Payment Gateway vs Payment Processor vs Merchant Account
What is a payment gateway?
Let’s take a look at what’s a the payment gateway and the way it functions. The payment gateway can be described as a solution that allows online businesses to accept payment through their website with credit cards. The payment gateway gives authorization for payments and ensures that the information entered is adequate to make the transaction. The solution safeguards the information on credit cards by encrypting the private information it holds. In addition, it creates an unsecure connection between customers and merchants.
Since a payment service acts as one of the intermediaries between the website and the bank that is acquiring it One might ask what exactly is an online payment gateway?
If a client buys something and you, as the owner of the online business can only access the data entered. What happens if the purchase is fraudulent, or if the debit card has been stolen, and then used by fraudsters?
When you make online purchases the risk of fraud is extremely high. The fraudsters could use your bank account to make purchases illegally that can damage your company. However when a large number of customers use the chargeback process banks won’t be willing to work with you, and your business may fail.
A payment gateway is a secure protection for customer’s payment information. The service transmits all essential data to the bank issuer and acquirer, and also prevents the theft of these data. Apart from preventing fraudulent transactions, a gateway checks to see if there is an amount that is required in the account, if the card is in use or if the credit limit is over or not, and many more.
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How does the payment gateway work?
The working principle behind payment gateways is rather easy:
- The client selects the product or service he wishes to purchase and then goes to the page for payment. Many payment gateways give you several options, local and international, for the payment pages.
- The customer inputs their debit or credit card information on the payment page. The data is comprised of the card number, expiration date, as well as CVV code. The information is transmitted securely to your payment processor based on the integration choice you have chosen.
- The payment gateway decrypts the information received and conducts an initial examination for fraudulent transactions. The data is then transferred to the bank that is the acquirer.
- The acquirer bank sends details about transactions directly to the payments system (Visa, MC).
- Payment systems analyze information and transmit it to the bank that issued the card.
- The bank that issued the card after examining the data and verifying the data, approves the transaction. Following that, it will send its response (confirmation or denial or denial of transaction) to the acquirer.
- The message is sent to the payment processor and later it is sent to the vendor. If the transaction is accepted the amount is debited and the buyer receives the item.
What is a merchant account?
Merchant accounts are specific account for trading that permits entrepreneurs to accept payments via cards, and cash payments from customers. Merchants can accept online payments and is not restricted to banking hours.
Another benefit of the merchant account is the capacity to accept payment from various countries. This allows you to conduct transactions not just within the country in which account is registered, but across the globe. In addition merchants are able to offer multicurrency settlements.
Why do I need a merchant account?
A merchant account is the place where the money of merchants is kept. Online business owners often question: why funds cannot be transferred directly to my bank account?
Merchant account keeps your money until they have been acknowledged by all the parties involved.
In the event that customers are unhappy about the quality of service provided, they are able to demand a refund.
In addition, your payment gateway is able to receive deposits from a variety of distinct sources. Merchant accounts are a great solution to manage all these sources. The payment gateways combine them into one payment for your bank account , which makes reconciliation easier.
What is a payment processor?
When you make a purchase the payment gateway is able to receive and analyzes the card information of the purchaser. However, the process of processing the payment takes place somewhere else. For this reason, there are payment processors , or online processors.
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Payment processors are a business or financial institution that enters into an arrangement with a merchant and gives them the capability to accept online payment. Payment processors link merchants with their payment processors. In addition, they have their own software which aids in the processing and analysis of every transaction.
In simple terms, a payment gateway is a program, and a payment processor an organization that offers businesses with a payment gateway to enable online payment.
The bottom line
The emergence of online commerce has dramatically altered the world of online payment. It is now used more than just communicating and exchanging data as well as to facilitate the business process more efficient. Payment gateways are an instrument that makes it possible to pay online. No matter if you’re a huge business or a start-up the payment gateway is the solution for your business.
Merchant Stronghold is an online payment processor that assists thousands of merchants process payments around the world. With our payment gateway, you can add a Merchant Stronghold payment gateway to your site within a single day. For any queries then fill out the Contact Form and your manager will be on the phone with you in a matter of minutes.
