Payment Gateway vs. Merchant Account - What’s The Difference?

Vivien Thuri

Merchant accounts and payment gateways - two closely related business tools with very different jobs.

While a payment gateway is a consumer interface allowing for the collection of card data, a merchant account enables businesses to receive the funds from these card transactions.

Without both, a business cannot offer card payment options to its customers.

If you’re trying to wrap your head around the differences between payment gateways vs. merchant accounts, as well as the importance of both and how they affect international businesses, then stay tuned as these points are covered in detail.

Table of Contents

What is a merchant account?

A merchant account is a type of bank account that enables businesses to accept cashless transactions, most typically being that of credit and debit card payments.

  1. The merchant - in other words, the business - enters a contract with a merchant acquiring bank, who in turn opens and controls a merchant account.

  2. When a card payment is processed, the funds will be deposited into the merchant account.

  3. From here, it’s the job of the business to transfer these funds to their business account.

This highlights an important difference - a merchant account is not the same as a business account.

  • A merchant account is strictly for accepting card payments - without one, a business is restricted to hard cash transactions and bank transfers. Similarly, you can’t withdraw or deposit money into a merchant account like you would with a business or personal account.
  • A business account, on the other hand, is for the day-to-day running of your business. This includes tasks such as the paying of employees and contractors, the acceptance of payments and storing of funds, as well as the management of subscriptions.

If you have an international business, it’s important that you’re withdrawing your funds to a business account that supports your activities worldwide.

Wise’s business account functionality allows you to work with multiple currencies and save on conversion fees. Pay your suppliers abroad in their own currency - conveniently and on time.

Learn more of the
Wise Business account

What is a payment gateway?

A payment gateway enables merchants to accept card payments.

In a physical store, the Point of Sale (POS) terminal - where card payments are made - is the payment gateway; in online stores, this is the ‘checkout’ portal.

In both of these examples, the payment gateway is the consumer-facing technology where card information is entered.

It should be kept in mind that a payment gateway is separate from a payment processor.

  • A payment processor is responsible for the routing of card data to the customer’s bank and merchant account, facilitating the movement of funds.
  • The job of the payment gateway is simply to collect the customer’s card data and route it to the payment processor.

Stripe is one example of an international payment gateway, allowing merchants to accept online card payments in multiple currencies.

On top of this, you can link your Wise business account to your Stripe account, allowing you to save on high conversion fees, exchange your money at the mid-market rate, and send and receive money from more countries.

Payment gateway and merchant account


As you can see, a payment gateway is different from a merchant account - they’re responsible for two separate processes.

While a merchant account is for the receiving and holding of funds from card transactions, a payment gateway is simply a consumer-facing interface that collects card data - an online checkout portal, for example.

Think of it like this - the payment gateway is like the cashier and the merchant account is the cash register.

Although a payment gateway and a merchant account are different things, they are related.

The payment gateway is the first link in the transaction chain.

The customer enters their details at the payment gateway, such as an online checkout portal or in-store POS terminal.

The payment gateway then routes this information to the payment processor.

The payment processor routes this card data, via the card network, to the customer's bank.

Once the bank authorizes the payment, the processor communicates this decision back to the payment gateway which alerts the customer and merchant of the successful transaction.

From here, the processed funds are deposited in the business's merchant account.

Importance of merchant accounts

Being able to accept card payments is a crucial aspect for your business. This is especially true for those involved in E-commerce.

💡 Did you know?
In 2020, debit and credit cards were the most popular method of payment for US consumers, accounting for 33% and 27% of monthly payments, respectively. Similarly, the share of consumers making at least one online payment per month increased by 7% in 2020.³ So having the ability to offer card payment options is increasingly important.

By opening a merchant account, you’ll be able to accept card transactions.

More to the point, being able to accept card payments has the potential to increase sales and thus incoming cash flow, as you’ll be able to offer multiple methods of payment.

Having card payment capabilities is also critical for international businesses. For this, an international merchant account is necessary, with which you can process multiple currencies.

A merchant account with high volume payment processing is also key to increasing sales and expanding your business.

This allows a high volume of monthly transactions to be processed, thereby increasing sales and revenue.

Importance of payment gateways

Having a merchant account without a payment gateway is like owning a house without any doors. The payment gateway is an interface between your business and customer, allowing them to pay via card.

Depending on your payment gateway provider, you can offer your customer a wide range of POS interfaces, such as Near Field Communication (NFC) technology for contactless and mobile wallet payments.

This allows you to offer a wider choice of payment options, attracting a greater share of customers, thus increasing your sales.

To have one of the best payment gateways is also crucial for businesses operating on an international scale.

  • An international payment gateway supports multi-currency payments as well as offering multiple languages for the checkout portal.

  • This will expand your market share in international markets.

  • Depending on your provider, an international payment gateway may also offer detailed financial reporting and payment analytics, allowing you to take better control of your business.

Overall, having a payment gateway and merchant account is an essential element to boosting your sales.

Your business will be able to offer a wider range of payment methods, attracting more customers, and resulting in a greater market share.

Increase your business potential. Take control of costs with Wise

If you’re planning to take control of your business and expand internationally, then a Wise business account might be for you.


With a Wise business account, you can pay invoices and employees in 70+ countries, having your money converted at the mid-market exchange rate.

Get local account details -IBAN, Routing Number, Sort Code and more- for up to 10 different currencies, allowing you to receive money like a local.

You can manage your transactions and move money conveniently, having all your currencies in one place. Also, you can save - up to 19x more compared to Paypal when paying suppliers abroad.

Open your Wise business account today


  1. The free dictionary - Merchant account
  2. Investopedia - Payment gateway
  3. Federal Reserve Bank of Atlanta - The 2020 Survey of Consumer Payment Choice

All sources checked 14 October 2021

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