Merchant account questions

[japancool]

I see the same questions being asked over and over again in this forum about merchant accounts and gateways.

Although I don't think it's a difficult thing to understand once someone explains it to you, it can be confusing if you don't understand the terms, how things are charged, etc. etc. I got confused when I first started looking into it over the term "merchant account", thinking it was something like a standard account, and not really understanding the difference between an IMA and the gateway.

There's a thread in the general forum about choosing a phone number for your business, perhaps one of you clever payment solution provider bods could write something similar for merchant accounts, something like an idiot's guide to MAs/gateways?

 

[faradaykeynes]

A merchant account is a type of bank account that allows businesses to accept payments by payment cards, typically debit or credit cards.

A payment gateway is an e-commerce service that authorizes payments for e-businesses and online retailers. It is the equivalent of a physical POS (point-of-sale) terminal located in most retail outlets. A merchant account provider is typically a separate company from the payment gateway. Some merchant account providers have their own payment gateways but the majority of companies use 3rd party payment gateways. The gateway usually has 2 components: a) the virtual terminal that can allow for a merchant to securely login and key in credit card numbers or b) have the website's shopping-cart connect to the gateway via an API to allow for real time processing from the merchant's website.

http://en.wikipedia.org/wiki/Merchant_account

 

[faradaykeynes]

In simple term money flows like this
Customer > Payment Gateway > Merchant Account > Your business bank account

 

[JPMiddleton]

I think japancool is looking for something a bit more substantial and by an expert.

A merchant account is a type of bank account that allows businesses to accept payments by payment cards, typically debit or credit cards.

A payment gateway is an e-commerce service that authorizes payments for e-businesses and online retailers. It is the equivalent of a physical POS (point-of-sale) terminal located in most retail outlets. A merchant account provider is typically a separate company from the payment gateway. Some merchant account providers have their own payment gateways but the majority of companies use 3rd party payment gateways. The gateway usually has 2 components: a) the virtual terminal that can allow for a merchant to securely login and key in credit card numbers or b) have the website's shopping-cart connect to the gateway via an API to allow for real time processing from the merchant's website.

http://en.wikipedia.org/wiki/Merchant_account

In simple term money flows like this
Customer > Payment Gateway > Merchant Account > Your business bank account

 

[kulture]

You mean like this

http://www.ukbusinessforums.co.uk/threads/how-to-guide-uk-merchant-accounts.52678/

 

[japancool]

You mean like this

http://www.ukbusinessforums.co.uk/threads/how-to-guide-uk-merchant-accounts.52678/

That's the sort of thing kulture, maybe it could be a sticky?

 

[Payment Expert]

In order to understand the terms it might be better to look at the credit card processing world and understand who the players within the credit card processing world are. You have two major groups of banks: the issuers and the acquirers. Issuers issue cards, acquirers issue merchant accounts. In order to process a credit card payment you need a merchant account which is a type of virtual account through which transactions are authorized and settled. Merchant account is tight to a physical bank account where the money is settled usually 24 hours or more after the settlement time. So merchant account is used to process a transaction and to do settlement and then a physical bank account that is linked to at a merchant account is funded usually after 24 hours or more after the settlement time. Merchant account is just a kind of business arrangement where you are allowed to process transactions within a certain amount/limit ($5000/day or $30 000/month).

In order to physically transmit transactional information you need to send something somewhere. Every acquiring bank has its own technical arm which is usually refer to as a processor. For example, Wells Fargo is an acquiring bank and FirstData functions as its technical arm knowing as processor. So what happens is you send transactions into FirstData using the merchant account that was issued by Wells Fargo.

Because most of the processors have really complex and old processing systems a concept of a payment gateway was invented. A payment gateway is a piece of software which is going to accept a transactional message in relatively simple format and pass it on to either a bank or a processor such as FirstData to process.

If you want more information about the topics related to processing and payment gateways you can google ‘Paylosophy’ and you’ll find a lot of information there.

Hope it'll help.

 

[kulture]

That's the sort of thing kulture, maybe it could be a sticky?

Its a bit out of date. I will suggest to Dan that someone updates it.