This article is all about the gateway account basics. Think of this is a few things that you'll want to know before getting setup with a new account. This type of account is typically used to facilitate the transactions that take place between the customer inputting their credit card information on some website's shopping cart checkout screen and the merchant bank who processes the credit card transactions.
A gateway is the software that collects the transaction information and submits that information to the merchant bank so that the funds can be paid by the credit card bank of the customer or individual using the credit card to the merchant bank, then a deposit to the bank account of the merchant so that the transaction can be completed. Of course, this can be compared to a regular physical terminal which does the same thing, just through a different method.
Most internet merchant accounts have the ability to process a transaction through a virtual terminal. This is done by logging into the gateway website (such as Authorize.Net) and accessing the page that provides this virtual terminal. The merchant or an authorized employee can then input the credit card number, billing information and the amount to be charged and get a real-time authorization that the funds are available. Assuming the product or service is delivered at that time or prior to, the funds can then be "captured" as well. This virtual terminal is a convenient way to process a direct order assuming the transaction information comes over the phone and will provide the merchant an immediate way to capture the sale instead of requiring the customer to go back to the website to input some information and try a checkout process again.
The fees associated with the gateway account are usually based on three components, the setup, the monthly fee, and a per transaction fee. Expect to pay around $25 to $150 for the setup, $5 to $15 for the monthly and anywhere from $.00 to $.10 per transaction for the gateway service. Keep in mind that these fees are usually above and beyond what the merchant account provider will charge you for the merchant account processing fees. Depending on who you use for your merchant account provider, you can usually get a very competitive rate and pricing that includes bundled fees to where your total monthly fee is less than $25 (which is about what the Paypal professional account costs). With this "real" merchant account, you'll usually be lower on your processing fees as well.
When setting up your merchant account that the gateway is supposed to use, it must be setup on a payment platform or processing platform that is compatible. For instance, Authorize.Net is compatible with about 8 or 9 different payment processors including Vital, First Data, Paymentech, etc. This doesn't mean you have to worry about which provider you go through as far as the merchant account as most all merchant banks have some platform that is compatible. If the merchant account provider is advertising Authorize.Net as an option, you won't have to worry about the compatibility. In fact, I don't know of a single processor that is not compatible with these platforms.
With a gateway account, there are some providers who have an option to process the transactions using a USB reader. What this does is allow the transaction to be processed at a "retail" rate because the card is physically present at the time of the transaction as demonstrated by the fact that the magnetic strip was read instead of just the credit card number. This doesn't work for all merchants, but if you are doing a good percentage of your transactions live, at tradeshows or a storefront as well as via the internet, this solution may work well for you and save you money in the long run. These readers typically cost around $50 to $70 or so for the basic ones and make sure your gateway company allows this type of transaction. This also means that you setup your account with your provider as a retail account as well, not an internet account. This is the only way you'll get those lower rates.
There are some instances when you can get the "spec" for the payment platform and if you or your programming team is skilled enough with the programming, you can send transactions directly to the payment platform for processing instead of going through the gateway. This has some advantages and also some disadvantages. The advantage is that if you bypass the gateway, you'll be saving the money you would normally have spent on each transaction that was processed through the gateway. The disadvantage is that you don't have the same access to support and if there is something wrong with your code or instances where you have transaction information "stolen" over the wire, your company is held liable for those lost transactions that can be as much as $10,000 per instance. If you lose 100 transactions, that's a cool $1,000,000. Although this is extreme, it's out of your hands if you're using a provider that is Verified by Visa or using the Mastercard program.
This article may not interest all merchants except to give a few additional details about what a gateway is and how it can be used. To summarize, there are fees involved with a gateway that is similar in function to a credit card swiping machine. Very few gateway accounts are not compatible with multiple forms of payment platforms. You can also typically get a usb card reader that will work with your gateway account for getting a "Swiped" rate or you can always use the virtual terminal as well which works for companies who do most of their processing online but some of the processing either at trade shows or other occasional retail locations. Research more than one provider simply to have a good idea about different fees and setup processes.
A gateway is the software that collects the transaction information and submits that information to the merchant bank so that the funds can be paid by the credit card bank of the customer or individual using the credit card to the merchant bank, then a deposit to the bank account of the merchant so that the transaction can be completed. Of course, this can be compared to a regular physical terminal which does the same thing, just through a different method.
Most internet merchant accounts have the ability to process a transaction through a virtual terminal. This is done by logging into the gateway website (such as Authorize.Net) and accessing the page that provides this virtual terminal. The merchant or an authorized employee can then input the credit card number, billing information and the amount to be charged and get a real-time authorization that the funds are available. Assuming the product or service is delivered at that time or prior to, the funds can then be "captured" as well. This virtual terminal is a convenient way to process a direct order assuming the transaction information comes over the phone and will provide the merchant an immediate way to capture the sale instead of requiring the customer to go back to the website to input some information and try a checkout process again.
The fees associated with the gateway account are usually based on three components, the setup, the monthly fee, and a per transaction fee. Expect to pay around $25 to $150 for the setup, $5 to $15 for the monthly and anywhere from $.00 to $.10 per transaction for the gateway service. Keep in mind that these fees are usually above and beyond what the merchant account provider will charge you for the merchant account processing fees. Depending on who you use for your merchant account provider, you can usually get a very competitive rate and pricing that includes bundled fees to where your total monthly fee is less than $25 (which is about what the Paypal professional account costs). With this "real" merchant account, you'll usually be lower on your processing fees as well.
When setting up your merchant account that the gateway is supposed to use, it must be setup on a payment platform or processing platform that is compatible. For instance, Authorize.Net is compatible with about 8 or 9 different payment processors including Vital, First Data, Paymentech, etc. This doesn't mean you have to worry about which provider you go through as far as the merchant account as most all merchant banks have some platform that is compatible. If the merchant account provider is advertising Authorize.Net as an option, you won't have to worry about the compatibility. In fact, I don't know of a single processor that is not compatible with these platforms.
With a gateway account, there are some providers who have an option to process the transactions using a USB reader. What this does is allow the transaction to be processed at a "retail" rate because the card is physically present at the time of the transaction as demonstrated by the fact that the magnetic strip was read instead of just the credit card number. This doesn't work for all merchants, but if you are doing a good percentage of your transactions live, at tradeshows or a storefront as well as via the internet, this solution may work well for you and save you money in the long run. These readers typically cost around $50 to $70 or so for the basic ones and make sure your gateway company allows this type of transaction. This also means that you setup your account with your provider as a retail account as well, not an internet account. This is the only way you'll get those lower rates.
There are some instances when you can get the "spec" for the payment platform and if you or your programming team is skilled enough with the programming, you can send transactions directly to the payment platform for processing instead of going through the gateway. This has some advantages and also some disadvantages. The advantage is that if you bypass the gateway, you'll be saving the money you would normally have spent on each transaction that was processed through the gateway. The disadvantage is that you don't have the same access to support and if there is something wrong with your code or instances where you have transaction information "stolen" over the wire, your company is held liable for those lost transactions that can be as much as $10,000 per instance. If you lose 100 transactions, that's a cool $1,000,000. Although this is extreme, it's out of your hands if you're using a provider that is Verified by Visa or using the Mastercard program.
This article may not interest all merchants except to give a few additional details about what a gateway is and how it can be used. To summarize, there are fees involved with a gateway that is similar in function to a credit card swiping machine. Very few gateway accounts are not compatible with multiple forms of payment platforms. You can also typically get a usb card reader that will work with your gateway account for getting a "Swiped" rate or you can always use the virtual terminal as well which works for companies who do most of their processing online but some of the processing either at trade shows or other occasional retail locations. Research more than one provider simply to have a good idea about different fees and setup processes.
About the Author:
Brian Armstrong is a professional merchant account salesperson with over 7 years of industry experience. You can meet Brian through his online videos about internet merchant accounts, and ecommerce merchant accounts. He is more than happy to answer any questions you may have about both internet merchant accounts and the corresponding gateway account.
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