What’s the difference between a merchant account and payment gateway

“What’s the difference between a merchant account and payment gateway, and, if they’re different, do I need both?”
– Betsy, Redondo Beach, CA

I asked my friends over at WebGem Network to respond to this great question.  I am currently moving my Simply Sarah website to their server and was just going through this process yesterday!!

Hi Betsy;

They are two different things – and yes, to have an online store with your own shopping cart that accepts real time credit card or online check transactions, you need both. You can of course use a third party like Pay Pal, but their transaction rates are generally quite a bit higher. Here is the difference between a Merchant Account and a Payment Gateway:

A Merchant Account is a type of bank account that allows businesses to accept payments by debit or credit cards. A Merchant Account provides access to the processor, so that the processor can authorize, capture and settle credit and debit card transactions. Without a Merchant Account, you would have to use a third party to process your credit card orders and would have to pay a higher percentage and/or

A Payment Gateway is what facilitates or allows the transfer of financial information between a website and a bank. When a customer orders a product from your online store, the payment gateway forwards the transaction information to the processor used by the merchant account or bank. Many payment gateways also provide tools that automatically screen orders for fraud and that calculate tax in real time prior to the authorization request being sent to the processor.

Hope this helps!

Joe & Denny of
Web Gem Network

WebGem Network provides services that will enable you to customize the look of your store. Upgrade your store’s default settings. Change the size of your logo, header, footer, and much more!

WebGem Network is dedicated to offer our clients all the essential tools necessary for a successful Online Business.

WebGem Network offers Additional Services for Your E-Commerce Site that can enhance your website’s traffic and provide a quality shopping experience for your customers. Whether you want to create a blog to link to your website, create a mass email campaign, or install live chat software, WebGem has what your looking for!

WebGem Network is dedicated to offer our clients all the essential tools necessary for a successful Online Business.

Written by Sarah Shaw