAT or pilot testing.
- Unfavorable contracts with higher rates, auto-renewals, or hardware lock-in.
- Reconciliation gaps that require custom reporting or manual workarounds
These issues don’t usually appear in demos — they surface once transactions start flowing in your Dynamics 365 environment.
The Pathfynder Approach
Pathfynder starts by understanding your actual payment requirements before recommending technology.
That means looking at:
- Transaction patterns and volumes.
- Payment methods and workflows.
- How payment data integrates with your ERP.
- Total cost across gateways, processors, and alternatives
The result: payment infrastructure that fits your business — not just what’s easiest to implement.
If You’re Evaluating Payment Infrastructure Now
If you’re mid-implementation or planning a Dynamics 365 project:
- Don’t accept “gateway” as a complete answer.
- Involve finance early.
- Validate the actual D365 connector — not just vendor slides.
- Compare multiple options before committing
Getting the payment gateway vs payment processor decision right early means fewer surprises, cleaner reconciliation, and smoother go-lives.