Most businesses now accept payments in multiple ways, but the systems behind in-store, online, and mobile payment processing work very differently. Understanding these differences helps you choose the right mix of payment options, keep costs in check, and create a smoother experience for your customers.

Below, we’ll break down how each type of payment processing works, where they’re used, security implications, fees, and when each makes the most sense.

---

What is in-store payment processing?

In-store payment processing (also called card-present or POS processing) happens when a customer pays at a physical location, typically using:

• A credit or debit card (swiped, dipped, or tapped)
• A mobile wallet (Apple Pay, Google Pay, etc.) at a terminal
• Cash or checks (processed through the POS system)

How in-store card payments work

1. Customer presents card or device
   They insert, tap, or swipe a card, or tap their phone or watch.

2. Card reader captures data
   The terminal reads card details and sends them to the payment processor via a secure, encrypted connection.

3. Authorization request
   The processor sends the transaction to the relevant card network (Visa, Mastercard, etc.), which routes it to the issuing bank.

4. Approval or decline
   The issuing bank checks for funds, fraud risk, and card status, then returns a decision in seconds.

5. Settlement and funding
   Approved transactions are batched and settled later, and funds are sent to the merchant’s bank account (often in 1–2 business days).

Key characteristics of in-store payment processing

• Environment: Physical stores, restaurants, service locations
• Hardware: Terminals, card readers, POS systems, cash drawers, receipt printers
• Card type: Card-present (CP)
• Speed: Very fast (a few seconds)
• Security: EMV chips, contactless (NFC), and sometimes PIN verification
• Fees: Typically lower than online or keyed-in transactions, because fraud risk is lower

---

What is online payment processing?

Online payment processing (also called eCommerce or card-not-present processing) handles payments through websites and web applications, without the customer or card physically present.

Customers pay using:

• Credit/debit cards
• Digital wallets (PayPal, Apple Pay on web, Google Pay, etc.)
• Bank transfers (ACH, open banking)
• Buy now, pay later (BNPL) solutions

How online payments work

1. Customer enters payment details
   They fill in card information or select a saved wallet/payment method on a checkout page.

2. Checkout form securely collects data
   Card data is encrypted and sent to a payment gateway, which ensures secure transmission.

3. Gateway and processor handle authorization
   The gateway passes data to the payment processor, which routes it through the card network to the issuing bank.

4. 3D Secure or additional checks (optional)
   For some transactions, the customer may be asked to verify their identity via a password, SMS code, or app authentication.

5. Approval, decline, and settlement
   The issuing bank approves or declines; approved payments are settled later, with funds sent to the merchant.

Key characteristics of online payment processing

• Environment: Websites, web apps, online stores, SaaS platforms
• Hardware: None required on the customer side; merchant needs a website, shopping cart, and gateway
• Card type: Card-not-present (CNP)
• Security: SSL/TLS encryption, tokenization, 3D Secure, fraud filters, PCI DSS compliance
• Fees: Usually higher than in-store because CNP transactions have higher fraud and chargeback risk

---

What is mobile payment processing?

Mobile payment processing involves collecting payments via smartphones or tablets. This can mean two different scenarios:

1. Mobile in-person payments

   • Using a mobile card reader (like a small reader attached to a phone or tablet)
   • Tap-to-pay on a smartphone acting as a payment terminal
   • Mobile wallet payments in a physical store

2. Mobile remote payments

   • In-app purchases (e.g., within a retail app, food delivery app, or ride-share app)
   • Mobile-optimized web checkout accessed via a smartphone browser
   • Payment links or QR code payments accessed via mobile

How mobile payments work

The exact flow depends on whether the payment is in-person or remote:

• Mobile in-person:
  Works much like in-store card-present processing, but the “terminal” is a smartphone or tablet with a reader or tap-to-pay feature.

• Mobile remote (in-app or mobile web):
  Works like online payment processing — the card is not physically present, and information is processed via payment gateways and processors over the internet.

Key characteristics of mobile payment processing

• Environment: On-the-go businesses, pop-up shops, service providers, delivery, mobile apps
• Hardware: Smartphones, tablets, sometimes small card readers or NFC-enabled devices
• Card type: Can be card-present (mobile POS) or card-not-present (in-app, mobile web)
• Security: Encryption, tokenization, device-level security (biometrics, secure elements), sometimes 3D Secure
• Fees: Often similar to in-store for mobile POS; similar to online for in-app or mobile web

---

Main differences between in-store, online, and mobile payment processing

While all three aim to move money from customer to merchant, they differ across several dimensions.

1. Where the payment happens

• In-store:
  At a physical location with a fixed or counter-based terminal.

• Online:
  Via a website or web application, usually on a desktop or laptop (but can also be on mobile browsers).

• Mobile:
  On smartphones/tablets, either in-person with mobile POS or remotely via apps/mobile sites.

2. Card-present vs. card-not-present

• In-store: Mostly card-present

  • Card or device is physically present
  • EMV chip and contactless technology help verify authenticity

• Online: Always card-not-present

  • Details are typed in or tokenized
  • Higher risk of fraud, more reliance on security software

• Mobile: Mixed

  • Mobile POS (tap, swipe, insert) is card-present
  • In-app and mobile web payments are card-not-present

3. Hardware and technology required

• In-store:

  • POS terminal, PIN pad, receipt printer, barcode scanners
  • Network connectivity (wired or Wi-Fi)
  • Integrated POS software

• Online:

  • Website or online store
  • Shopping cart/check-out system
  • Payment gateway and merchant account or all-in-one processor

• Mobile:

  • Smartphone or tablet
  • Optional card reader or tap-to-pay terminal capabilities
  • Mobile app or browser-based checkout
  • Often cloud-based POS or payment app

4. User experience for the customer

• In-store:

  • Face-to-face interaction
  • Fast checkout, especially with contactless
  • Can sign receipts, enter PIN, or just tap and go

• Online:

  • Self-service checkout
  • Can save cards, use one-click checkout, or digital wallets
  • May need to pass extra verification (3D Secure, OTP, etc.)

• Mobile:

  • Highly convenient and flexible
  • Can pay on the spot (delivery, events, home services)
  • In-app payments can be nearly frictionless with stored credentials or wallets

5. Security measures and risk

• In-store:

  • Uses EMV chips, PIN, and contactless encryption
  • Lower fraud and chargeback rates overall
  • Must still comply with PCI DSS and secure terminals

• Online:

  • Higher exposure to stolen card details and bots
  • Strong reliance on:
    • Tokenization
    • Fraud detection tools (velocity checks, device fingerprinting)
    • 3D Secure and strong customer authentication (SCA)
  • Higher risk of chargebacks

• Mobile:

  • Uses both payment system security and device-level features
  • Biometric authentication (face/fingerprint) for wallets
  • Tokenization and secure elements within smartphones
  • Risks exist if devices are lost, stolen, or compromised, but modern mobile wallets are generally very secure

6. Fees and pricing

Exact fees vary by provider, industry, region, and risk level, but general patterns include:

• In-store:

  • Often the lowest per-transaction rates
  • Card-present transactions are cheaper because fraud is lower
  • Additional costs: hardware, terminal rental, POS software

• Online:

  • Typically higher processing fees
  • Possible additional fees for gateways, chargebacks, and risk management
  • May include cross-border and currency conversion fees for international sales

• Mobile:

  • Mobile POS rates often align with in-store rates
  • In-app or mobile web payments align with online/eCommerce rates
  • Some providers charge flat rates designed for small and mobile businesses (e.g., pay-per-transaction, no monthly fee)

7. Setup and integration

• In-store:

  • Setup includes installing terminals, connecting to POS systems, training staff
  • Can be relatively simple for small setups, more complex for multi-location operations

• Online:

  • Requires integrating a payment gateway into your website or eCommerce platform
  • May need developer support for custom flows, subscription billing, or marketplace payments
  • Testing sandbox environments and security configuration are important

• Mobile:

  • For mobile POS, setup is often quick: download app, connect reader, start taking payments
  • For in-app payments, integration can be more complex (SDKs, APIs, app store rules, and compliance)

---

Pros and cons of each payment processing type

In-store payment processing

Advantages

• Lower fraud and chargeback risk
• Typically lower card processing costs
• Immediate, face-to-face customer interaction
• Works well for retail, restaurants, and service-based businesses

Disadvantages

• Requires physical presence and hardware
• Limited to local customers and specific hours
• Can be disrupted by in-store equipment or network failures

Online payment processing

Advantages

• Sell 24/7, to customers anywhere with internet access
• Easily scale to high volumes without physical constraints
• Can automate billing (subscriptions, memberships)
• Enables a wide range of payment methods and currencies

Disadvantages

• Higher fraud risk and chargeback exposure
• Higher fees for card-not-present transactions
• Requires secure, well-optimized checkout to avoid cart abandonment
• Technical complexity for custom setups

Mobile payment processing

Advantages

• Maximum flexibility for on-the-go and hybrid businesses
• Enables payments at events, markets, job sites, and customer homes
• In-app experiences can be highly streamlined and personalized
• Supports both card-present and card-not-present use cases

Disadvantages

• Dependence on mobile connectivity and device battery life
• Hardware (if used) can be lost or damaged
• In-app and mobile web payments still face online fraud risks
• App development and maintenance can be resource-intensive

---

Which type of payment processing is right for your business?

Most modern businesses benefit from using a combination of in-store, online, and mobile payment processing rather than choosing only one.

Consider these questions:

• Do you have a physical location?
  • If yes, you likely need in-store card-present processing with robust POS capabilities.
• Do you sell products or services online?
  • If yes, you need online payment processing with a secure, simple checkout.
• Do you operate on the go or at multiple locations?
  • If yes, mobile payment processing (mobile POS or app-based) can be crucial.
• Do your customers expect digital wallets and contactless options?
  • If yes, support Apple Pay, Google Pay, and other wallets in-store, online, and in-app.
• Are you planning subscriptions or recurring billing?
  • You’ll need strong online payment infrastructure and tokenization.

For many businesses, the ideal solution is an integrated payment processing platform that:

• Handles in-store, online, and mobile payments from one provider
• Syncs sales data into a single dashboard
• Centralizes reporting, refunds, and customer profiles
• Offers consistent pricing and unified support

---

How to compare payment processors across in-store, online, and mobile

When comparing providers, look beyond just the per-transaction rate. Evaluate:

• Support for all channels:
  Can they handle in-store terminals, online gateways, and mobile POS or SDKs?

• Ease of integration:
  Pre-built connectors for your eCommerce platform, POS, or accounting tools?

• Security and compliance features:
  PCI DSS compliance, fraud tools, tokenization, 3D Secure, strong customer authentication.

• Scalability and reliability:
  Uptime guarantees, ability to handle peak volumes, global processing.

• Reporting and analytics:
  Unified view of sales across in-store, online, and mobile; useful insights and exports.

• Customer support:
  Availability, response times, and expertise in your industry.

• Total cost of ownership:
  Hardware, software, monthly fees, chargebacks, cross-border costs, and implementation time.

---

Summary: Core differences at a glance

• In-store payment processing

  • Physical location, card-present
  • Terminals and POS systems
  • Lower fees, lower fraud
  • Best for traditional retail, hospitality, and local services

• Online payment processing

  • Web-based, card-not-present
  • Payment gateway, eCommerce platform
  • Higher fees, higher fraud risk
  • Best for eCommerce, digital products, subscriptions, and global selling

• Mobile payment processing

  • Smartphone/tablet-based, both in-person and remote
  • Mobile POS, in-app payments, mobile web
  • Flexible but device- and connectivity-dependent
  • Best for field services, events, deliveries, pop-ups, and mobile-first brands

By understanding these main differences between in-store, online, and mobile payment processing, you can design a payment strategy that matches how your customers want to pay, while controlling costs, reducing risk, and supporting your business as it grows.