Difference Between Payment Gateway & Merchant Account

In an August 2009 e-commerce sales report, the U.S. Census Bureau reported that e-commerce sales accounted for more than 3.6 percent of all U.S. retail sales in the second quarter of 2009. While that number may seem like a small percentage, it amounted to more than $32.4 billion (in the quarter) that consumers spent online.

Using a credit card to purchase goods online can save a consumer valuable time.

Function

As a matter of convenience for their customers and to generate more sales, a business can offer a product for purchase directly from the company website.

Types

A business that wants to accept credit card payments must set up a merchant account through a financial institution. The merchant account is tied into the business's checking account and funds from a credit card sale are deposited directly into that account.

A payment gateway is different from the merchant account. It is a secure process used to facilitate the online transaction. Only a business with an online store will need a payment gateway to process the credit cards through its merchant account.

Features

The payment gateway collects the credit card information from the customer, encrypts it and transmits it to the business's merchant account for authorization. The merchant account then deposits the funds from the sale into the business's bank account.

Time Frame

The customer's credit card is immediately charged by the merchant account when it receives the data from the payment gateway. Within two to three days, that money will be deposited into the business's bank account.

Benefits

In our current age of technology, shopping online has become fast and convenient. A merchant account allows customers the freedom to use their credit/debit cards to purchase goods. By also having a payment gateway, a business can operate 24/7 on the Internet.

References

• U.S. Census Bureau