The online payment processing industry is vast and you have to understand the difference between a merchant account and a payment gateway. For your business, you do not need a merchant account or payment gateway alone.

The two serve different functions but work closely allowing your business to collect card data and receive the payment from payment transactions.  If you are confused about what a merchant account and payment gateway are and how these two can impact your business, this article can help you.

What Is a Merchant Account?

A merchant’s account is an account specifically for merchants’ to hold customers’ deposits for a short period before the money is deposited in a regular bank account.

A merchant’s account is simply a “holding” place for deposits or sales from credit cards or debit card payments. The money that sits in the merchant account is transferred to the business account according to the schedule set-up determined by the payment gateway.

Why not transfer the sales directly to the regular account? It is because chances are, merchandise can be returned and that the sale will have to be paid back as a refund. The remaining funds after refunds are processed at that time will then be transferred to the business bank account.

Benefits of Merchant Account

A merchant account may only be for accepting credit or debit card payments but also offers some benefits. Having a merchant account makes it easier to consolidate all transactions in one deposit.

A merchant account also allows fraud checks and suspicious transactions before these payments reach a regular bank account, saving your business the hassle and a large amount of money due to hefty transaction fees.

What Is Payment Gateway

Payment gateway refers to the technology where the customer’s card information is entered. This could be the POS or Point Of Sale terminal in physical stores or the “check out” portal in online shops.

The payment gateway is responsible for collecting customers’ card data and routing the details to the payment processor. Once the customers’ details are verified and the transaction is approved, the payment gateway then facilitates the transfer of funds to the merchant account.

Aside from this, a payment gateway helps keep customers’ details safe and secure from fraudulent activities.

Since it routes the collected data to the merchant account or payment processor, further checks can be made before the transfer to the regular bank account. Lastly, the payment gateway allows merchants to accept or deny payment if there is an issue regarding the customer’s given details.


Payment gateway and merchant account are different but related. The former acts as the frontline in the payment transaction chain while the latter bridges the gap between the customer’s payment methods to the merchant account.

For your business, it is crucial to have both. You need to have the payment gateway tool to be able to accept and process credit card payments to increase sales and cash flow. And by opening a merchant account, your business will be able to accept virtual and card transactions.