What is the difference between payment gateways and merchant accounts?
|Created On: 15 October, 2015||Created By: Creation Studio|
Nowadays, thanks to the fact that, not only that the internet now plays such a vital role in so many of life’s day to day activities, but also because more people than ever before possess smart phones and tablets, ecommerce is now more popular than ever. Ecommerce online stores are appearing all over the web, with many of them providing very successful indeed. If you yourself are thinking of getting into the ecommerce game and are looking to sell products and services online, you will need both, a merchant account, and a payment gateway. A lot of people struggle to actually know the difference between the two, and as a result, they find themselves struggling to set up their online stores. To help ensure this is never an issue for you, here we’ll be taking an in-depth look at the main difference between payment gateways and merchant accounts.
What exactly is a merchant account? – Put simply, a merchant account is a form of online bank account, designed to temporarily hold onto funds, as you are after all, the merchant, before they’re transferred over to your real bank account. So, as an example, say that you do complete a sale, the customer will pay you, and that cash will then make its way into your merchant account, where it will sit around doing nothing for the next few days, usually between 2 and 10 days, where it will then clear. After it has cleared, it will either directly make its way over to your bank account, or it will allow you to manually transfer it over to your bank account. In simple terms, a merchant account functions in a similar fashion to a cheque, where you pay it into your bank, but can’t actually access the money until it has cleared.
What about a payment gateway? – As for payment gateways, they are basically a form of specialized service which have been designed to process debit and credit card payments and transactions for the seller. When a customer makes a transaction in your store, they obviously can’t hand over real cash to you, because it’s all online, so they will instead more than likely pay via credit or debit card. Once they enter the card details, you online store will then send this information to your payment gateway. From here, the transaction will be authorized, or declined, and the payment will either be processed, or rejected. If the customer’s card details they submitted to the gateway match up with the information on file, the payment will be approved and from there, the gateway will then transfer the money over from the credit or debit card, and then into your merchant account, which we’ve just looked at previously.
So there you have it, although sometimes it can be quite daunting and confusing when dealing with technical business terms, in reality, payment gateways and merchant accounts are decidedly simple, and now that you understand the difference between the two, you can get back to hopefully making a great deal of money from your ecommerce store.