Merchant accounts and payment gateways are crucial for businesses using electronic payments like credit and debit cards. As an e-commerce business, providing online payments means diving into the culture of merchant accounts, payment service providers, and payment gateways.

You might need one or a combination of these components. Rest assured, we’ll untangle the confusion, explain the differences, and prepare you with the insights you need to establish a seamless payment processing infrastructure.

With this comparison blog, you’ll be ready to showcase your products, enable hassle-free purchases, and witness your hard-earned revenue flow.

💡 Did you know?

The percentage of credit card payments increases with income: 34% for $100,000 to $149,999 and 44% for over $150,000.

In the upcoming sections, we’ll describe the concepts of merchant accounts and payment gateways, distinguishing their roles, exploring their symbiotic relationship, and discovering how merchant account and payment gateway functionalities work for businesses.

Merchant Account:

A merchant account is like your business’s money hub. It’s where the money from sales goes and stays until you move it to your actual bank account. Only authorized people in your business can access this account. So, when customers pay you, the money ends up in your merchant account before going to your bank.

Payment Gateway:

Think of a payment gateway as a bridge between your customers’ banks and merchant accounts. It helps move money from your customer’s bank accounts to your merchant account. Many businesses share one payment gateway for their customers.

A secure gateway makes sure the money reaches your account safely.

Types of Accounts and Gateways:

Payment Service Providers (PSP) vs. Independent Sales Organization (ISO)

For accounts, there are two common types: one is more accessible and suitable for small to medium businesses (PSP), and the other is more powerful and suits big companies (ISO).

PSP accounts are like the simple mode, and ISO accounts are like the expert mode. ISO accounts are better for big businesses, but they cost more upfront.

When it comes to gateways, there are classic and modern options. Classic ones need more setup, while modern ones like PayPal or Stripe are quick to set up and don’t always need a separate account.

Classic ones are better for serious businesses, even though they are more complicated. They also help your business look trustworthy and keep transactions smooth.

How Do You Choose a Payment Gateway Provider?

Similar to a merchant account, the suitability of a payment gateway hinges on your business type and specific requirements. Finding the right solution involves aligning with your company’s needs.

However, compatibility between payment gateways and certain merchant accounts or banks can be restrictive, potentially alienating specific customer segments. Thus, diversifying your payment options to cater to different preferences might be prudent.

While evaluating potential payment gateway providers, there are a few major inquiries to address. These queries will help determine if a particular provider aligns with your operational requirements.

1. Diverse Payment Methods: Does the provider offer a broad spectrum of payment methods? While credit and debit cards remain popular, alternative forms like eWallets, mobile payments, and direct debits are critical to accommodate varying customer preferences.
2. Fraud Prevention: In the virtual scenario, the specter of fraud looms large. Adequate fraud protection is essential for both consumers and businesses. Opting for a payment gateway with dedicated fraud prevention mechanisms is paramount. Neglecting fraud management could severely impact your business’s reputation.

By addressing these considerations, you can forge a confident path toward selecting a payment gateway that seamlessly integrates with your business and extends your customers a secure, versatile payment experience.

💡 TIP: Find one that lets you work in your preferred money type for accounts. Always see if there are any hidden fees. If you do many transactions, ensure there’s no limit to how much you can process in a month.

The Comparison

Merchant Account vs. Payment Service Provider

1.     Setup:

• Merchant Account: Involves a verification process and an agreement with an acquiring bank, taking several weeks.
• Payment Service Provider: Offers instant or fast setup, often without a lengthy verification process.

2.     Stability:

• Merchant Account: Generally poses a lower risk of unjustified account holds or terminations.
• Payment Service Provider: Carries some risk due to account aggregation, potentially leading to account freezes or terminations.

3.     Fees:

• Merchant Account: Fees can vary and are customized based on business needs and transaction volume.
• Payment Service Provider: Offers fixed flat-rate fees, which can be less expensive for smaller businesses.

4.     Processing Volume:

• Merchant Account: Allows negotiation of terms and limits on processing volume and transaction size.
• Payment Service Provider: This may have limits on transaction volume and size.

5.     User Experience:

• Merchant Account: Offers customization options for optimizing user experience.
• Payment Service Provider: Provides out-of-the-box solutions with limited customization.

Choosing the Right Option for Your Business:

The decision between a merchant account and a payment service provider depends on your business’s specific needs:

• Merchant Account: Ideal for businesses with higher transaction volumes and customization requirements. It offers a direct relationship with the account provider, potentially lowering fees.

Vs.

• Payment Service Provider: Suited for smaller businesses seeking simplicity and lower upfront costs. PSPs offer faster setup, streamlined operations, and fixed pricing.

💡 TIP: For gateways, focus on security. Look for ones that follow the rules to keep transactions safe. Also, get one that works with many money types, especially if you have customers from different countries.

Also Read: Best Practices for Merchants to Handle Chargebacks!

Square | The Complete Payment Solution 

Square is a complete payment solution that modernizes and simplifies the payment process for businesses. With its user-friendly tools and features, let’s quickly check out what Square offers.

1. All-in-One Platform: Square provides a unified platform for accepting payments, managing sales, and tracking transactions. This eliminates the need for multiple systems, making your payment operations more efficient.
2. Easy Setup: Setting up Square is easy, even for beginners. Its intuitive interface and step-by-step guidance ensure a smooth onboarding process.
3. Contactless Payments: Square supports various payment methods, including contactless options like tap-to-pay and mobile wallets. This enhances convenience for both you and your customers.
4. Invoicing and Online Payments: Generate and send invoices seamlessly, allowing customers to pay online. This feature simplifies the billing process and accelerates payment collection.
5. Inventory Management: Square offers inventory tracking capabilities, helping you monitor stock levels and manage products more efficiently.
6. Analytics and Reporting: Gain insights into your sales, customer behavior, and transaction history through Square’s analytics tools. This data-driven approach aids in making informed business decisions.
7. Secure Transactions: Square prioritizes security, implementing encryption and compliance measures to protect your business and customer data.
8. Customizable Solutions: Customize Square to your business needs by integrating various apps and add-ons from the Square App Marketplace.

Use Square with WP EasyPay

Simplify and enhance your WordPress payment processing experience with WP EasyPay, a global Square payments plugin that offers simplicity, speed, and security.

This plugin empowers your business to accept payments, reaching a wider audience and boosting conversion rates with an exceptional 99.9% uptime guarantee. Whether you’re initiating transfers at any time, WP EasyPay ensures a smooth payment journey for your customers.

WP EasyPay Features:

●        Improved Form Builder:

• Change form appearance
• User-friendly interface
• Support for amount layout customization
• Drag-and-drop functionality
• Success URL redirection

●        Improved Single Form Layout:

• User-friendly interface
• Simplified payment collection
• Drag and drop capabilities
• Predefined essential fields
• Enhanced form validation options

●        Subscription Reports:

• Parent and child subscription reports
• Streamlined subscription tracking
• Categorization for easy management
• Transaction report review

●        Subscription Pause & Run Functionality:

• Pause and run subscriptions
• Manage customers effortlessly
• Scheduled payment creation

● Multi-Step Form:

• Step-by-step tab interface
• Ideal for signups and payments
• Organized user data input
• Sequential step progression
• Option to use multi-step form layout

●        Drag-&-Drop ‘Upload’ Fields:

• Easily add ‘UPLOAD FIELD’ option
• Users can attach important documents.
• Uploaded file view in the reports section

INSTALLATION GUIDE (PRO VERSION)

Conclusion:

To start receiving online payments, you require a merchant account for handling the funds and a payment gateway for facilitating the transactions.

A merchant account can be obtained through a dedicated merchant services provider or by joining a payment services provider offering an aggregated merchant account solution. These two components work hand-in-hand to enable smooth money transfer during online transactions.

Consider your business’s size, transaction volume, customization needs, and budget when choosing the option that aligns with your goals.

Whether you opt for the control of a merchant account or the simplicity of a payment service provider, take your time to research and decide on the best fit for your business’s payment processing journey.

Frequently Asked Questions

In the e-commerce business, where user experience reigns supreme, the role of a well-suited payment gateway cannot be underestimated. It is the key player between your customers and revenue, transcending simple transaction processing.

An effective payment gateway fosters trust, reinforces security, and ensures a frictionless purchasing journey, boosting customer loyalty and increasing sales.

Innovative technologies are shaping the changing payment gateway trends, making transactions smoother and improving user experiences.

Let’s explore primary considerations when selecting the optimal payment gateway for your e-commerce enterprise.

Key Features of an Exceptional Payment Gateway

A proficient payment gateway possesses attributes that collectively contribute to customer satisfaction, security, and seamless integration.

Here’s a breakdown of what to focus on:

1. Security Measures for Secure Transactions

A robust payment gateway must align with stringent security protocols. Incorporating 3D secure mechanisms and adhering to the PCI Data Security Standard is imperative.

These safeguards offer a formidable defense against fraudulent activities, instilling trust in your clientele.

2. Seamless Integration to Enhance User Experience

The ease with which the payment gateway integrates into your e-commerce platform is essential. A responsive customer support system is essential to address any integration hiccups swiftly.

Rapid resolution of integration-related concerns ensures uninterrupted shopping experiences.

3. Payout Timeframes for Timely Financial Flow

Opting for a payment gateway with reasonable payout timeframes is critical. Payout schedules that sync with your business cadence –weekly or bi-weekly – are important to maintaining consistent cash inflow and nurturing expansion.

4. Multi-currency support for Global Outreach

For enterprises catering to an international clientele, multi-currency support is indispensable. Seamlessly facilitating transactions across diverse currencies and regions broadens your global footprint.

Top 7 Global Payment Gateways

1. PayPal

PayPal is a comprehensive eCommerce payment platform facilitating seamless financial transactions for individuals and businesses. By eliminating the need to share sensitive financial information, PayPal stands out as one of the premier payment gateways.

Users can effortlessly send and receive payments on a global scale using just an email address, ensuring instant and hassle-free transactions.

This gateway supports transactions in 203 countries and accommodates widely recognized credit cards like Visa, Mastercard, Citibank, and American Express.

Key Features:

• PCI compliance
• Inventory tracking
• Shopping cart integration
• Credit card reader support
• Express checkout option

2. Amazon Pay

Amazon Pay emerges as a secure and efficient payment gateway tailored to Amazon merchants and customers. With a presence in 8 countries, Amazon Pay offers a fast and user-friendly payment solution.

This gateway offers two distinct packages: “Login and Pay” for shoppers and “Pay with Amazon” for merchants.

Its design focuses on enhancing the shopping journey for online retailers and sellers, enticing customers to engage more and streamline their shopping process.

Amazon Pay’s features encourage customer loyalty through saved payment details, enabling faster checkouts.

Key Features:

• Automated payments
• Seamless merchant website integration
• In-line checkout experience
• Enhanced customer identity verification
• Robust fraud protection measures

3. Stripe

Stripe emerged as a cloud-based payment gateway platform, enabling businesses to manage and accept online transactions across the globe. Its comprehensive solutions cover the entire spectrum of online payments.

Its numerous features are a custom UI toolkit, embeddable checkout options, and consolidated reporting capabilities. Stripe emphasizes security and functionality and ensures smooth fund movement within businesses.

Its open API facilitates seamless integration with various business ecosystems, enhancing security, revenue management, and global sales expansion.

Key Features:

• Mobile-friendly customer interface
• Multi-currency payout support
• Customizable UI toolkit
• Embeddable checkout functionality
• Authorization controls

4. Authorize.Net

As a prominent global payment gateway, Authorize.Net provides a robust infrastructure for secure and rapid transactional data transfer. Similar to a card-swiping machine but in an online setting, Authorize.

Net handles transaction routing. With a merchant base of over 370,000 globally, this gateway offers secure payment acceptance, streamlined experiences, and scalability.

Authorize.Net’s fully integrated electronic check payment system accepts and processes payments from various bank accounts via the merchant’s website or virtual terminal.

Key Features:

• E-check processing capabilities
• Retail payment processing
• Virtual terminal and batch upload functionality
• Mail/phone payment support
• Recurring billing options

5. Payza

Payza is a convenient, swift, secure payment gateway solution catering to businesses and individuals seeking to send and receive money worldwide.

Offering distinct account types for different user needs, Payza accommodates personal and business use cases.

With its presence in 190 countries and support for 22 currencies, Payza bridges the gap in global payment needs, making it a preferred solution for international transactions.

Key Features:

• Centralized management capabilities
• Support for 22 currencies
• Fund request functionalities
• Operations in 190 countries
• Localized payment options

6. SecurionPay

SecurionPay is now Shift4, a secure payment gateway solution offering online and mobile payment solutions across various operating systems. Its versatility extends to Windows, Mac, Linux, Android, and iOS platforms.

SecurionPay’s features include embedded payment forms, and advanced checkout features that contribute to increased conversion rates, serving as a comprehensive solution for businesses requiring online payments and subscription management.

A flexible API facilitates seamless integration and control within various business ecosystems.

Key Features:

• PCI level 1 compliance and tokenization
• One-click payment functionality
• Customizable payment forms
• Delayed payment capture options
• Subscription plan management

7. BlueSnap

BlueSnap emerges as a global payment gateway designed to enable businesses to accept payments across different scales seamlessly.

This gateway empowers enterprises to cater to local and international customers, offering a secure platform fortified with fraud prevention measures.

With access to over 30+ acquiring banks, BlueSnap fosters customer trust, leading to enhanced conversion rates and revenue growth.

Operating in 180 countries, it boasts automatic connectivity with acquiring banks worldwide and supports 110 payment types, 100 currencies, and 29 languages.

Key Features:

• Multi-currency reporting options
• 3-D Secure and PSD2 compliance
• Integrated payment solutions
• Multi-currency payout capabilities
• Integration with direct debit and bank transfers

Empowering Your E-commerce Venture

Selecting a suitable payment gateway is a pivotal juncture in your e-commerce odyssey. Beyond the rudiments of transaction processing, it contributes to the overall customer journey, security, and worldwide expansion.

By aligning with the attributes above and delving into the offerings of these premier payment gateways, you’re poised to construct a seamless, secure payment ecosystem that nurtures trust and propels sustained growth.

Final Thoughts

The journey to selecting the perfect payment gateway entails comprehending your business nuances, aligning with stringent security standards, and having a global perspective.

By integrating the apt payment gateway, you’re not just managing transactions but fostering customer faith and constructing the bedrock for your e-commerce triumph. That’s why it is important to choose a payment gateway with reliable and responsive 24/7 customer support that can help you resolve any issues or queries quickly and efficiently.

Frequently Asked Answers

As more businesses and consumers rely on online transactions, it becomes increasingly important to have a reliable and secure payment processing system in place. Two essential components of this system are the payment gateway and payment processor.

If you run an eCommerce business, you’ve probably heard about payment gateway and payment processors, and if you are wondering what they are and what’s the difference between them, then keep reading because, in this article, we will compare payment gateway vs. payment processor and will explain how Square simplifies online payments and empowers merchants to accept a wide range of payment options seamlessly.

So, without any further delay, let’s dive right in.

What is a Payment Gateway?

A payment gateway is a service that authorizes and processes credit and debit card payments. It acts as an interface between a website, an app, a merchant, and a payment processor. The payment gateway securely transfers the customer’s payment information between the merchant and the payment processor.

A payment gateway facilitates communication between payment processors and merchants, which is a crucial component of the payment ecosystem. 

How Does a Payment Gateway Work?

When a customer places an order on a website or app, the payment gateway encrypts their payment information and sends it to the payment processor. The payment processor then sends the information to the customer’s bank, which approves or declines the transaction. The payment gateway then receives the response from the bank and sends it back to the website or app.

Payment gateways communicate using APIs that send and receive data between the payment gateway and payment processor. When a payment is initiated, the payment gateway captures the payment information, including the cardholder’s name, card number, expiration date, and CVV security code. It then sends this data securely to the payment processor for verification, which involves checking the card’s authenticity and available funds. 

Once the payment processor confirms the transaction’s validity, the payment gateway receives the approval or decline status from the issuing bank and sends it back to the website or app.

Pros and Cons of Payment Gateways

Here are a few pros and cons of payment gateways:

Pros of Payment Gateways

• Security: Payment gateways use encryption and tokenization to protect customer payment information, making it almost impossible for hackers to intercept and decode. It ensures the security of sensitive payment data and builds customer confidence.
• Multiple Payment Methods: One of the significant benefits of payment gateways is their ability to offer customers a variety of payment methods, including credit and debit cards, mobile payments, and e-wallets, which leads to a better customer experience.
• Seamless Integration: You can easily integrate any payment gateway with your websites and apps to make the checkout process faster and easier for customers. For merchants, this means fewer abandoned carts and more sales.
• Customer Support: Most payment gateways offer customer support for payment-related issues, so merchants can rest assured they will receive assistance if any issues arise.
• Global Reach: Using a payment gateway enables you to accept payments from customers worldwide, allowing you to reach new markets and gain new customers.

Cons of Payment Gateways

• High Fees: While payment gateways offer security and flexibility, they come with fees that merchants must pay for their services. These fees are typically based on a percentage of the transaction amount, with additional fees for international transactions, chargebacks, and refunds.
• Technical Issues: Technical issues with payment gateways can result in delayed or failed transactions. These issues can frustrate customers and may result in lost sales for the merchant.
• Third-Party Dependence: Payment gateways depend on third-party providers such as payment processors and banks, which can lead to increased risk and complexity. The payment gateway may be affected if these third-party providers experience downtime or technical issues.
• Limited Customization: Some payment gateways offer limited customization options, limiting a merchant’s ability to tailor the payment experience to their brand. It can include limitations on the design of payment pages or checkout forms.
• Chargeback Fraud: Chargeback fraud occurs when a customer disputes an authorized transaction to receive a refund while retaining the item the customer bought. This type of fraud can be challenging for merchants to detect and prevent, and it can lead to financial losses.

What is a Payment Processor?

In online payments, payment processors act as intermediaries, facilitating communication between a business, its customers, their bank accounts, and the business’s bank account.

Regardless of the type of business, every online merchant needs a payment processor to accept customer payments. Additionally, many payment processors provide POS systems for brick-and-mortar stores, making it easier to collect credit card information during in-person transactions.

Merchants can connect payment processors to their accounts to collect payments directly. Alternatively, merchants can use third-party payment processors that store payments for multiple businesses, leading to a more streamlined experience with lower fees.

How Does a Payment Processor Work?

A payment processor facilitates the behind-the-scenes transaction process for businesses. The payment process works as follows: 

1. Firstly, the customer provides their card information to the merchant via a payment page online or at a terminal in a store. The payment information is then submitted through the payment gateway, a payment processing portal that may come bundled with payment processing services. 
2. Next, the payment gateway sends the payment information to the payment processor, which initiates the transaction by forwarding the information to the relevant card network, such as Mastercard or Visa, for approval. 
3. The card network evaluates the payment request and informs the payment processor of its approval or decline. 
4. The merchant completes the transaction with the customer, and the payment processor then instructs the issuing bank to send funds to the acquiring bank. 
5. Finally, the merchant receives access to the funds from the sale, which may occur immediately or within a few business days, depending on the payment provider and the type of account.

Pros and Cons of Payment Processors

The following are some pros and cons of using a payment processor:

Pros of Payment Processors

• Cost Savings: Payment processors often charge lower fees than traditional banks for merchant accounts. It can save small businesses money and prevent them from paying monthly contractual fees. It’s important to note that fees vary widely between processors, so comparing costs before signing up is essential.
• Easy Set-up: Banks require extensive set-up processes to set up merchant accounts, while third-party payment processors offer an easy setup process. Small businesses can start selling immediately using an e-commerce processor that integrates seamlessly with their apps and websites.
• International Payment Processing: Processing international payments can be complex due to additional layers of complexity and compliance requirements. Using a payment processor can help navigate this world of tax and banking regulations, making transactions smoother for global customers. With tools like automatic currency exchange, merchants can streamline international transactions.
• Payment Security: Payment processors specialize in keeping up with the latest high-tech security trends. They implement the most current protocols for identity verification, fraud protection, and security checks, which can be time-consuming and costly for small businesses. Payment processors use tools like tokenization and encryption to keep customers’ financial information secure, ensuring PCI compliance for the business.

Cons of Payment Processors

• Limited Control Over Accounts: Advanced security features payment processors offer can sometimes cause merchant issues. For example, if they detect suspicious activity, PayPal may freeze an account, leading to a temporary transaction halt until the investigation concludes. It can be problematic if merchants don’t have a backup processor.
• Transaction Fees: Most payment processing services charge a fee for each transaction, which can add up quickly for businesses with high transaction volume. It’s important to compare fees between different providers to find the best deal.
• Limited Options: Payment processing services offer limited options depending on the provider. Some providers have restrictions on certain devices or brands, making it challenging for merchants to comply with these limitations. Often, this can become a hassle for merchants who want to offer a variety of payment options to their customers.

Payment Gateway vs. Payment Processor: A Quick Comparison

Here’s a quick comparison between payment gateways and payment processors:

Payment Gateway	Payment Processor
Acts as the bridge between the merchant’s website and the payment processor.	Facilitates the transfer of funds from the customer’s account to the merchant’s account.
Offers a variety of payment methods, including credit and debit cards, mobile payments, and e-wallets.	It provides security features like encryption and fraud protection, along with multiple payment options.
It provides security features like encryption and fraud protection, along with multiple payment options.	Offers real-time analytics and data for merchants to manage their payments.
Charge fees are based on a percentage of the transaction amount, with additional charges for international transactions, chargebacks, and refunds.	There might be a fee for each transaction, which can add up quickly for businesses with high transaction volumes and also have lower fees than traditional banks for merchant accounts.
It can be integrated with merchant accounts or use third-party payment processors.	It may have restrictions on certain devices or brands.

How Square Simplifies Online Payments

Square is a leading payment solution provider that offers a simplified way to accept online payments. With Square, you don’t need a separate payment gateway and a merchant account to accept payments, which makes it much easier for merchants to manage their payments in one place.

Here are a few key points of how Square simplifies online payments:

• Integrated payment gateway and merchant account: Square offers an all-in-one solution that eliminates the need for multiple payment service providers to accept online payments.
• Easy setup: Its user-friendly interface and quick setup process make it easy for businesses to accept payments online.
• Integration with multiple platforms: Square integrates with a wide range of platforms, making accepting payments across various channels easy.
• No monthly fees: Unlike other payment solutions, Square doesn’t charge monthly fees, making it more cost-effective for businesses.
• Competitive pricing: Square offers competitive pricing with a flat fee structure, making it easy for businesses to calculate costs.
• Customizable checkout: You can customize Square’s checkout to match your business’ branding, which gives your customers a seamless experience.
• Automatic deposits: Square automatically deposits funds into a business’s bank account, eliminating the need for manual transfers.
• Real-time analytics: Square’s analytics dashboard provides real-time insights into a business’s sales and performance, enabling data-driven decision-making.
• Fraud prevention: With Square, you get fraud protection as it uses cutting-edge fraud prevention measures to protect businesses and customers from fraudulent activity.
• 24/7 customer support: It provides a 24/7 customer support service to assist businesses with issues and questions.

Go Global with WP EasyPay: The Best Square Payments Plugin for Secure, Fast & Easy Online Transactions

Are you tired of dealing with complex payment solutions or struggling to manage multiple payment gateways for your WordPress website? Check out WP EasyPay – the best Square payments plugin for secure, fast, and easy online transactions.

Navigating all the options for a secure and efficient payment process may be challenging. If you’re a global business, finding a payment solution that works across different countries can be tough.

Fortunately, WP EasyPay is the perfect solution to all your payment woes. With this plugin, you can easily integrate the Square payment gateway on your website in just a few simple steps. WP EasyPay supports multiple payment options, including credit cards, for easy and efficient payment processing.

And the best part? WP EasyPay is a global Square payment plugin that lets you accept payments from customers worldwide without complications. Aside from that, with outstanding uptime and real-time reports, you can be confident that your payments are secure and your business is running smoothly.

So, if you’re looking for a secure, fast, and easy way to accept payments on your WordPress website, look no further than WP EasyPay. Install and activate the plugin today and start accepting payments from your global audience with ease!

Wrapping Up

When you compare payment gateway vs. payment processor, you realize each performs different roles. A payment gateway is a technology that securely authorizes credit card transactions between a website and the payment processor. On the other hand, a payment processor is a financial institution that processes the payment.

Most third-party payment processors, such as Square, simplify online payments by eliminating the need for a separate payment gateway or payment processor (merchant account), making it easier for merchants to manage payments in one place. 

Moreover, if you own a WordPress website and want to take advantage of Square’s payment capabilities – the WP EasyPay plugin makes it easy! It’s a powerful Square payment plugin for WordPress that offers secure, fast, and easy payment transactions.

Frequently Asked Questions