So, you know how credit card payments are processed, now it’s time to learn the difference between a payment gateway and a merchant account.
Ok, so if we imagine the payment gateway as the go-between in the middle of the merchant and processor. The gateways main job is to pass transactions over to the network. (Visa, Mastercard, American Express, you get the picture). The gateway complies with credit card processing security rules by passing the information securely through to the end user. Once the user taps in their pin and the information is entered, the gateway then safely and securely dispatches the card data to the network, who in turn, disclose it to the cards issuing bank for authorisation. Encryption technologies are then used to ensure that all information attached to the cardholder is never left unprotected or uncovered. And within a split second, the transaction has gone through.
This brings us to where all those card payments are stored, the merchant account. This is linked to your personal bank account where the funds are settled each day and processed in cooperation with your payment gateway. Sounds simple so far.
Your merchant provider will set up your merchant account. They’re the people who provide you with the account. Now it’s time to do some digging. Some Merchant Accounts and Payment Gateway Providers are good, and some are not so good, so it’s vital that you do your research here. For example, a good payment gateway tends to equip you with everything you need to process payments to the networks without too many complications and at a fair price. Try and find out if your gateway offers a cost-plus pricing package so you can keep track of what you’re being charged.
So, you’re ankle deep in research trying to find the best option for your business.
The most well-known processors tend to stick to a bundled pricing price model. This commonly is made up of a flat fee, plus a percentage of the payment.
To consumers, this type of pricing model seems the most hassle-free and straightforward. However, with the pros, come the cons. Even though the rate is the same, regardless of whether or not data is passed with the payment, it makes it impossible to access the breakdown of the fees. This can be annoying for consumers as they never really know what they’re paying for or who is charging them.
In turn, this tends to be why others opt for a the cost-plus pricing option as you’re provided with a clear break down of charges. Every single fee is documented as well as the processing markup, so you can see exactly what you’re paying and how they came to that sum.
So, the decision is down to you. What are your personal and business needs? Which model suits your way of working? The industry as a whole is changing quickly, and that means your business needs to keep up. Do your research, keep up with industry changes and growth and you’ll be sure to find the right option for you.
Once you have had more than three months merchant card trading you could be eligible for a Merchant Cash Advance – a type of forward finance where you borrow against future card sales that pass through your merchant account. A percentage usually between 10% and 15% is repaid to the lender as and when your business makes sales via the maerchant account.