What is the difference between Merchant Account and Payment Gateway?

Siddharth_SSiddharth_S Posts: 2subscriber Member
How are merchant services different from a payment gateway? How do they enable running a business?


  • Ryan O'BlenessRyan O'Bleness Birmingham, Mich. Posts: 891administrator Site Admin

    I believe payment gateways are used for facilitating online transactions and helping them get approved and flowing through the payment funnel. Merchant accounts are for collecting the funds sent to the merchant on successful sales and are paid out to the merchant. 

    I am certainly not an expert on this, but this article from 2016 seems to explain it well. 


    If you're interested in merchant services, definitely check out our partner, International Bancard: https://startupnation.com/internationalbancard/

    Ryan O'Bleness
    Community Manager
    StartupNation, LLC
  • paycronpaycron FloridaPosts: 4subscriber Member
    If you want to sell something online you need both a payment gateway and a merchant account. A payment gateway is the service that processes credit card transactions for you. When your customers are buying something from your online store they enter ther credit card numbers during the checkout process. Your e-commerce site sends that credit card information to your payment gateway to authorize the transaction and process the payment. If the credit card information submitted to the payment gateway matches the information on file with the credit card company and the charge is approved the payment gateway will then transfer the money from your customers credit card into your merchant account.

    Everybody talks about payment gateways but merchant accounts are really the more complicated of the two. The merchant account is basically an online bank account that will temporarily hold your money (you are the merchant) until it is moved into your actual bank account. After a successful sale, money will me transferred into your merchant account and it will sit there for a few days, usually between 2 and 7 days, then, in most cases, it will automatically be transferred into your bank account – the one that you actually think of as your bank account where you deposit checks and so forth. You can sort of think of your merchant account as a temporary holding tank for the money that comes in from online sales.
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