Merchant Accounts & Payment Gateways for eCommerce Websites

shyam_bhardwaj profile image Shyam Bhardwaj ・3 min read

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I was discussing with my old-time friend Ekta recently who is a jewelry designer, we were discussing her online business activities (She sells her product line through Amazon and Ebay) and the end goal, sales turned to individual ecommerce websites.

As of now, Ekta doesn’t own her website as she has been selling through major online selling platforms quite well and getting her margins, she is actually considering building one for her so that she can put her information, contact information and showcase her product line. I wanted to help her but due to my current assignment loads, I can’t. But I recommended her SITE123, an easy choice to create fast and responsive websites.

She also mentioned being able to list products that she uses and recommends to her clients, allowing them to be purchased online.

We discussed her options and whilst I was explaining what would be needed to get up and running it struck me that there is a lot to understand and it’s not exactly straightforward, hence this post…

Two What is a merchant account?

Anyone wanting to accept credit cards (or debit cards) as payment methods for their online store will need a special type of bank account called a Merchant Account.

Merchant accounts are different from standard bank accounts in that they are only used to accept card payments, they are issued by merchant acquiring banks and are subject to their own terms and conditions.

The merchant acquiring bank is responsible for collecting funds from purchaser’s credit or debit cards, it then deducts any transaction fees and deposits the balance into your standard business bank account.

Once you have a merchant account set up and running it is a fairly automated process and there is no need to check it on a day to day basis, funds just ‘magically’ appear in your normal bank account a few days after the purchase was completed.

All merchant accounts have transaction fees associated with them, the exact fees are often a small percentage of the transaction value and can usually be negotiated based on things like average transaction value and monthly volume.
I’ll put together a post detailing the rates of some of the more common merchant accounts shortly.

Three Where can you get a merchant account from?

A google search for merchant accounts brings up a wealth of options. I currently use Streamline and whilst it was quite a long process to get it all up and running, for me the transaction fees are pretty good.

Before Streamline I was using Paypal, this was fairly easy to setup but the transaction fees were quite a bit higher. Other notable merchant accounts I have either used or had clients use would be NoChex and HSBC.

Three What is a payment gateway?

In conjunction with a merchant account, you also need a payment gateway, these are responsible for authorizing credit card details when they are entered into your online store.

When a customer enters their details they are encrypted and are passed on to the cardholders' bank for authorization, if successful the payment gateway instructs your merchant account to collect the funds from the customer’s account.

Most payment gateways have an online admin area where you can log in, view and manage transactions. Some go further and give you fraud warnings or scores for each transaction, you can often also see failed transactions and the reasons for the failure.

Some merchant banks have their own payment gateway and some require you to use a 3rd party one, these often have their own fees.

I use SagePay as my payment gateway because my number of monthly transactions is below 1,000 the cost is just £25 per month and there are no additional fees applied to transactions.

If you go with an option like PayPal or Nochex then they have their own payment gateways built in so you will not have to bother setting up a 3rd party one. Hopefully, this gives you a clearer understanding of exactly what these two key services are and why you need them.

Posted on Nov 1 '17 by:

shyam_bhardwaj profile

Shyam Bhardwaj


Open Source Programmer and Marketer. Runs a web design agency - eShine Marketing.


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in my personal opinion it is also worth checking the payment gateway g2a pay -
especially that the integration process is really friendly compared to others