Confused Between A Payment Gateway And A Merchant Account? Well, Here Is Your Explanation

Confused Between A Payment Gateway And A Merchant Account? Well, Here Is Your Explanation

Dec 2, 2017, 5:02:57 PM Business

There are a lot of people out there who are confused about what a payment gateway and a merchant account is. For a lot of sellers, getting payments done online and finding the right integration for their business is the starting step for development.

Shopify is one of the best POS systems and business development tool for ecommerce as well as retail stores. You can use it to boost the sales of your business.

But in general the world of online payments can be very confusing. If you're a merchant who is looking forward to build your own ecommerce website, then it is highly recommended that you leave the website building task to Shopify, while you can focus on growing your business.

But before doing so you need to understand the complete ecosystem of the payment world. There are a lot of terminologies that you need to get yourself familiar with. One of the most important things is the difference between a payment gateway and a merchant account.

What Is The Difference Between A Payment Gateway And A Merchant Account?

A payment gateway is used to guide transactions that happen online, and help in approving them. It is one of the first place to which a transaction heads to when a user places an order online. It goes through the gateway, then it goes into the payment ecosystem, and after it gets approved, it finally goes into the merchant’s account.

So technically, payment gateway is the first place a transaction goes to and the merchant account is the last place it makes it to.

A merchant account is used to monitor and store the funds that are diverted to it. All the payments that are approved reaches you with the help of the merchant account. Well, not so fast! This is not the last stop where you can get your hands on the cash. After this it gets transferred to your business bank account. That is where you can get your hands on the cash.

We also have some advice for you. There are a lot of payment gateways that can differ in their complexities and functionalities. It works great when it comes to cross border transactions. When you are setting up your online business, make sure that you select a good ecommerce website builder like Shopify that can help you in setting up the perfect payment gateway and merchant account. Doing so can aid in managing and maintaining your business funds seamlessly without any issues.

Now let us discuss how a merchant account and a payment gateway works.

The merchant’s payment gateway helps to process the debit and the alternative payments that are available online. You need to know that retailers are not allowed to send customers payment information to a processor that manages payments. A payment gateway acts as a route that ensures that the payment data, customer details etc, are secure and encrypted.

As soon as customers finish their payment on the checkout page, it enters the payment gateway and then enters the processor. Later on it goes to the debit or the credit card network, and finally it reaches the issuer, who has to authorize it at this point. If the payment is authorized, then the funds are transferred to the merchant.

Working Of A Merchant Account

A merchant account functions similar to a bank account. When a sale is successful, the money gets transferred into the account of the merchant. It depends upon the merchant to accept various forms of payments that include debit and credit cards as well.

You might understand it better when explained like this—it is a collective tank for all the sales that you make online. Once the funds get transferred to your merchant account, they are then sent to your bank account. This where you can withdraw the amount.

If you are an online retailer, then maintaining a merchant account for your business is crucial because, the funds that you receive after successful payments have nowhere to go and you can never get paid at all. This process of transferring money to your bank account takes place in a fixed schedule. It can be weekly, biweekly or even monthly.

Finding The Right Merchant Account And Payment Gateway For Your Business

If you’re new to the ecommerce world, just get your products ready and start using Shopify. By doing so you have access to a secure payment gateway, user friendly merchant account, a lot of free and premium themes, that are available at an affordable price.


Published by Jason Roy

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