A payment gateway is the till in an online retail site. So, before you
start accepting payments online, look at setting up a payment
gateway.
Let’s
start with the basics- the terminology.
Payment
Gateway:
A
payment gateway is a service that processes credit card transactions
for your site. When your customers check out from your online store
with a credit card, the site sends credit card information to your
payment
gateway. The payment gateway
authorizes the transaction and processes the payment. The gateway
verifies if the credit card information submitted by the buyer
matches the information on file with the credit card company and if
the charge is approved by the bank. After this, the payment gateway
transfers the money from the credit card into your merchant account.
Merchant
Account:
Every
payment gateway is attached to a merchant account. A merchant account
is a designated online bank account that will temporarily hold your
money until it is moved into your actual bank account. It is a buffer
holding place for your money. Typically, transfer between accounts
takes anywhere between 2 and 7 days.
There
are 2 kinds of merchant accounts- dedicated merchant account and
aggregate merchant account.
- Dedicated
merchant account:
A
dedicated merchant account is an account set up just for you, the
merchant. Generally, payment gateways like Authorize or
PayLeap
give you
a dedicated merchant account. A dedicated merchant account gives you
the benefit of custom rates for your sales and you can negotiate
these rates. Typically, rates are based on the volume of your sales
and also on the type of products being sold.
Business
people choose a dedicated merchant account when they want control
over their money and the ability to negotiate custom rates. Getting a
dedicated merchant account involves an in depth credit check and
underwriting.
- Aggregate
Merchant Account:
An
aggregate merchant account is the opposite of a dedicated merchant
account. A bunch of people use the same account where their money
gets dropped in a pool. Examples of such services that offer
aggregate merchant accounts are Stripe and PayPal. While you still
need to provide some information about your company and the types of
products you intend to sell, the process of getting access to an
aggregate merchant account is easy. Needless to say, there are some
issues you have to be willing to compromise with. You cannot
negotiate rates and you cannot have much control over money when it
is present in the aggregate merchant account.
Like
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following weeks. Let’s analyze the technicalities of accepting money
online. Let’s compare and contrast various service providers in the
industry!Leave
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Image: ePaymentsGlobal.
