Merchant Account Or Payment Gateway? Comparison Between These Confusing Terms
When you are paying for a purchase at the grocery store, the gas station or even over a website with your credit card, have you ever thought about the reason you have to wait? You know, when your card is being processed. Where is your information going, how does the whole transaction work? Most people don't care much about it, but the whole thing is actually pretty interesting when you take the time to think about it. This article will show you exactly what happens to your account number and other personal information once a transaction is initiated.
Merchant Account Transactions
When you are at a store, and your credit (or debit) card is swiped, your information is then forwarded to a processor at the company who issued a merchant account to that particular business. Within a short small amount of time, your information is checked, the transaction is approved or denied, and the transaction is complete. It happens pretty quickly in most cases, and business pay a price for this. Fees vary, depending upon the total number of transactions that are typically done in a month and the type of transaction: swiped card, manually typed in, or no card present. One the system of checks and balances is completed by both the business and their merchant account issuer at the end of the night, money is transferred into the business' account, minus the fees.
Payment Gateway Comparison
When you make a purchase from a website, a payment gateway is used. This is a much more complicated process (hence the reason you may wait so long for after you click the "submit" button). Basically, your information is encrypted, sent to the business who then sends it to their bank, who sends it to your credit card company who then issues a response, which is forwarded back to complete or decline the transaction (Are you lost yet? It can be a confusing process). An easy way to think about payment gateways are that they are a connection from an online website to a merchant account. The biggest issue with payment gateway is the security of your private information. Of course, companies go to great lengths to make sure that your private information stays just that. After all, it is their reputation and your future business at stake!
As you can see from this merchant account to payment gateway comparison, there is really a lot going on while you are standing there waiting to check out. Think about that when you next make a credit purchase. it usually happens so fast, even via the Internet, that your transaction will be done before you get through the process yourself!
Questions and Answers
Merchant account is the bank account of retailer that permits payments from the debit or credit cards of the consumers. On the other hand, payment gateway is not a bank account yet it only serves as a terminal for authorization and verification of transactions in debit or credit card processing.
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Most businesses have a merchant account, which is a special bank account that allows the merchant to accept your payment by using your debit card or your credit card. Remember back when you used to make a charge on your credit card and the merchant would lay the card down on the machine and then swipe the imprinter over top of the card and imprint all the information, making two copies, one for you and one for the merchant, and then these would be mailed or telephoned in to the network?
Most of us have grown up using credit cards and have become familiar with how they work in a physical store. Most have a small pin pad where you swipe your card or they swipe your card for you. Then we wait while watching the "Processing..." message until finally "Approved" appears and the receipt starts printing. Charging online is relatively the same, except we are sitting at our computer making our purchase instead of standing in line at the store.
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