A gateway represents a conduit to get from one place to another. With eCommerce, a gateway allows for the verification and transaction of business via credit cards. A payment gateway is needed if your online business plans to accept payments.

A merchant account is needed whenever you deal with credit cards. A merchant account can be opened at the bank of your choice. This is where money will be transferred once a credit transaction has been verified through the gateway.

There are companies online that operate as payment gateways for merchants to accept credit card payments. You can choose a payment gateway independently. Another option is companies that offer more than one service. Some shopping cart software packages include merchant account and gateway options.

First Things First

You need a merchant bank account and a payment gateway account to get you started. When choosing a bank for the merchant account it is helpful to make sure that they accept payments from the gateway account you will be using. The payment gateway account is a service account that allows you to set up these payments between your site and your merchant account.

Business owners selling online and accepting credit cards also have an Internet merchant account. The funds are transferred here from the payment gateway but they don’t stay here. The funds are transferred, sometimes on a daily basis to another bank account that you, the merchant, designate for business.

The Nuts and Bolts of how it Works

Here is a basic representation of how this process works. While the steps may seem lengthy, everything happens in the space of several seconds.

1. The customer will go to your website and choose a product(s) to buy. When they are ready to checkout, they are taken to the payment page to verify their order and the type of payment. 
   
2. When payment is made, the transaction (according to your setup instructions) is sent to the payment gateway of your choice. Through the payment gateway, the transaction is forwarded to your bank’s processor.
   
3. The transaction then proceeds on to the credit card network. That network forwards the transaction to the bank issuing the customer the credit card being used.
   
4. If there is a sufficient amount of credit to make the purchase, the transaction is approved. Then, it moves back through the system, the same way it came.
   
5. Once the notification of approval reaches the payment gateway again, the information is sent to the customer on the site and also to you, the merchant.

Payment gateways take the work out of processing credit card payments. Now, you can focus on other aspects of your eCommerce business.