Understanding the Difference Between a Payment Gateway and a Merchant Account

If you run a business or service and accept card payments, you will need both a merchant account and a payment gateway. These two distinct but linked business tools can be confusing to wrap your head around. This guide will aim to clear up the definitions and differences between these two necessary card payment tools. On top of this, high-risk businesses will be discussed. A high-risk business is deemed so as it is associated with a greater risk of credit card fraud. For this reason, some credit card processors do not like to offer high-risk businesses, such as adult entertainment or gaming sites, a merchant account. If you run a high-risk business, you will need to find a provider that will offer you a high-risk merchant account.

Merchant Account

A merchant account is a type of bank account that allows businesses to accept payments in multiple ways, such as by debit or credit cards. When a business accepts a payment, this is where the funds are held. Once the payment is verified, the funds are passed on to the business bank account. A merchant account is established under an agreement between an acceptor and a merchant acquiring bank for the settlement of payment card transactions.

Payment Gateway

The payment gateway is the link that makes the connection between a customer’s bank account and your business merchant account. It is a technology used by businesses to accept debit or credit card purchases from shoppers. The term includes not only the physical card-reading devices found in physical retail stores but also the payment processing portals found in online stores. The payment gateway allows funds to flow into your business account after a payment transaction is cleared.

What’s The Difference?

A payment gateway is a consumer interface allowing for the collection of card data, while a merchant account enables businesses to receive the funds from these card transactions. A business will need both tools to offer card payment options to its customers.

If you are still struggling to discern the difference between these two processes, think of it like this: the payment gateway is like the cashier and the merchant account is the cash register.

High-Risk Merchant Accounts

While there are risks that come with accepting credit card payments, the positives outweigh them. You add a layer of respectability and trustworthiness to your service and products by offering credit card payment options. Moreover, you will boost your sales, profit, and turnover. You simply need to find a high risk merchant account provider that you can trust and work with to achieve these benefits. Your high-risk account will allow your business to accept all methods of payment. This includes allowing customers to swipe their cards in-store, call in an order, and process the card transaction over the phone, or pay through a secure payment portal on your web page.

Accepting credit cards can also increase your customer base, as with a high-risk merchant account, your business and services can reach customers living all across the country and around the world. With the flexible payment options you can now offer, you give your customers the freedom to shop and pay at their convenience through an online shopping and payment system. This makes the daily running of your business easy and lucrative; all you need to do is fill out the orders and make sure the customers get them.

High-Risk Businesses

High-risk businesses are those that sell items or services that fall into areas such as adult entertainment, online gaming, unlicensed ticket sales, or medications. While the products sold and services provided are legal, these items and entertainments come with a higher risk of fraud or chargebacks. In instances where customers use stolen credit card numbers, then later deny the charges took place, a high-risk business might find itself out of pocket. This risk means that some credit card processors will not offer high-risk merchant accounts to business owners. If you think you own a high-risk business, consider opening a high-risk merchant account.

Now that you have a basic understanding of how businesses can accept and receive card payments, you should have a better understanding of what payment gateways and merchant accounts are, and why your business needs both tools. If you run a high-risk business and therefore require a high-risk merchant account, you will need to look for a provider that is willing to offer this service. As you have seen, it is massively beneficial to accept card payments, as this will increase your customer base and online credibility.