Payment Gateway vs. Merchant Account - What’s The Difference?

Merchant accounts and payment gateways - two closely related business tools with very different jobs.

While a payment gateway is a consumer interface allowing for the collection of card data, a merchant account enables businesses to receive the funds from these card transactions.

Without both, a business cannot offer card payment options to its customers.

If you’re trying to wrap your head around the differences between payment gateways vs. merchant accounts, as well as the importance of both and how they affect international businesses, then stay tuned as these points are covered in detail.

What is a merchant account?

A merchant account is a type of bank account that enables businesses to accept cashless transactions, most typically being that of credit and debit card payments.

1. The merchant - in other words, the business - enters a contract with a merchant acquiring bank, who in turn opens and controls a merchant account.
2. When a card payment is processed, the funds will be deposited into the merchant account.
3. From here, it’s the job of the business to transfer these funds to their business account.

This highlights an important difference - a merchant account is not the same as a business account.

If you have an international business, it’s important that you’re withdrawing your funds to a business account that supports your activities worldwide.

Wise’s business account functionality allows you to work with multiple currencies and save on conversion fees. Get paid on time, and maximize your profit.

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Wise Business account

What is a payment gateway?

A payment gateway enables merchants to accept card payments.

In a physical store, the Point of Sale (POS) terminal - where card payments are made - is the payment gateway; in online stores, this is the ‘checkout’ portal.

In both of these examples, the payment gateway is the consumer-facing technology where card information is entered.

It should be kept in mind that a payment gateway is separate from a payment processor.

Stripe is one example of an international payment gateway, allowing merchants to accept online card payments in multiple currencies.

On top of this, you can link your Wise business account to your Stripe account, allowing you to save on high conversion fees, exchange your money at the mid-market rate, and send and receive money from more countries.

Payment gateway and merchant account

As you can see, a payment gateway is different from a merchant account - they’re responsible for two separate processes.

While a merchant account is for the receiving and holding of funds from card transactions, a payment gateway is simply a consumer-facing interface that collects card data - an online checkout portal, for example.

Think of it like this - the payment gateway is like the cashier and the merchant account is the cash register.

Although a payment gateway and a merchant account are different things, they are related.

The payment gateway is the first link in the transaction chain.

The customer enters their details at the payment gateway, such as an online checkout portal or in-store POS terminal.

The payment gateway then routes this information to the payment processor.

The payment processor routes this card data, via the card network, to the customer's bank.

Once the bank authorizes the payment, the processor communicates this decision back to the payment gateway which alerts the customer and merchant of the successful transaction.

From here, the processed funds are deposited in the business's merchant account.

Importance of merchant accounts

Being able to accept card payments is a crucial aspect for your business. This is especially true for those involved in E-commerce.

By opening a merchant account, you’ll be able to accept card transactions.

More to the point, being able to accept card payments has the potential to increase sales and thus incoming cash flow, as you’ll be able to offer multiple methods of payment.

Having card payment capabilities is also critical for international businesses. For this, an international merchant account is necessary, with which you can process multiple currencies.

A merchant account with high volume payment processing is also key to increasing sales and expanding your business.

This allows a high volume of monthly transactions to be processed, thereby increasing sales and revenue.

Importance of payment gateways

Having a merchant account without a payment gateway is like owning a house without any doors. The payment gateway is an interface between your business and customer, allowing them to pay via card.

Depending on your payment gateway provider, you can offer your customer a wide range of POS interfaces, such as Near Field Communication (NFC) technology for contactless and mobile wallet payments.

This allows you to offer a wider choice of payment options, attracting a greater share of customers, thus increasing your sales.

To have one of the best payment gateways is also crucial for businesses operating on an international scale.

• An international payment gateway supports multi-currency payments as well as offering multiple languages for the checkout portal.
• This will expand your market share in international markets.
• Depending on your provider, an international payment gateway may also offer detailed financial reporting and payment analytics, allowing you to take better control of your business.

Overall, having a payment gateway and merchant account is an essential element to boosting your sales.

Your business will be able to offer a wider range of payment methods, attracting more customers, and resulting in a greater market share.

Save Time and Money On Overseas Payments With Wise Business

Wise Business can help you save big time on international payments.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in currencies.

Signing up to Wise Business allows access to BatchTransfer which you can use to pay up to 1000 invoices in one go. This is perfect for small businesses that are managing a global team, saving a ton of time and hassle when making payments.

Some key features of Wise Business include:

• Mid-market rate: Get the mid-market exchange rate with no hidden fees on international transfers

• Global Account: Send money to countries and hold multiple currencies, all in one place. You can also get major currency account details for a one-off fee to receive overseas payments like a local

• Access to BatchTransfer: Pay up to 1000 invoices in one click. Save time, money, and stress when you make 1000 payments in one click with BatchTransfer payments. Access to BatchTransfer is free with a Wise Business account

• Auto-conversions: Don't like the current currency exchange rate? Set your desired rate, and Wise sends the transfer the moment the rate is met

• Free invoicing tool: Generate and send professional invoices

• No minimum balance requirements or monthly fees: US-based businesses can open an account for free. Learn more about fees here

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All sources checked 14 October 2021