Merchant Accounts - Understanding the Ecommerce Puzzle

If you are new to merchant accounts and the whole ecommerce scene, you are probably confused. I know I was when I started. You start hearing terms like merchant accounts, payment gateways, discount rates, miscellaneous fees, etc. Once I saw the whole puzzle, however, I started to make sense of the pieces. Let's take a very broad look together.

There are three main pieces to an ecommerce site: the website and shopping cart, a payment gateway, and a merchant account. The website and shopping cart allows people to shop and place things in their virtual cart. It gives them the information they need to make a purchase. That's the easy part to understand. The hard part comes when we start thinking about the things we don't see. This is especially true when it comes to the payment gateway and merchant account.

The payment gateway can be thought of as a broker and a bouncer. They broker the deal between the customer, who is purchasing on your web site, and the merchant account. The payment gateway makes sure the transaction goes as planned. It makes sure all the necessary information is being obtained. If it isn't, then the payment gateway puts its bouncer clothes on and sends you packing. The payment gateway handles the transaction.

The merchant account can be thought of as the banker. They are the one who interfaces with the credit card being presented and the billing that needs to happen. They make sure that the buy gets billed and you get paid. I like the banker. Now, because the merchant account makes this transaction happen, they will want to be compensated for their service. The payment gateway is no different.

This is where the waters start to muddy even more. The fees that these services charge can be different from place to place. This can make comparison shopping very difficult. The various fees include: installation fees, discount rates, fixed transaction fees, miscellaneous fees, etc. It's enough to make your head spin. And getting all the pieces to work together can be a real pain. Sometimes getting an all-in-one service is the best way to go. But that all depends on what your requirement are. Now that you know the big picture, I think the pieces will be easier to understand.

Paul McGillivary has been a technologist for 15 years. In that time, Paul has experienced thousands of technology problems, challenges, and products. He brings this experience to bear in the articles that he presents.