Compare the difference between Stripe and Merchant account

With more than 39 billion card transactions made annually in the US, businesses that support credit card payments are likely to have higher revenue than those that do not. Stripe has emerged as one of the popular payment processing solutions recently. However, Stripe is only a payment service provider and does not offer Merchant accounts, or commercial accounts. Therefore, to decide on the right payment processing service for your business, let's learn about Stripe and Merchant accounts with PlutusPay and compare the differences between them.

Source: Internet

1. Difference between Stripe and Merchant account:

A merchant account, also known as a commercial account, is a business bank account specifically used to process credit and debit card transactions. This account is used to help transfer transactions between issuing banks and acquiring banks. Another equally important advantage of a Merchant account is that it allows businesses to establish a direct relationship with the financial institution responsible for processing payments for them.

On the other hand, Stripe is a payment service provider. This payment processing method consolidates multiple businesses and related transaction amounts and all go through a single Merchant account. Because this Merchant account belongs to Stripe, there is no need to go through the rigorous review process normally required for Merchant accounts.

Is Stripe a Merchant account?

No, Stripe is not a Merchant account. Instead, Stripe is a payment service provider (PSP) that handles multiple merchants through a single Merchant account. As a result, merchants using Stripe will have fewer choices for the payment processor they desire.

Read more: Payment Processors and Payment Gateways

2. How does Stripe work?

Stripe is known for its solutions for the eCommerce industry, but Stripe also offers in-store transaction processing services. By fully supporting payment systems, Stripe allows businesses to process all types of transactions – credit cards, invoices and international transactions.

The steps to register for a Stripe account are very simple. You will need to prepare business information, such as the company's bank account, operational details and accompanying documents. Once approved, you can start accepting payments on your store. However, new accounts must wait one to two weeks after receiving transactions to receive the money transferred to the account.

Stripe has a great “pay-as-you-go” model Pay-as-you-go, which means you only pay for Stripe's services while you're using them. Stripe's processing fee depends on the type of transaction and the type of card used, but the fee will be approximately 2.9% + $0.30 per transaction. This is higher than average credit card processing fees, but many businesses accept these fees to benefit from a speedy application process.

2.1 What is Stripe's API?

Thanks to Stripe's unique API solution, the platform is even suitable for eCommerce businesses looking for a solution to customize their checkout page. However, Stripe is not the right solution for high-risk businesses, as Stripe lacks the necessary resources to support high-risk businesses. In case your business is high risk, it is best to cooperate with a merchant service provider to get that high risk Merchant account.

2.2 Stripe is one Payment Gateway or a Payment Processor?

Stripe is the simplest solution if you're new to a payment service for your business. Instead of providing a payment solution that contains a full range of features and services for customers, Stripe will only focus on the features they consider necessary for businesses to support payment processing. To get the right payment gateway or payment processor for your requirements, you must partner with a merchant service provider.

3. How a Merchant account works

A merchant account is a special type of bank account, necessary for payment processing. When a customer makes a payment through a payment gateway or a POS system, the credit card information is immediately encrypted and sent to the acquiring bank (acquiring bank). This Acquiring bank will contact the customer's issuing bank to verify the transaction. At this point, the issuing bank will send a confirmation request to the customer whether to accept or decline the transaction, through a payment gateway or payment device. If the customer accepts the transaction, Acquiring bank uses the Merchant account to hold the transaction amount until it is settled.

Once the transaction has been settled, the money will now be transferred from the Merchant account to your business's bank account. In general, the Merchant account acts as a temporary reserve account for the transaction amount until it is settled.

4. Pros and cons of using a payment service provider (PSP) like Stripe

As with any payment solution, payment service providers offer different advantages and disadvantages. You can see the detailed comparison table below:

4.1 Advantages:

• Fast review time: Payment service providers do not require strict vetting processes like Merchant accounts, so the registration process is much quicker.
• Trusted name: Companies like PayPal and Stripe are both very famous names today. Putting their logo on your store will increase trust between you and your customers.
• Modern interface: Most payment service providers have easy-to-use and intuitive interfaces, enhancing the user experience.
• Fixed price: Helps you easily calculate credit card processing fees for each transaction. This means businesses don't have to pay different fees to different card issuers.

4.2 Disadvantages:

• Higher cost: Fixed prices may still contain hidden fees and commissions for each transaction that you are not aware of.
• Lack of online support: Payment service providers usually do not provide online support. Therefore, receiving help will be much more difficult for businesses.
• Do not accept high-risk businesses: Because payment providers lack the appropriate infrastructure to support high-risk businesses, they typically opt out.
• Slower time to receive money: Because funds from multiple merchants must be confirmed in a single Merchant account, it may take longer for businesses to receive funds.
• Risk of account closure: If some transactions cause serious problems, payment service providers reserve the right to close your account without prior notice.

5. Do you need a Merchant account for your business?

Those who are just starting out in business may consider using payment service providers (Stripe, PayPal, etc.) because of the speed of account creation. However, Merchant accounts offer many more unique benefits including reduced transaction processing time, cost transparency, 3rd party software integration, advanced security features, and additional features. Other outstanding functions. If you want to use a credit card processor that costs a little more but reduces the complexity of using it, payment service providers are a great choice for you. , typically Stripe.

Read more: What is Stripe? Basic knowledge for newbies