If you run an ecommerce business, there are two essential components that you’ll need in order to accept credit card payments from customers: merchant services and a secure payment gateway. Many online business owners don’t realise that these are two distinct services that don’t always come as a bundle, but there are ways that you can streamline them for the benefit of your business and your customers.
Payment Gateway vs Merchant Services
Your merchant services are all of the services bundled into your merchant account; a payment gateway is the encrypted channel through which customer payments are transmitted.
- Merchant services. Your merchant services provider or payment processor is responsible for approving and processing your credit card transactions, securing your merchant ID, consolidating your transaction data, and ensuring that funds are collected and promptly transferred to your business bank account. The suite of services may also include a virtual terminal for contactless payments as well as other ancillary services. Think of it as your main credit card processing service. You want to choose a provider that can handle all of the currencies and payment methods that your customers use.
- Payment gateway. Online payment gateways serve as middlemen between your customer’s bank and your merchant account. Though not part of your merchant account specifically, the gateway provides a secure pathway for transaction data to travel. The credit card payment data is encrypted using SSL (at Unicorn Group, we use the SHA-256 encryption standard) to avoid third-party interception of payment details. Once the transaction reaches its destination, the payment processor may approve the transaction or (if there’s a problem with the transaction details or customer) decline. The status of the payment is sent back through the gateway, and the customer is notified accordingly. You want a gateway that supports a lot of different payment options.
So whereas a merchant account is yours alone, the payment gateway is shared by numerous businesses within the same network. Your merchant ID and other unique information are used to ensure that payments are always routed to the correct channels and that the signals never get crossed.
It’s worth noting that not every merchant services provider has its own gateway. In some cases, you’ll need to invest in a separate gateway and manually configure it to work with your payment processor. Alternatively, you can just opt for a merchant provider that makes both services available to process payments.
Why You Should Streamline Your Payment Gateway & Merchant Services
When you bundle your payment gateway and payment processing services, you can enjoy enhanced security, a more user-friendly experience, and more reliable support, all at a lower cost.
Better security. When your merchant services and payment gateway are part of the same network, there is less potential for a devastating security breach. You never have to worry about the two components being misconfigured, and your payment processor’s fraud detection tools should protect both the shared gateway and your unique merchant account.
A more user-friendly experience. Configuring and managing a payment gateway can be a complex process. But if it’s already bundled into your online merchant services, you can put the entire process on autopilot—at least after the initial setup is complete, which your payment processor should handle on your behalf. Unicorn Group offers setup at no additional cost.
Reliable support. If you have a customer dispute or a technical issue with your payment transactions, who do you contact? The payment gateway provider or the merchant services provider? These types of problems can be frustrating to resolve when you have a separate merchant services provider and gateway, but if the two services are bundled, you can get your issue resolved more quickly and with less back-and-forth.
A lower cost. With a bundled payment processor and merchant services, you can consolidate your monthly bills for accepting credit cards and debit cards while usually enjoying a lower rate with fewer service fees. You’ll also have a much more accurate understanding of your effective processing rate, the ratio of total payment processing fees over the total amount processed. Ideally, you want to keep your effective rate below 2%.
How to Connect a Payment Gateway to Your Merchant Services
If your merchant services provider doesn’t have its own gateway, you’ll need to sign up for a separate gateway provider and configure it with your merchant account. The method for accomplishing this will depend on whether you have a hosted gateway, a direct post hosted gateway, or an integrated gateway.
Hosted Gateway: A hosted gateway is a third-party gateway that processes transactions on its own website. In other words, customers are redirected away from your website during checkout. Once the transaction is complete, the customer is redirected back to your site. The gateway provider will usually provide instructions for how to integrate the service into your site. For example, some gateways will provide you with a piece of HTML code to paste into your website’s source code. The code automatically inserts a payment button onto your checkout page using a specially configured application programming interface (API).
Direct Post Hosted Gateway: A DPHG is like a hosted gateway, and it’s installed much in the same way, but the customer never leaves your site. It’s a much smoother and quicker process than traditional hosted gateway services, and it can look more reputable for serious businesses. In most cases, a vendor will need to manually configure the API connection between your ecommerce store and the payment gateway. This may be handled by the gateway provider, or it may be handled by the merchant services provider.
Integrated Gateway: This is the most personalised type of gateway to install. It’s your own personal gateway service with no third-party intervention. You must first obtain PCI DSS compliance to ensure that your customers’ payment data won’t be compromised, and then you must manually install the gateway solution on your website, typically using the gateway provider’s APIs. Implementing this type of gateway usually requires assistance from knowledgeable web developers, but some gateway providers will guide merchants through the setup process. For example, Unicorn Group offers free integration assistance, so you can get your gateway up and running in no time, even if you have no understanding of coding or APIs.
While some types of gateways are easier than others to implement, it’s still typically in your best interest to go with a bundled solution that caters to all of your online sales needs.
How to Bundle Your Payment Gateway & Merchant Services
If you want to streamline your payment gateway and merchant services, first look for payment services providers who offer both. The integration can usually be completed with a single API configuration.
In many cases, it’s as simple as downloading a plug-in or extension from your shopping cart app store (whether BigCommerce, Shopify, WooCommerce, or any other marketplace you rely on) and then configuring the API from your dashboard. Once again, your merchant services provider should assist you here
If you want to accept online payments from customers and enjoy consistent ecommerce cash flow, you must have a payment gateway and a merchant services account. But that doesn’t mean the process needs to be difficult. By streamlining your services, you can get up and running quickly and enjoy all the benefits of your all-in-one payment processing solutions.