The online e-commerce business community is growing at a rapid rate. Every day more businesses are setting up online retail stores. There are a number of different methods businesses can use to accept online payments. Understanding the ways of accepting online payments can often seem overwhelming, but a little background information can make it much easier. Two important methods of accepting payments are the Merchant Account and a Payment Gateway.
Whenever you read about an internet venture, you see phrases like “e-commerce payment processing” and “payment gateway”. If you are just getting into the field, you should know a bit about the differences between a merchant account and a payment gateway – sometimes called an “e-commerce” payment processor.
To help you understand the technology, the following explains the differences between a Merchant Account and a Payment Gateway:
What is a merchant account?
A merchant account is a specific kind of bank account provided by a financial institution on a set contract. This will allow you to take credit card payments when conducting transactions, online credit card payment accounts, online credit card processing accounts, credit card transaction accounts, or e-Commerce merchant accounts, permit businesses to accept credit cards, debit cards, gift cards and other forms of card payments. A business acquires a merchant account from a merchant bank or a merchant service provider. Without a contract, a business cannot directly accept payments by any of the major credit card companies.
An e-Commerce account is a service that e-Commerce merchants implement in order to use online credit card processing services. The process of acquiring this specific account type depends on the provider and the type of e-Commerce account. Fees and rates will vary among providers. The advantage of using one of this account is that it can automate a business. Customers can deposit money into the account on the web 24 hours a day/ 7 days a week.
A merchant account allows you to take credit card payments from your clients. Depending on the merchant service, it is possible that you could also be able to accept debit cards and e-check payments. For an online business, you will be required to get a payment gateway after you set up a merchant account. This will provide you with a shopping cart system with which your customers are able to buy and pay for whatever product they select. The asset that a merchant account provides is that it has the capacity to automate your business – people will be able to put money into your account on the Internet, around the clock.
What is a payment gateway?
A payment gateway is an e-commerce service that authorizes payments for e-businesses and online retailers. It is connected to a large network of credit card issuing banks. One of the other main functions of credit card processing is encryption. A gateway uses SSL 128-bit encoding technology to encrypt and decrypt all the data being sent through it. Without encryption, all the credit card holders’ information could be stolen.
An online business will have to sign up for this specific gateway once they set up a merchant account. They will be provided with a shopping cart system where their customers can pay for any products that the business is selling. The primary difference between the merchant account and the payment gateway is that a merchant account is a license by which businesses are permitted to accept payment by credit cards, and payment gateway is the means of receiving online payments.
As you can see, the main difference between the merchant account and the payment gateway is that one is the license that allows you to take payment by credit cards, and the other is the medium through which the receiving of online payments takes place, including credit cards.
You should know that having access to payment gateway does not entitle you to take credit cards. The merchant account is an entirely different service that must be applied for and gotten before you are able to accept credit card payments. Keeping that in mind, many merchant providers also provide payment gateway services. Many times when you establish your business you will be given the option of opening some payment gateways or other services with which you would be able to receive credit card payments. When you accept this offer, many times you will not have to pay for set up charges that you would be required to pay when you apply for a merchant account. Sometimes, these may be beneficial when compared to a regular merchant account if you have low sales volume.
Generally, if you are looking to do any sort of volume with your company – and I’m speculating that you are – it’s better to simply obtain a merchant account of your own. It’s more dependable, more affordable over the long haul, and you retain more control over the payments that are processed – also access to card/customer data) Remember, a payment gateway will rarely include the approval of receiving credit cards, while numerous merchant accounts, in reality, offer the setup of payment gateways as part of the extra features affiliated with the contract with you.
Both the payment gateway and the merchant accounts are vital steps in establishing your online business on the way to complete automation. In fact, you may not understand how many sales you’re forfeiting until you take the plunge and set up your own merchant account with a gateway. They play a major role in attracting consumers and maintaining repeat customers. Acquiring a merchant account with a gateway is essential to business success