“Merchant accounts and Payment gateways: Everything you need to know”

Merchant Processing payment with card through payment gateway

If you are an e-commerce merchant, you must have heard of things such as payment gateways, merchant accounts, online payment solutions, and so on. And even if you are not a merchant, but want to start your online store, worry not. Through this blog, we will discuss everything from payment gateways to merchant accounts, and beyond. Selling online comes with a lot of challenges and smart work. This does not mean that you refrain your business from going online. It only means that you do thorough prior research to make smart decisions when the need be.

All these concepts are somehow related to each other. To start your online store, you must know the in and out of everything. Choosing and configuring the right aspects can impact your business in a positive way. It does not matter whether you have an established business or a business that has started growing, we are here to prime your basics to help you emphasise the critical concept of online business. The payment settlement is an indispensable part of any business. Customers buy goods and services in return for the money they entail sellers with. Many merchants collaborate with payment gateway services for fast and effective payment settlement. Let us now understand what payment gateways are.

What is a payment gateway?

A payment gateway is a revolutionary technology that connects sellers across the globe, not only online, but offline too, with payment networks. It is a domain that allows your business to accept payment from customers. Payment gateways offer many payment options such as debit and credit cards, UPI, digital wallets, and so on. Let us go over the process that is followed by a payment gateway when transacting money from the buyer’s bank account to the merchant’s bank account:

  • It can be integrated with your online business: It gives your online business many ways to integrate online processing of cards and smoothening your business operations. The integration of a payment gateway should be done with your mobile app or website after finalizing a payment gateway that best meets your requirements and demands.
  • Payments gateways gather payment details for processing transactions: The seller sends the buyer’s personal information to the payment gateway through the mediums/channels provided by the payment gateway. To transfer this information in an encrypted manner, the gateway codifies the personal details during the transfer.
  • The information is routed to a payment processor or the procuring bank: This is when the acquiring bank takes over the process. The bank will perform some screenings for any kind of fraudulent activity and will then route the transaction to the card networks.
  • The bank will send an approval or decline message back to the seller: Based on the response of the bank, the seller may either redirect the shopper to a page of confirmation or ask the buyer to provide some other form of payment to complete the transaction.

This entire process is completed very fast and the merchant or the buyer do not have to worry about any fraudulent activity taking place during the process because, Payment gateways use security techniques such as Hashing, Data encryption, Secure Electronic transfer protocol (SET), Tokenization, Anti-fraud tools, 3D Secure authentication, and Payment card industry data security standard (PCI DSS) compliance to keep the process secure and devoid of fraudulence, and malpractices.

Why are payment gateways so much in demand?

Payment gateways are skyrocketing in popularity due to various reasons comprising, security in payments, rapid transactions, ease of use, and so on. Beyond providing the basics, many payment gateways offer a myriad of other services surrounding payment processing. We have compiled a list of these services:

  • Various modes of payment: Credit and debit cards are not the only modes of payment through which a buyer can buy goods and services from a merchant. Many buyers prefer using other modes of payment such as digital wallets, UPI, and so on. Hence, a payment gateway is needed that caters to all the other modes of payment. You need more than a card payment gateway.

Many payment gateway providers offer their customers a service that supports a plethora of payment options. Hence, you must definitely consider choosing a payment gateway service that offers you many options for payment. This way, you will be able to keep your customers and attract the right set of audiences.

  • Anti-fraud services: Digitization of businesses has created ample room for fraudulent practices. Online businesses are always at risk of theft or attack every time a payment is processed. If your business is a target of such malpractices, your business will be affected and you will end up facing huge losses. This can be combatted by choosing a payment gateway that has powerful anti-fraud tools.
  • Detailed analytics: Having a conclusive analysis of what’s selling can give you valuable insights about your business and help you make smart decisions to elevate the growth of your business. A good payment gateway will give you a complete picture of where your payments are thriving and what area needs some work.

Merchant accounts

A merchant account is a bank account that allows merchants to process payments and settle them. The payment gateway that has been integrated with your business will deposit the funds from your sales in the account. These funds are transferred from your merchant account into your business’ bank account. It is interesting to know that, a merchant account and a business account are two completely different things. You do not hold any kind of control over your merchant account. It is for holding deposits only.

Now, you must be wondering, “Why can’t the money from the sales be deposited directly to your business account?”. The answer is since the goods and services can be returned, there is always a chance that some amount you receive as a merchant will have to be paid back. This amounts to a particular extent of risk in your transactions. The returns are subtracted from whatever amount of money is present in your merchant account at the time of the payback. The funds that remain are then transferred to your bank account.

How do you get a merchant account?

Many payment gateway providers offer a readymade merchant account along with their payment gateway services. But, it should be noted that this is not always the case. Some payment gateway providers leave the job to you and ask you to set up a merchant account for yourself. This is not always an ideal solution. What you can do is, you can contact a payment gateway that also offers you a merchant account along with a payment settlement solution.

Conclusion

Now that you understand the basics of how payment gateways and merchant accounts work, you are free to integrate your online store with a payment gateway that offers you convenient options to glide your business to the top. Choose something that covers all your needs and optimises your business. Make transactions easy with Payomatix.

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