Merchant Account vs. Payment Gateway: What You Need to Know

Today, being able to accept debit and credit cards online is a must for many businesses. If your busy setting up your ecommerce business, you have likely started looking into the basic payment ecosystem and terminology. One of the most important things to understand is the difference between a merchant account and a payment gateway.

Getting Started

First, you will need to know the key differences between the two. A payment gateway is as it sounds; it is used for facilitating online transactions and helping them get approved. It is also the first stop for a transaction when a customer submits an order online. The transaction is shuffled through the payment gateway to the payments ecosystem for approval. Then, it makes its way into the merchant account.

A merchant account reconciles the funds sent to the merchant on a successful sale. These funds are the same funds approved through the payments ecosystem. All approved payments are paid out to you, the merchant, through your merchant account just before you see the funds in your normal bank account.

Ins and Outs of Payment Gateway

So, how does a payment gateway work? Essentially, a payment gateway allows you to process credit, debit and alternative payments online – enabling your business to be much more efficient. Retailers are actually prohibited from sending customers’ payment information directly to a payment processor; thus, the need for a payment gateway. The payment gateway acts as a go-between that protects sensitive customer data.

Once the customer submits their payment on the checkout page, the payment travels through the payment gateway, on to the payment processor, then through the credit card network and finally to the customer’s credit card issuer for authorization. Once approved, the funds find their way to your merchant account.

How a Merchant Account Works

Very similar to a normal bank account, a merchant account transfers money after a successful sale. A merchant account allows you to accept many forms of payments, everything from credit and debit cards to alternative payment methods like ACH, giropay, wire, etc. As an online retailer, a merchant account is critical for business success. Without one, you will have no where to put your funds or get paid.

Now that you understand the differences between merchant gateway and a merchant account, all that is left to do is to find the right processor. The key is to find a processor that specializes in working with your industry and business type. They should also offer your business constant support for your questions and other services like chargeback protection.

Author Bio:Electronic payments expert Blair Thomas is the co-founder of high-risk payment processing company eMerchantBroker. He’s just as passionate about his business as he is with traveling and spending time with his dog Cooper.

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