Merchant Account vs Payment Gateway

The terms merchant account and payment gateway are often conflated, but they are not the same thing. If you run a business that accepts credit card payments, you need both of these important items—each of which serves a distinct purpose. Let’s compare merchant account vs payment gateway.

What is a Merchant Account?

A merchant account is the account where your incoming funds are collected and stored. It’s associated with information about your business, and it’s only accessible to you and anyone authorised to manage payment information within your organisation. After a payment is completed and cleared, it passes from your merchant account into your bank account.

What is a Payment Gateway?

A payment gateway is the link between your customers’ banks and your merchant account. Whenever someone uses a credit or debit card to pay you for goods or services, the money is transferred from their bank account to your merchant account via the payment gateway. Whereas the merchant account is unique to you, the payment gateway is shared between several businesses and all of their respective customers. A secure gateway will ensure that incoming funds are always transmitted to the appropriate merchant account without third-party interception.

Types of Merchant Accounts and Payment Gateways

Merchant Accounts: There are two common types of merchant accounts: payment service providers (PSPs) and independent sales organisations (ISOs). Small and medium-sized businesses are usually best served with PSP accounts, as these are easy to set up and relatively low-maintenance. They also tend to be more affordable for businesses with less demanding needs. An ISO account is ideal for large businesses, as it’s more robust and capable of handling high volumes. This type of account also tends to have lower transaction fees, which offsets the higher upfront cost.

Payment Gateways: When deciding on a payment gateway, you’ll need to choose between the classic gateway and the modern gateway. A classic gateway requires you to configure your own merchant account and bank account; a modern gateway, like PayPal or Stripe, is all-inclusive and takes just minutes to set up—usually with no merchant account required. A classic gateway is usually the best bet for serious businesses. Although it’s a bit more complicated to set up and manage, it lends legitimacy to your business and contributes to a better customer experience. Customers usually don’t have to leave the website, and transactions are completed in seconds. Classic gateways are also more affordable.

What to Look for in a Merchant Account vs Payment Gateway

Just as merchant accounts and payment gateways serve different purposes, they also differ in their essential features.

Merchant Accounts: When shopping for a merchant account, you want to go with a provider that lets you settle in your preferred currency. You should have on-demand access to your account information, and you should always watch out for hidden fees. If your business manages high-volume transactions, make sure that there are no caps on monthly processing volume.

Payment Gateways: When choosing a payment gateway, you want an option that’s secure above all else. Your gateway should be fully PCI compliant (preferably Level 1 compliant), and it should be protected by a quality SSL certification. We recommend the SHA-256 SSL encryption standard. In addition, you want a payment gateway that’s compatible with as many currencies as possible, particularly if your customer base is international. Fraud detection tools are also important.

How to Find the Right Merchant Account & Payment Gateway

Compatibility is the most important feature to keep in mind when choosing a merchant account and payment gateway. Many payment gateways limit the banks, payment methods, and merchant accounts they’ll work with. Some gateways restrict entire industries.

Consider working with a reputable payment processor that offers both merchant services and payment gateway services. QPay Europe is an example of a business that covers the full range of payment processing needs. When you bundle your payment processing services, you typically benefit from lower-cost hosting, streamlined service, and seamless compatibility. The setup process is much easier, and you never have to worry about trying to get your payment gateway and merchant account on the same page.

Make sure to choose a provider that’s affordable, secure, and reputable. Your business will run much more smoothly, and your customers will thank you.

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