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Payment Gateway vs Merchant Account: What’s the Difference? – Part 1

Many make the mistake of thinking that a merchant account and a payment gateway are one and the same, meaning if you have one, you won’t need the other. The truth is that both serve completely different functions in that a payment gateway facilitates online transactions, and lets users process them, while a merchant account is actually a holding account where payments first land before they get deposited into your bank account.

In this two-part post, your trusted accountant for eCommerce businesses in Australia talks about the differences between a payment gateway and a merchant account:

What Is a Merchant Account?

A merchant account is a business account that a merchant gets from a bank to process payments online. This is where online payments first land when they come to your website, before they are processed and pushed through to your bank account.

If you are running an online store, chances are that you have a merchant account. In fact, this is where you deposit your online sales and withdraw your profits.

The merchant account has a merchant bank account where all your incoming payments are settled. You are responsible for withdrawing money from that account for your business needs.

How Do Merchant Accounts Work and What Do They Really Do?

Merchant accounts accept all kinds of payments from customers who are looking to make purchases online. When a customer is ready to pay, they are directed to the merchant account where they can pay using a credit card, a debit card, Bitcoin, or any other payment option.

Merchant accounts are OPEN, which means there are no limits or restrictions on the amount of money that can be deposited or withdrawn. There is no maximum monthly or annual deposit limit and no minimum transaction or monthly fee.

What Are the Benefits of a Merchant Account?

Having a merchant account gives you the freedom to do your online business the way you have always dreamed. You get to:

  • Accept all different types of payments from your customers, even if you don’t have a website. In other words, you can engage in a high number of transactions and grow your business by increasing your merchant account’s limits.

  • Add and customise your services at will.

  • Start out with a FREE merchant account, which means no fees and no deposit limits.

When you get a merchant account, you can process your transactions and make profits immediately.

What Is a Payment Gateway?

A payment gateway is an online gateway that facilitates online transactions. It is the online equivalent of the card payment terminals you find on the physical premises of a traditional store. When a customer comes to your store and says they want to make a purchase, they can make use of the payment terminals to pay for their purchases. Pretty much like that, payment gateways help make paying for goods and using payment cards possible on the Internet.

A payment gateway also processes payments and forwards them to the merchant account of the merchant website.

In simple words, a payment gateway allows you to accept all types of payments, including credit and debit cards, and deposit them into your merchant account.

Why Does My Business Need a Payment Gateway?

A payment gateway lets you accept payments online. The most popular payment gateways on the market are PayPal, Stripe, and They connect your website to credit card payment networks like Visa, MasterCard, and American Express. This allows your customers to pay for products and services using credit cards.

Merchants get payment gateways to:

  • Increase the number of transactions their website does and get more sales.

  • Accept payments, especially in cases when they don’t have a merchant account.

  • Process payments in a more secure way.


Merchant accounts and payment gateways are two different things. Sure, they both have the same purpose and they can exist together, but they have different functions and meaning. A payment gateway is an interface that allows users to pay for goods and services using their cards, while a merchant account holds payment accounts and organises payment options. If you want to increase your online sales and transactions, it is best that you get both a merchant account and a payment gateway. You should also consider seeking the help of an accountant for eCommerce businesses who can guide you.

The ECommerce Accountant is where you can get the services of one of the best accountants for online businesses in Australia. Contact us today to find out more about the services we offer!

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