A payment processor completes the transaction by sending data between you, the merchant; the issuing bank (i.e. the bank issuing the customer’s credit card); and the receiving bank (i.e. the bank). Usually, the payment provider also supplies credit card machines and other facilities to accept credit card payments. To accept credit cards, you can set up a merchant account with a merchant service provider.
A payment gateway is a mechanism that safely transmits online payment data to processor to begin the transaction ‘s lifecycle. It also authorizes fees for non-present-card purchases, mainly for eCommerce websites. Think of it as the remote point-of – sale terminal.
The difference is that a payment processor facilitates the transaction, and a payment gateway is a tool that communicates approval or decline between you and your customers.