Merchant Accounts vs. Payment Gateways

Understanding the world of payments can be a daunting task. Many different financial players and parts are working to finalize a transaction or process a check. Some of these actors work completely internally, while others are more outward-facing. Regardless, your business needs to grapple with these terms and techniques to run a successful platform. This blog will explain the difference between two primary functions of the payment processing world: merchant accounts and payment gateways.

What’s the Difference Between Merchant Accounts and Payment Gateways?

Payment Gateways

Online payment gateways are an integral part of eCommerce. They allow customers to submit their credit card and bank information online. Depending on what platform they choose, this function will enable businesses to process payments, attract new clients through offers/discounts, and make the transaction seamless. The importance of payment gateways in today’s market cannot be understated. The size of your company is irrelevant: if you don’t provide convenient payment methods when it comes time to make purchases, you will lose customers.

How Do They Work?

The first step with an online transaction is to submit payment information through your website’s integrated shopping cart or secure hosted payment form. The info is then transferred to the payment gateway, where said data is encrypted and sent to the third-party payment processor. The payment processor runs all your information through the card or ACH network for authorization, sending it on to be processed by a bank for approval. Once the transaction has been approved, the payment is processed.

Merchant Account

The lifeblood of any company is its finances. A merchant account provides the means to collect credit card and bank payments from customers. With a merchant account, transactions are processed electronically 24/7! A merchant account enables companies to focus on their day-to-day business without worrying about the intricacies of payment processing. A merchant account is an essential tool for increasing sales and cash flow. Helping you manage your finances can also keep the lights on while staying competitive in this challenging market! Specific industries require a high risk merchant account to avoid funds being held or possible termination.  An example of a  high-risk industry is fantasy sports, as there are many regulations in this type of business.

Payment Gateway vs. Merchant Account

You need both a payment gateway and merchant account to process payments online, but, as demonstrated prior, they do not have the same functionality. The former facilitates transactions while the latter processes them and deposits into your bank account! One cannot function without the other because the two work together to process your transactions. Rather than regarding the two as payment gateways vs. merchant accounts, one should imagine payment gateways bringing payments to and from the slopes of the merchant account. The challenge, therefore,  does not stem from choosing one or the other, so finding the appropriate merchant account and payment gateway for your business is challenging.

Choosing the Right Merchant Account & Payment Gateway

Choosing a payment gateway is vital because it’s the first step in setting up your business and ensuring everything runs smoothly. For example, some gateways only work with specific types of merchant accounts or banks; if you want to accept payments from more than one customer on different websites (or even via phone), make sure that any potential fits meet those needs! There are plenty other factors, too – processing fees may differ based on who offers them at the time when choosing between two competing providers. A company like Seamless Chex takes care of all of your processing needs for you. Whether your industry is high-risk, high-volume, or high-ticket, the experts at Seamless Chex understand the intertwined relationship between merchant accounts and payment gateways intimately. Seamless Chex’s all-in-one payment processing solution makes it easy: processing safer, faster, and more seamless than ever before.

Contact us today to learn more about how Seamless Chex can support your business’s success.