Do I Need a Merchant Account to Accept Payments Online?

If you would like to accept credit cards on your website or on a mobile device, you may be wondering if you need a merchant account to process these payments or if you can get by with only a payment gateway. The short answer is: yes, you do need a merchant account.

Truth be told, you can’t have one without the other. So let’s briefly discuss here why you’ll need both a merchant account and a payment gateway, and then we’ll see an overview of how the whole process works.

The easiest way for me to explain exactly what a payment gateway is, is to say that it is like a car that gets your payment from your customer on the internet to your merchant account provider for processing. Having a merchant account itself is like having the license that enables you to drive the car. If you’d like to take the analogy one step further, the garage is like your business bank account. You need all three to accept credit card payments online, but you can’t have a car (payment gateway) without being able to store it in a garage (bank account) and you can’t operate the car (payment gateway) without a license (merchant account). You can have a license (merchant account) without a car (payment gateway), although you can’t operate a car without a license. At the end of the day, you still need a garage (bank account) to store all your stuff, regardless of whether you’re processing online or via a terminal. It’s a silly analogy, but it helps make sense of how everything works together CBD oil merchant account services.

The payment gateway takes your customers payment information and carries it on to your processor. It then carries the approved or denied response from your processor back to you. The processor is the entity communicating with the credit issuing banks to get that response.

Here’s a step-by-step overview of the entire online processing experience:

Customer enters their payment information online and clicks “submit”

Your company’s web server or host securely receives this payment information

Through the payment gateway, the payment information is transmitted to your processor

The processor then communicates with one of the major card networks (Visa, MasterCard, etc.) to discover whether a customer’s payment is approved or denied

The network issues the approved/denied response, communicating that response back to the processor

Through the payment gateway, the processor forwards the response back to you, the merchant. Depending on the response (approved or not approved), your customer either gets a confirmation of payment page or a “payment not accepted” message.
This entire process only takes a few seconds.

If you’re thinking about accepting payments from your smartphone using software provided by your processor or a third party, the steps are almost exactly the same. The only difference is in Step 1, where your customer isn’t entering information into a website. Instead, you the merchant are keying in a customer’s payment information via the keypad on your phone. That information gets sent through the gateway directly on to your processor. The approved or denied response appears directly on your phone’s screen, allowing you to inform your customer whether their payment has gone through or not.

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