Understanding the difference between a merchant account and a payment gateway is very important for businesses seeking to streamline their online transactions. Whether you’re a small business owner or managing a large eCommerce platform, knowing how these two systems work—individually and together—can improve customer experience and boost sales.
This blog delves into the distinctions between how merchant accounts and payment gateways collaborate and how Masterly selects payment gateways and merchant account services.
What Is a Merchant Account?
The usual bank account that permits any business to accept debit card, credit card, electronic check, or other types of payments is called a merchant account. This is kind of an intermediary between your customer’s payment and business’s bank account to create smoother funds transfer.
Key Features of a Merchant Account
Transaction Authorization: Ensures customer funds are available.
Payment Settlement: Funds are transferred to the business’s account.
Fraud Prevention: Helps verify and reduce fraudulent transactions.
Merchant account services are important for businesses that process a significant volume of card payments, especially for in-store and online sales.
What Is a Payment Gateway?
A payment gateway is a technology through which a website or an application securely transfers payment information to the payment processor. It is the digital version of a point-of-sale (POS) terminal in a store.
Key Functions of a Payment Gateway:
Encryption: Secures sensitive cardholder data.
Authorization Request: Communicate with the bank to approve or decline the transaction.
Payment Confirmation: Recommends the transaction status to the merchant and customer.
Payment gateway integration is very important for businesses with an online presence. This allows them to process payments securely and efficiently.
Merchant Account Benefits
Having a merchant account offers several advantages for businesses, including:
Faster Payment Processing: The merchant accounts will hasten the time taken for funds to reflect in your business account, meaning improved cash flow.
Accept Wide Payments: Businesses may accept a wide range of payments, from credit cards to ACH transfers, expanding the possibilities for customers.
Customizable Features: Merchant account services usually have recurring billing, chargeback management, and reporting as part of their services, which can help businesses better manage their finances.
Lower Risk of Fraud: Advanced fraud detection systems in merchant accounts lower the risk of fraudulent transactions.
Payment Gateway Benefits
Using a payment gateway offers its own set of unique advantages:
Enhanced Security: Gateways utilize encryption and tokenization to protect sensitive data, safeguarding both merchants and customers.
Global Accessibility: With payment gateway integration, businesses can accept payments from customers worldwide, eliminating geographical barriers.
Seamless User Experience: A good payment gateway ensures smooth and fast checkouts, improving customer satisfaction and reducing cart abandonment.
Compatibility with Multiple Platforms: Payment gateways can be integrated into websites, mobile apps, and even physical POS systems, providing flexibility to businesses.
How Do Payment Gateways And Merchant Accounts Work Together?
While a merchant account and a payment gateway have different roles, they work together seamlessly to ensure secure and efficient payment processing.
Customer Initiates Payment: When customers enter their payment details online, the payment gateway encrypts the data and sends it for authorization.
Authorization and Settlement: The merchant account receives the authorized payment and holds the funds temporarily before transferring them to the business’s bank account.
Final Confirmation: The payment gateway notifies both the customer and the business that the transaction is complete.
This collaboration ensures a smooth and secure transaction process from start to finish.
How Do You Choose a Merchant Account?
Consider the following elements when choosing a merchant account provider:
Transaction Fees: Compare the pricing structures and select the one that fits your sales volume.
Integration with Your Platform: Their merchant account service should integrate seamlessly with your existing payment systems.
Fraud Protection: Seek companies that provide strong fraud prevention tools.
Customer Support: Good customer service can be important in situations like downtime or technological problems.
The most popular merchant account providers include Square, Chase, and PayPal; these are each unique in features that cater to different business needs.
How Do You Select a Payment Gateway Provider?
Choosing the right payment gateway provider is equally important. Here are some considerations:
Ease of Integration: A seamless payment gateway integration with your website or app minimizes setup time.
Global Payment Support: If you have international customers, choose a gateway that supports multiple currencies.
Security Features: The gateway must provide for Advanced Encryption, Tokenization and PCI Compliance.
Speed and Reliability: Choose a provider known for fast and reliable processing of transactions.
Stripe, Authorize.Net, PayPal, and others are some popular payment gateway providers.
Conclusion
Merchant accounts and payment gateways are the lifeline of modern businesses, but each serves a different complementary role in the payment process. Merchant account services facilitate businesses to accept and settle funds, while payment gateway integration ensures secure and efficient online transactions. By understanding their functions, benefits, and how they work together, businesses can make informed decisions to optimize their payment systems.
