Looking to accept credit cards or do business online?
If you’re a company looking to accept credit cards or do business online you’ll find yourself in need of a merchant account and payment gateway, but do you really know what these are? Do you know what benefits they can provide to your specific business? And how do these vital parts of e-commerce differ from one another?
Below we’ve provided an in depth explanation of these seemingly alien terms and how opening a merchant account can improve your business.
Merchant Account
A merchant account is a bank account specifically used for capturing funds made by both Credit and Debit Card transactions. Anytime your card is charged or swiped and funds are withdrawn, your funds are transferred into a merchant account. After arriving in a merchant account the funds are typically transferred into a regular business account, belonging to the vendor.
Payment Gateway
When making a credit card purchase, information must be sent to verify the cardholder’s funds. In everyday face to face transactions, the POS terminal is what converts the cardholder’s information and transfers it to their financial institution. However in an e-commerce transaction, it is the duty of the payment gateway to certify credit card transactions.
Payment Gateways operate in the following:
- Receives transaction request
- Connects to Visa/Mastercard
- Connects to cardholder’s financial institution
- Determines availability of funds
- If funds equal or exceed the requested amount, the transaction is then authorized and the funds are transferred from the cardholder’s financial institution to the retailer’s merchant account.
Note: At times payment gateways and merchant accounts are set up through the same company.
Payment Processor
A payment processor is the company in charge of processing credit card transactions for the merchant bank accounts. The payment processor is also deemed responsible for the transaction requests, they transmit the authorization and settlement information from the cardholder’s financial institution and issues these files to multiple payment gateways and merchant account providers. Additionally, they are responsible for dealing with credit card settlements and chargeback requests.
Advantages of Using an Established Merchant Account for Business
Business Perks
Merchant Accounts offer a vast array of conveniences for the merchant, the best probably being the ability to allow the merchant to increase productivity. As stated above, merchant accounts have the ability to accept credit and debit card payments, this opens the merchant up to a whole new world of payment possibilities and is especially beneficial if the merchant account provider is a well established company, such as Authorize.net who accepts credit, debit, online transactions, echeck, Apple Pay, international transactions, and even set up reccuring billing.
Even for the local mom-and-pops business, merchant accounts have the ability to boost sales tremendously by attracting new customers who may have a habit of not carrying cash, giving your customers a variety of options. This works not as a double-edged sword, but as an extra-sharp butcher knife, now allowing you to cater to the impulse buyers. All of these benefits are possible, while avoiding bad checks and being able to manage your money easier electronically versus having to keep track of wads of cash and a multitude of coins.
Being able to accept credit and debit cards is not just a privilege, but a necessity and not being able to cater to your customer’s needs is just bad business. After all, your competitors accept credit and debit, so why shouldn’t you?
Perhaps one of the most important factors of siding with an established merchant account provider, over competitors such as PayPal is your vision of the future. Competitors such as PayPal tend to start with very minimal fees and free of cost to set up, but once a business begins to generate a lot of revenue the fees seem to almost skyrocket. On top of this businesses like PayPal can put a hold on your account whenever they see fit, locking funds for weeks or even months, and if you’ve ever had a PayPal merchant account you already know that transferring funds to a regular account can take up to 7 days, putting you at serious risk if you’re in a financial jam.
Customer Convenience
Merchant Accounts also offer the second best service after being able to boost sales, customer satisfaction. The only thing merchants like more than cold hard cash is a happy customer, because a happy customer is a returning customer. These established merchant accounts allow consumers to purchase goods with far less hassle than our predecessors, eliminating the need to carry large sums of cash simplifying the transaction process even further making it not only faster, but easier. Through payment gateways customers don’t even need to leave the comfort of their own homes, now that’s a happy customer!
Advantages such as these are only the tip of the iceberg! Not only will you be able to take your company to the next level, but you’ll have supremely flexibility; allowing you to control issues such as shipping, coupons, security, creating customer accounts, and mailing lists. Best of all when business booms, you won’t have to go through the hassle of migrating from your established merchant accounts provider!
Technological Benefits
Merchant accounts don’t just allow business to flourish, they stimulate growth, strategy, and the implementation of new innovative technology. Take the SLICE network gateway for example. SLICE is a hardware/software solution used to deliver and manage internet and WiFi in densely populated environments as well as a means to digitally market various other products. Through personalized custom portals SLICE is able to self-authenticate across multiple devices including tablets, mobile devices, notebooks, and desktops. This authentication method presents the ability to collect payments for multi-tiered internet access from end-users with no operator intervention. This revolutionary technology eliminates the need for end-users to communicate with providers to upgrade their internet service, simplifying the entire process and giving end-users total control, all while generating revenue for the provider.