Merchant Account Vs Payment Gateway: What Are the Differences?


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Every eCommerce merchant has knowledge of different accounts because it’s a key to successful online selling. When it comes to different accounts, every account varies from another account in various manners, as you can see with the merchant account and payment gateway account. Both these accounts are different from each other and have their own importance in eCommerce. Those who want their business to grow more must have knowledge about these two accounts.

To compare merchant account vs payment gateway, let’s have a look at what these accounts are?

merchant account vs payment gateway

What Is a Merchant Account?

A merchant account is a type of account that allows businesses to accept and process payments. You can also say that a merchant account is a bank account that enables your company to take a variety of payment methods, such as debit cards, credit cards, and ACH (Automated Clearing House) payments, from users. Although you do not have direct access to this account, it links your company and the particular card-issuing banks, facilitating the acquisition of money and the subsequent settlement of cash into your business account. 

A merchant account is required if you want to accept debit cards and credit cards at your company.

Benefits of Merchant Accounts

As we discussed before that, with the help of a merchant account, you can make multiple payments. It also helps you in growing your business. Some benefits of a merchant account gateway are:

  • You can Accept the Credit Card 

It is possible to accept debit cards and credit cards using a merchant account, which is one of the most significant advantages that can be gained. With each passing year, customers’ desire for debit cards and credit cards continues to rise, and they are becoming the new “standard.” Businesses that place a high value on the customer experience frequently discover that removing any complexity from the purchasing or payment acceptance procedures may help them gain new customers while also boosting their income stream.

  • Boosting Sales 

According to a number of researches conducted over the years, customers spend money when they are offered the choice to use credit cards rather than cash. In fact, according to a study conducted by Community Merchants in USA and sponsored by Intuit, 83 percent of small companies that took credit cards reported an increase in sales. This increase has the potential to directly influence your company’s sales and overall growth.

  • Assistance for the Needs of Customers

Customers who may make purchases in various methods will be more likely to be satisfied, which will lead to retaining the existing customers for your business. With credit or debit cards, payment services, shopping carts, mobile phone payments, or regular billing, your customers will love their experience with a company because they can purchase whenever they want to. 

  • Keep You Away from Faulty Checks

It is possible for your business to avoid the inconvenience and costs connected with failed checks by utilizing merchant account services and receiving electronic payments instead. Additional benefits of a merchant account include the ability to take recurring payments for services that are provided on an ongoing basis when used in conjunction with a comprehensive payment system such as PayPal.

  • Improved Financial Management

Accepting credit cards and transitioning to online payments simplifies the way your company processes transactions and improves efficiency. Electronic payments, rather than cash payments, can assist you in staying organized and will enable you to better manage your cash flow and forecasts.

What Is a Payment Gateway?

A payment gateway is a technology that links all types of merchants. In the case of Stripe, which is an example of an international payment gateway, merchants may take online card payments in a variety of different currencies.

When it comes to performance, an online payment gateway is similar to a credit card machine in that it allows your consumers to input payment information through the internet. Every sort of business, from large box shops to eCommerce businesses and from trade fair exhibitors to antique dealers, requires the ability to take credit card payments in order to expand its customer base and revenue. And an increasing number of those organizations are accepting payments over the internet.

How Do Payment Gateways Work? 

If you’re new to eCommerce, you’re most likely just learning about payment gateway accounts right now.

When using a payment gateway, the online transaction takes place through a safe hosted payment method on your business website.

When a consumer enters his or her order, the following occurs:

  • The payment information is sent to the payment gateway.
  • The payment gateway protects cardholder data before sending it to the payment processor for verification.
  • The payment processor sends the information to the customer’s card issuing bank for authorization, which is accomplished through the card network.
  • The payment processor informs the gateway if the transaction has been approved or declined.
  • The decision is communicated to both the merchant and the client through the gateway.

Benefits of Payment Gateways 

Payment gateway account has its own benefits different from the merchant account. Some of its benefits are;

  • Help in Checkouts Faster and Save Time

From a customer’s perspective, a quick, and efficient checkout process is essential to their satisfaction. The payment gateway makes these capabilities possible, which makes online buying as simple as possible.

Payment gateways accounts receive card payments quickly. Unlike manual processing, you may start collecting payments within 24 hours of creating your payment gateway. Online transactions and e-commerce performance rely on quick payments. Online buyers are renowned for impulse purchases, so making sure they don’t have to wait may make or break a transaction.

  • Better Experience for Users

Payment gateways provide additional features that provide a better customer experience. Customers may usually add goods to a cart and save bundles and favorites. Users may quickly create a profile and save their payment information, allowing for one-click purchases. Payment gateways generally provide merchants with complete control and the ability to intercept issues. At the same time, other methods may be time-consuming and costly.

  • Extend your Business

With the help of a payment gateway, you can extend your business. Customers from all around the world may effortlessly reach your shop. Secure digital payment alternatives are becoming increasingly important, especially for online retailers. Ecommerce is becoming worldwide. People are becoming more comfortable making online purchases, allowing them to shop anywhere they want, whenever they want. Many payment gateways also provide affiliate marketing programs to assist you in generating more leads.

Which One Is Right for Your Business?

If you want to know which one is better, either a payment gateway or a merchant account, then let us clear one thing. Both of these accounts have their own importance, and both of them are useful for any business. However, there is a significant difference between the two accounts as a payment gateway supports online transactions and enables you to execute them, while a merchant account serves as a holding account where funds are received before being put into your normal bank account.


A payment gateway is merely a customer interface that gathers card data, such as an online checkout portal. A merchant account is for receiving and keeping payments from card transactions.

In other words, the payment gateway acts as a cashier, while the merchant account acts as a cash register.