Online Payment Solution

Your Complete Online Payment Solution Explained: Payment Gateways, Payment Processors and Merchant Accounts

There is no doubt that ecommerce is thriving and everyone wants to taste some of the success by getting in the game. For all of you who are ready to take your company global by going online, you might be trying to figure out the payment aspect. A lot of terms are probably being thrown at you when it comes to online payment solution. Well, online payments are made possible by three distinct parties; payment gateways, payment processors and merchant accounts. There are a lot of payment gateways and payment processors and merchant accounts in the market. You should do a thorough research before selecting the most suitable one for your online business. But first, you should know what exactly they are and what do they do. Here is a quick brief on each.




What is a Payment Gateway?

Like the name implies, it is your gateway to selling online. An online payment gateway is basically the virtual equivalent of a Point-of-Sale (POS) terminal at retail stores. It is the link between your website and the payment processor. In other words, for your transaction to occur, it’s details needs to go from your website over to the payment processor through the payment gateway. This is because it is prohibited to send such details directly from the ecommerce website to the processor for security reasons.

What is a Payment Processor?

A processor work in the background. It has many jobs ranging from validating the transaction to checking whether they have been approved. It connects to the gateway as well as the merchant account and transmitting information between them quickly yet securely.

What is a Merchant Account?

This is a type of bank account that allows you to accept online payment via debit or credit cards. A lot of payment processors and gateways provide merchant accounts, also called merchant IDs (MIDs), to be opened up with banks. You do need to have an arrangement with the payment processor in order to get a merchant account, to start accepting payments from customers all around the world.

These three have separate jobs that work towards providing you with the best possible online payment solution for you to accept easy and secure payments online via debit or credit cards. So now let us see how they all work together to get your online business going.

Your customer browses through your ecommerce website, fills up his cart and makes his way to checkout. As soon as he enters his payment details, they are sent through the payment gateway and the payment processor to the merchant account. Now, the payment processor gets in touch with the customer’s bank and checks whether the card details are right and if he/she can pay. The customer’s bank then accepts of rejects accordingly. This signal is sent by the payment processor to the payment gateway. Once the payment is approved, the customer’s bank transfers the funds to your bank which then sends it over to your merchant account. And voila, transaction complete!


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