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The basics about payment gateways and
merchant accounts
The e-commerce industry is an
ever-growing one. Each day, the number
of traders setting up online stores is
increasing. There are several ways in
which businesses can accept payments
online. The two basic methods employed
in accepting payments are payments
gateways and merchant accounts.
The following is a detailed explanation
about the factors which differentiate a
payment gateway from a merchant account:
Merchant Account – Merchant accounts are
also known as known as online
credit-card payment accounts, online
credit-card processing accounts, card
transaction accounts, e-commerce
merchant accounts. These accounts allow
businesses to accept the various forms
of card payments such as gift cards,
debit cards, and credit cards. A trader
can acquire this account from financial
institutions such as banks or from a
merchant account provider. Ecommerce
accounts are services implemented by
merchants so that online card processing
services can be utilised. The procedure
to acquire a merchant account depends on
the type of ecommerce account and the
provider. The rates and fees vary with
different merchant service providers.
The benefit of having merchant accounts
are they have aid it automating
businesses.
Payment Gateways – Payment Gateways are
services that authorise payments for
online retailers and e-businesses. A
payment gateway is attached to a
credit-card issuing network. The
important function of processing credit
cards is encryption. Gateways use a
specific encoding technology for
encrypting and decrypting all the
information sent through the payment
gateway. With the absence of encryption,
the data on a credit card can easily be
stolen.
Following is a general description of
the working of a gateway:
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The purchase of a service or product
is made by a consumer when he/she
clicks on the “ORDER” button on a
trader’s site.
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The consumer is then told to fill an
order form where details such as
shipping information and cardholder
information need to be specified.
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After the consumer clicks on the
“SUBMIT” button, the information
gets encrypted by the web browser of
the cardholder. After this, a key is
produced after which it is passed to
the trader’s gateway.
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The trader’s gateway then decrypts a
part of the information received
after which a re-encryption process
takes place and this is now sent to
the acquiring bank of a merchant.
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The bank then forwards the received
information to the bank that has
issued the credit card for
authorization and verification.
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A kind of response code is sent by
the issuing bank to the merchant
bank. The merchant bank in turn
sends this code to the gateway.
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The billing of the credit card then
takes place and the funds get
transferred to the trader’s bank.
Finally, the funds are deposited
into the trader’s account.
The payment gateways as well as merchant
accounts are important components to set
up automated businesses. They have a
vital role in increasing the number of
customers and sustaining repeat
customers. The success of a business in
a way is dependent on acquiring merchant
accounts with gateways. |
