Merchant Account vs. Payment Gateway: What is the Difference?
Online payment has become a necessity rather than an option for businesses. Online enterprises are actively jumping on the online payments bandwagon if they aren’t already in it. While payment services like Zaakpay and others have made the process convenient and straightforward, a few questions still trouble the merchants.
One such question that keeps cropping up time and again is the difference between a merchant account and the payment gateway. All businesses who accept online payments would have certainly heard both the terms but might not know that both are distinctive. This blog discusses the difference between them and the puzzle pieces of the same bigger picture.
What is a Payment Gateway?
A payment gateway is an online system hosted on a server that accepts payment information from the customer to initiate a transaction from the customer’s bank to the merchant account. Think of it as a middle-man who authenticates the customer’s payment information from their bank and requests the same bank to process the payment. This is the checkout page that customers are directed to when they are making the payment. Zaakpay is one of the best online payment gateways in India.
What is a Merchant Account?
A merchant account is an account created by a payment gateway provider that temporarily stores the funds received via a gateway. After the payment is received, it stays in the merchant account before being transferred to the business bank account. Generally, the amount is kept in the merchant account for a few days or until the total amount in the account has reached a withdrawable threshold. Here, the merchant account acts as a safe keep for the amount until it can be transferred to the business account.
What is the difference?
| Payment Gateway | Merchant Account |
| A payment gateway is a portal that facilitates payment. | It is an account that temporarily stores money received from the payment gateway. |
| This handles the transfer of money from the customer to the merchant account. | It receives the money from the online payment gateway, stores it for some time, and then transfers it to the merchant’s bank account. |
Do payment gateway and merchant accounts work together?
The answer to this question is both ‘yes’ and ‘no’. This is because it varies from one gateway to the other. Few online gateways require the merchant also to create a merchant account while signing up for the service. Such gateways also declare the minimum threshold amount or daily payout while signing up.
When a customer pays the merchant using a payment gateway, the gateway transmits the payment information to the issuing bank for authentication. After this stage, the payment is processed, and the amount is debited from the customer’s account and credited temporarily in an account known as the merchant account. This is applicable for gateways that mandatorily require the enterprise to set up a merchant account. For those that don’t have this requirement, the amount is directly deposited in the merchant’s bank account.
Types of Merchant Accounts
Primarily, merchant accounts are of two types: Dedicated Merchant Account & Aggregate Merchant Account.
Dedicated Merchant Account
A dedicated merchant account offers more control over the account to the merchant. This is an online payment solution dedicated to that particular merchant. The payment gateway provider deposits the amount received through the gateway directly into the merchant account after deducting the transaction charges. A dedicated merchant account is better for correcting any errors in the transactions and preventing fraudulent transactions.
Aggregate Merchant Account
It is an account that stores money belonging to several enterprises in the same account. Such an account is less flexible in control, and the charges are non-negotiable for such accounts.
Benefits of payment gateways and merchant accounts
- Improved cash Flow
Online payments encourage immediate payments for all products and services. Unlike traditional payments like cash or cheques, the amount is credited to the business’s merchant account as soon as the transaction is processed in the gateway. This improves the business’s cash flow and gives the merchant an idea of the exact funds available at hand.
- Better Tracking of Payments
With a separate merchant account in which the funds received through the gateway are deposited, tracking of the payments becomes easier. The funds can be kept separate from the other funds to avoid any confusion.
- Simplified Banking Features
A payment gateway and merchant account simplify many aspects of the payment process. The system is capable of crediting, debiting, and refunding with just a few clicks. Accepting recurring payments also becomes simplified.
How to integrate a payment gateway and merchant account using Zaakpay?
One of the best online payment gateways that cater to the needs of all types of businesses is Zaakpay. The seamless onboarding process of the service makes it suitable for all kinds of merchants. Zaakpay provides the facility to activate the merchant account in nearly 24 hours. With its customer-centric features like support for multiple gateways and high security, Zaakpay is a highly reliable and profitable solution that businesses can depend upon. The payout policy of Zaakpay is also pretty simple and can benefit businesses in establishing a proper flow of cash.
Conclusion
The concept of merchant accounts and payment gateways can seem complicated at first glance. However, it is not so when you choose the right payment gateway partner. With the right combination of gateway and merchant accounts, businesses can give a decent boost to their sales and profits. Zaakpay is the best online payment and ready-made solution in this segment that businesses can opt for.
