Ecommerce Essentials: A Merchant Account and Payment Gateway

If you are just starting an ecommerce business, searching for a merchant account and a payment gateway should be top priority. Together a merchant account and payment gateway will enable you to accept online payments in the form of credit cards directly on your website. There are myriad options for both merchant accounts and payment gateways, though they can vary greatly.



What is a Payment Gateway?

A payment gateway is the online equivalent of a point-of-sale system (like a credit card machine) in a brick-and-mortar store. When an online shopper selects "Pay Now" on a website, their payment information is passed through your secure server to a payment gateway, which serves as a liaison between your bank and the customer’s bank.



What is a Merchant Account?

The details of the transaction are then sent from the payment gateway to your merchant account. Your merchant account bank requests authorization from the customer’s issuing bank to complete the payment. The issuing bank then will either authorize or reject the payment and send the details of the authorization through the payment gateway to your website and the customer.



Hybrid Solutions

There are a handful of services that offer hybrid solutions that combine a payment gateway and merchant account into an all-in-one service. The advantage of doing so is the entire process to authorize a transaction takes just a few seconds; however, the cost of using such a solution is often slightly higher than if you were to obtain a payment gateway and merchant account separately.



What to Look For

Whether you opt for a hybrid solution or a separate merchant account and payment gateway, you should always research prospective options to find one that fits your needs. No matter what you choose, here are a few key features to look for:



Account Management

Compatibility with your site’s shopping cart

Encryption capabilities

Fraud prevention and security features

Hidden fees and payments

Reporting features

Startup costs



Since every ecommerce business needs to accept online payments but has its own unique needs, it’s important you research various options to find one that can best meet your company’s payment needs.