If you’re researching credit card processing companies, it’s easy to come across a ton of conflicting information. Instead of a cash register, you actually have three options: payment processors, gateways and merchant accounts. Here are the facts about each one, so you can better understand and choose the services you need.
Payment processors are outside companies whose job is to handle transactions for your business. They essentially process the communication that occurs between your company and whatever company handles your customer’s credit card number. This facilitates the exchange of money between two banks, and provides an additional layer of security for both the customer and seller. They may also sell or lease credit card readers, and other software related to integrating your payment system.
The payment gateway is the mechanism by which payment information is transferred to the bank. The gateway connects the processor to the bank, which is a fairly critical role in this process. Without the gateway, you couldn’t move money anywhere, even if you’re equipped for mobile credit card processing it and have the means to transfer it.
Some payment processors and merchant accounts come bundled with payment gateways, which really means they either have their own system or already work with a third party.
Merchant accounts are similar to payment processors, but you work directly with the merchant instead of a third party. A merchant account is a lot like a bank account, so it’s used for transactions, payments, processing returns and many of the back-end financial work of your business.
Why choose a merchant account? Simple: more of them are able to work with brick and mortar and eCommerce stores. That trend is changing now that more payment processing companies are entering the retail space, but merchant accounts function seamlessly. Payment processors may require both parties to have an account with the processor before money can be moved.