Merchant account vs payment gateway: what’s the difference?

A merchant account and a payment gateway are both essential for businesses that want to process payments online. But what’s the difference between these two?

A merchant account is a bank account that’s specifically set up for businesses to accept credit and debit card payments. When a customer makes a purchase, the funds are transferred from their card to the merchant’s account. Merchant accounts are issued by banks, and there are several fees involved with setting up an account as well as running it.

A payment gateway is a way for customers to make e-commerce payments securely online for goods or services. The customer gives their details (card number/expiration date etc.) to the website which is then passed with security through the payment gateway. The payment gateway encrypts it and passes it to the bank (business’s merchant account) for processing. Merchant accounts are provided by banks, while payment gateways are usually provided by third party companies that specialize in online payment processing.

Merchant accounts vs Payment gateways: which is right for your business?

As Merchant accounts are often provided by banks, it tends to be the safer option as you’re likely to get more support. However, merchant account setup fees can be much higher than those of a third party payment gateway. Payment gateways also have much lower monthly fees and charge no set up fees, but they may have a small transaction fee. Merchant accounts can also take a longer time to set up as the bank needs to approve them – payment gateways are often instant.

These are just some of the differences between Merchant accounts vs Payment gateways; contact your business bank or preferred third party company for more information on either. Merchant accounts and payment gateways are both important for processing ecommerce transactions, so it’s best to choose the one that works best for your business after discussing costs, fees and more with each company.

Merchant account vs payment gateway: what’s the difference?

Merchant Account - Merchant Accounts are often provided by banks, while Payment Gateways are third party companies that specialize in online payment processing. Merchant accounts tend to have higher up-front costs, but lower monthly fees compared to Payment Gateways. Merchant Accounts also take a longer time to set up as the bank needs to approve them - Payment Gateways are often instant.

Merchant Account vs Payment Gateway: which is right for your business?

Merchant Accounts are the safer option as you’re likely to get more support from your bank. However, Merchant Accounts also have much higher setup fees than Payment Gateways. Payment Gateways also have lower monthly fees and charge no set up fees, but they may have a small transaction fee. Merchant Accounts can take a longer time to set up as the bank needs to approve them. Before choosing between a Merchant Account and a Payment Gateway it's important to discuss costs, fees and more with each company. Merchant Accounts and Payment Gateways are both important for processing ecommerce transactions, so it’s best to choose the one that works best for your business.