Many start-up eCommerce businesses find the concept of payment gateways and merchant accounts confusing. This article will help new businesses understand where these two important pieces fit into the jigsaw of payment processing and accepting online secure payments.
Payment gateways and merchant accounts: separate but walking hand in hand
A payment gateway allows the internet seller to accept payment from its customer, while the merchant account enables that payment to travel from the customer to the business. Although independent functions, clearly they also work together.
Of course, the risk of fraud and chargebacks to a business is deemed to be greater in the eCommerce world than in bricks and mortar shops. Online payment security is a chief function of both payment gateways and merchant accounts.
Payment gateways provide online secure payment functionality
The payment gateway is the online equivalent of the cash desk credit card reader. It has two major elements:
- The ability to allow the eCommerce business to accept credit cards
- The ability to connect to a shopping cart to allow real-time processing
The payment gateway takes keyed in information and authorises payments from the customer’s credit card.
The role of a merchant account
Once payment has been authorised, the eCommerce business needs somewhere for payment to be ‘parked’ before onward processing. A merchant account is typically provided by a third-party provider known as an acquiring bank. The merchant account:
- Allows processing of credit card transactions from online customers
- Transmits information between buyer and the business account of the merchant, allowing payment via banking systems
Dual capacity reducing costs
Payment processors such as North Payments offer solutions covering both payment gateway and merchant account needs. The payment gateway can be customised to individual business needs, with bespoke solutions for advanced integration.
Though some businesses will develop their own payment gateways, we’re seeing more choosing to utilise a dual capacity solution which enables more easily accessed customisation for an increasingly diverse array of card payment solutions.
If you would like to know more about how our front end gateway and back-end integration solutions will benefit your business, reducing your costs and helping you entre new and lucrative markets, contact North Payments today.