Merchant Accounts and Payment Gateways

An internet merchant account really has two parts. Separate, yet intertwined, they provide the backbone for your online payment processing. First, there is the merchant account itself. Secondly is the payment processing gateway.

In the broadest sense, a merchant account is a line of credit a bank extends to the merchant. The acquiring bank approves a merchant to accept credit cards based on underwriting criteria. The bank is betting that the merchant stays in business, does not have excessive chargebacks, treats the customers right and runs a clean show.

Sometimes a bank offers merchant accounts directly to its customers. Other times, the merchant gets a merchant account through an independent sales organization that is registered to offer the accounts on behalf of the bank. When the merchant account is approved, the bank issues a merchant identification number.

However, if a merchant is accepting credit cards online, there must be a way for consumers to buy from the merchant’s website. That’s where the payment processing gateway comes into play.

The payment processing gateway is a type of ecommerce software. It connects to the merchant’s website through a simple interface. Ecommerce gateways are an integral part of accepting payments on line.

Companies use ecommerce gateways to enable payment processing through the internet. As IP terminal applications continue to grow at POS, payment gateways are rapidly becoming part of the retail environment as well.

The gateway functions as the secure connection to the banking networks. When a customer buys online, the authorizations and approvals or denials on the credit cards flow to and from the banking networks through the payment gateway.

Payment gateways safeguard business operations. Transaction processing software includes sophisticated rule-based filtering parameters which protect against fraudulent transactions. Customizable strategic tools built into the gateway gives merchants strong weapons to win the battle over criminals lurking in cyberspace. Payment gateway fraud protection enables merchants to quickly set policies for accepting and rejecting transactions.

Payment processing gateways also have important security features that help keep merchants safe from security breaches. Merchants can eliminate the need to keep cardholder information by using special features on the gateway.

Merchants still must implement and update internal security protection because no payment processing system can keep a business safe from attacks from its own employees. And many security breaches have been tracked back to merchants that haven’t taken the most basic precautions such as limiting who has access to the system or changing passwords on a regular basis.

Reporting functions of the gateway are important. The best gateways give merchants the ability to customize reporting features for particular business needs.