Understanding ACH Merchant Accounts and Payment Gateways

With the global acceleration of the digital economy, merchants today need a more unified approach to commerce. Businesses require two key components to build a robust digital commerce model: 

  • Payment gateway 
  • Merchant account 

Without both, merchants restrict access to more convenient and secure revenue channels. Merchants need both components to accept credit and debit card payments and Automated Clearing House (ACH) transactions, including electronic bank-to-bank money transfers, Remote Deposit Capture (RDC), and direct deposits.

Simply put, the push to digitize payments via emerging mobile, email, SMS text message, eCommerce, and Interactive Voice Response (IVR) channels demands multi-channel payment solutions, requiring both a secure payment gateway and a merchant account. Many merchants often confuse the two. This blog outlines key differences between both.


What is a Payment Gateway?

A payment gateway is an application provided by a third-party vendor that simplifies payment acceptance and authorization for eCommerce and brick-and-mortar businesses. It acts as an assistant between the front-end system, such as an online shopping cart or a virtual terminal, and the bank that processes the transaction. The gateway captures and encrypts payment data from the front-end system, sends it to the bank for authorization, and transfers funds from customers’ bank account or card to the merchant account.


What is a Merchant Account?

A merchant account is a specific type of bank account, separate from the business bank account, which serves as a holding account for payment processing revenue. Payments processed through all channels are settled from this account daily. Merchant accounts are set up and maintained by the acquiring bank, which also processes related fees, including the payment card interchange fees determined by the major card brands and ACH and credit card transaction mark-up fees set by merchant service providers. Acquirers include First Data, Bank of America, Elavon, Heartland Payments, and World Pay.

The ISO merchant account, provided by Independent Sales Organizations (ISOs), offers more flexibility in customized account settings and is best for small to large enterprises. Watch our video to learn more about an ACH and credit card processing gateway.


All Payment Gateways Are Not Created Equal

When comparing payment gateways, it is essential to consider differentiators beyond the basic functions before deciding which one is most appropriate for your business.

Multi-channel processing

Your payment gateway service should support a variety of payment options, including current types of payment your business accepts and potential future opportunities, such as recurring billing or SMS text invoicing. Critical features include access to a virtual terminal, hosted payments, and ACH and credit card transactions supported through one API. Having these processing capabilities built into your merchant gateway can increase customer retention.

Fraud Protection, Security, and Compliance Features

Security features are critical when choosing a payment gateway and merchant account provider. The systems must adequately protect Personally Identifiable Information (PII), such as driver’s license, social security, and account numbers, in compliance with state, federal, and international standards. Data tokenization will prevent the exposure of sensitive information.

The gateway provider should be Payment Card Industry Data Security Standard (PCI DSS) Level 1 compliant. To ensure that merchants remain compliant, they need to rely on this relationship and trust that they stay current on changing guidelines and regulations set by the National Automated Clearing House Association (Nacha).

Other essential fraud detection and prevention tools include:

  • Front-end customer validation measures
  • Inline frame (iFrame) webpage protection
  • BIN (Bank Identification Number) intelligence and filtering
  • Transparent redirect tools that allow your merchant website to post payment details to a third-party gateway server.

These tools actively help the merchant reduce PCI compliance burdens.

Easy Payment Gateway Integration

Your payment gateway should easily integrate with popular eCommerce platforms such as WooCommerce and Magento, as well as back-office online and desktop accounting software such as QuickBooks. Virtual terminal features should include real-time authentication, the ability to view settled and returned checks, and void transactions. Simple to navigate APIs, plugins, support resources, developer tools, customized web branding, and user-friendly interfaces help create a future digital platform.


Choosing a Payment Gateway and Merchant Account Services Provider

In choosing a third-party provider, it is advisable to consider a provider that does not limit their merchants to eCommerce alone but has the resources to support various payment options and channels, including credit card and ACH processing in multiple industry categories. Before committing to a provider, discuss which fee and agreement options will best suit a cost-effectively and comprehensively managed strategy for the type of business flow and size of operations anticipated by your business moving forward.

Access to a built-in merchant account, data hosting on a secure server, unified reporting, detailed payment analytics, and simple merchant onboarding should be featured prominently, as with iCG’s all-in-one platform. Our platform provides virtual terminal support, multiple payment channels, advanced fraud protection, and future-proof payment capabilities, including recurring payments, IVR paymentsmobile app paymentsSMS invoicingEmail Invoicing, and other revenue-generating possibilities.

iCG’s APIs, developer tools, and plugins help businesses of all sizes streamline payment processing, expand online sales with easy shopping cart integrations, and enable customers to pay by eCheck, ACH transfer, or credit/debit card for a smooth user experience backed by professionally trained merchant and developer support teams.

 Contact iCheckGateway.com for an all-in-one, secure payment processing solution.


Date Originally Published: November 04, 2020

Date Updated: August 1, 2022

iCheckGateway.com’s innovative solutions help you accelerate payments simply, securely, and reliably.

We help businesses accept and process payments with our suite of next-gen customizable fintech solutions. Our automated technologies help you carry out ACH and credit card transactions on a single easy-to-use platform.