The difference between these two options occurs when a customer makes an online purchase. From there they are redirected to your SSL-secured checkout page.
If you have a merchant account, your website host secures this page. Your payment gateway collects the transaction details and sends the information to the authorized card issuer. The issuer then authorizes (or declines) the transaction.
For third-party payment processing services, you outsource the payment processing function to a third party. Instead of a payment gateway, a third-party server collects the data and processes the transaction.
Many people feel the benefit of using a third-party payment processor is the ease of use. However, keep in mind—as in all things—there is a fee for having someone else do the work.
Finding a Third-Party Payment Processor
Choosing a third party to process your credit and debit card payments can be the toughest part. Take your time to find one that works well for your specific needs. To give you a start, here are a few you might want to consider.
PayPal. This is probably the best-known and most widely used credit card processing service around the world. They offer a multitude of services, some of the lowest transaction fees in the business, and even provide a shopping cart for you to place on your website.
Braintree. A mobile and online payment platform, Braintree is a Chicago-based company used by several large international organizations, including anti-virus software leader AVG and Angry Birds maker Rovio. It offers “an alternative to payment gateways and merchant accounts, which are typically operated by large banks and companies, and difficult for smaller startups to access.”
2Checkout. This provider accepts payments online using their merchant account and payment gateway. 2Checkout provides an online payment processing solution to help you “accept all major credit cards, debit cards, PayPal, and more.”
Ultimately, when it comes to merchant accounts, there are two schools of thought. Those in favor of the process suggest merchant accounts allow you to:
On the other hand, small business owners just starting out frequently look for opportunities to save money. They may not need a merchant account right away or the many costs (and sometimes headaches) that go along with the process.
If you are currently deciding the best method of accepting customer payments for your online business, a third party payment-processing solution may be the answer.
So what has been your experience with merchant accounts and/or third-party payment processors?