Gateway or merchant account? Do I need one or both? | What is a gateway?

Yo, what’s up everybody? It’s Justin Live from B2B Vault, the Payment Technology Podcast sponsored by Nationwide Payment Systems, hosted by this guy, the Pistol Peter Payment processing himself, Allen Kopelman, and we’ll be providing you educational information about FinTech. Payment processing small business and the technology businesses are using in the world today.

In today’s podcast, we’re gonna be talking about gateways and merchant accounts. Do you need one the other or do you need both? What are they? You know? Alan is gonna educate you guys on this topic because he gets asked a lot like, Hey man, I need a gateway. And then they’re like, yo, but I don’t have a merchant account.

And he’s like, well, then I can’t help you. No, I’m just kidding. But no, we’re gonna talk about that. He’s gonna f yeah. Get it all straight for you guys. Um, but yeah, real quick, how you doing? Everything’s good. Got my first Father’s Day present from, Jacob Sha. Yeah. My kids suck. I didn’t get anything. Got this.

I got six daughters and names. Got this nice Marlins hat. I get a kick in the, ugh. A nice Marlins hat. Nice. It is nice. It’s very curved, bro. It’s a little too curved. Happy. I’m hating on it. Happy. But Happy Father’s Day to you. Oh, happy Father’s Day to you too, sir. Happy Father’s Day. Make sure you don’t do anything.

Don’t answer your phone. Don’t ask them. Don’t. If they ask you for something, tell ’em to kick rocks. Really, I, I don’t look dude on Father’s Day like I do. Not if I’m gonna make some pancakes. What? They’re supposed to make you pancakes. I don’t think I’ll get pancakes. On Father’s Day, dude, I don’t pick up on, my kids know better.

They don’t even ask, like, they’ll like, normally, like, I’ll do anything for my kids, but they, they know Even it, I was, they’re like, yo, I was gonna, uh, ask for a ride to work, but it’s Father’s Day, so nevermind. Oh, so an honor of Father’s Day. I got a little Father’s Day joke going on. Well, you know, got a jokey joke.

So did you hear about the tornado that became a comedian? No, it was a real whirlwind of jokes. It’s cuz my daughter’s a meteorologist. So what, why did the cloud go to therapy? I don’t know. It had some. Serious emotional baggage. What do you call a snowman with a six pack? I don’t know. Alan, what do you call ’em?

An abdominal snowman.

I didn’t say they were good jokes. How do hurt? These are bad dad jokes and on her father’s day, how do hurricanes apologize? I don’t know, sir. They say, I’m sorry. I didn’t mean to blow you away. Why did the meteorologist bring a ladder to work? Because he wanted to climb the ranks and reach new heights in his career.

That’s enough. You got more? Yeah. Oh my God. Did you hear about the mathematician who was afraid of money? No. Suffered from. Deca Biphobia. I don’t know what that was. Why did the golfer bring two pair of pants to the game in case he got a hole in one? That one’s not bad. Okay. So you know, there’s your bad dad jokes.

We have to tell bad dad jokes. I don’t tell jokes. Remember we talked about, I, I, I don’t know why I’m not, I, I can’t, my retain jokes like it’s just, This, my father always tell me, I never remember useless information. Like if I don’t utilize the information, like if I’m something that I’m not using every day.

Yeah. It’s like people’s names. If I’m not gonna use your name every day, I, I do not care to memorize it. Sometimes I’m sorry’s. It is. My wife says I’m rude that way, but, I just don’t care to remember cuz it’s taking up space. It’s valuable real estate up there, man. You know what I mean? Yeah, I get it. So, yeah, I don’t know.

I’m looking, uh, forward to the, uh, three day weekend. Yeah. Yeah. I got a three day weekend coming up. I, I’m gonna plant, uh, I got, I got my greenhouse from Amazon, so I’m gonna put that together, see how that looks. And then I also got another raised garden bed, so I gotta go get some dirt. Plant some stuff. Um, I got a hoop house that I gotta install to the, uh, for the, for my current garden cuz it’s burning the crap outta my kale.

Uhoh? No make gusta man. Don’t like that. It’s making kale chips. I’m gonna make all kinds of things. Kale. Kale juice. Kale juice. Yeah. Okay. That’s what I usually use the kale for. I juice it. Yeah. I’m not a big fan of cooking it. Um, yeah. I gotta plant my bamboo too. I got some purple bamboo seeds, dude, that they’re like supposed to be like super exotic.

They start green, but after a couple of years they’re so purple they almost look black. Oh, thank, so that’s, so that’s gonna be a cool little project. My avocado seeds sprouted. Yeah. So I’m ver dude, I’ve been trying to grow an avocado tree for like two years. Okay. Um, this is the farthest I’ve gotten. So what did you use a Haas Avocado or a Florida one?

So I have Haas, um, growing. I have a Florida groin. Okay. The Florida tree I was given by my homeboy, uh, Mr. Gail PT Retta. He’s in, he’s in Jamaica right now, so he’s having a ball. Okay. But yeah, I got a lemon tree I gotta plant and I have a, uh, another, got a lot of stuff going on. A Mexican, uh, sheesh. Mexican cream, something else.

It’s supposed, it’s supposed to be a pretty good fruit. Yeah. Guava. Guava. Guava. Okay. I got a guava tree that, um, I rescued from Home Depot that they were gonna toss. It was all yellow. Yeah. And all I did was put it in my backyard and it’s green. Literally, that’s all I did taking care of it. They didn’t, but my daughter, she’s got her whole garden going up.

Yeah. Mine is a mess. My wife calls my backyard at trailer park, so I gotta fix that this weekend. Okay. Yeah, definitely gotta fix that, fixing that. But yeah man, let’s hop into it. What the heck is the difference between a gateway and a merchant account? So what is a gateway? So a gateway is basically a little piece of software that’s in the cloud that’s in between your merchant account and then.

Something else. So that could be a virtual terminal, it could be your invoicing software. Alright. Right. I feel like why would I need a gateway? I don’t get it. So what, um, I have a bus. What is my business? I may, I sell water blasters. The new ones, the new crazed ones where you, you know, the little bbs, you know what I mean?

They got like the, they look like guns. Right. I don’t like it. You sell it on a website? Yeah. Okay. So, And in my store, right? So when you have, when you’re in your, when, when you’re, when you’re setting up your website, you know, most websites, unless you’re using the bad people, PayPal and Strike, you need, you need a gateway in between that’s installed with the WooCommerce or whatever website, or whatever website software you’re using.

You need a gateway. And the Gateway basically is the software that connects to the process. Sir. So that’s what the, that’s what the gateway is. All right. So I have a website. You have a website. Mm-hmm. And then you have a gateway and a merchant account. And the same thing, like you could be using like swipe simple or you know, I still don’t get it.

You still don’t get it. It’s a piece of software. It’s middleware. Okay. What is it used for? So it’s used to connect your merchant account. To the credit card processor in most cases when you’re using, so like, if you want, can I just say something real quick? Yes. As someone if, if I was not in tune or like educated.

Yeah. It is all that sounds like nonsense. So you’re gonna, we gotta figure out how we can explain this better. So when you get, if you’re doing e-commerce, we help you so that you can piece the whole thing to, you can piece it all together so that. You have to have your merchant account, and then with the merchant account comes, you get a gateway with that.

And then that’s how it’s all goes together. And the gateway links two pieces of software together. It’s a happy marriage. It’s a, makes a hap, makes everything work. So you have your website, you have the gateway, then you have your, what’s an example of a gateway? Authorized net nmi, those are like the two most popular WooCommerce popular.

Well, WooCommerce is not a gateway, that’s a shopping cart. Okay. So you need, with WooCommerce, you need, you need something, even if you’re using, so you would use authorized.net, right. For instance, as your gateway for WooCommerce. Correct. Or some, or you could use the, the, the, well, the guys that we don’t like to name.

Well, no, there’s like PayPal, square and Stripe, but whatever. Right. But there’s other gateways too. That’s just one that’s very popular that people know. authorized.net. Yeah. Cuz it’s been around the longest. Yeah. So there are other gateways that those gateways link to the WooCommerce. And the purpose of having this gateway is what?

For authorization purposes. You can have velocity controls, so you can control things like your fraud and, and, and, and making sure that you’re doing like the AVS address verification. Mm-hmm. CVV two address, so it has all your fraud features in there. Okay. So that way you can protect your, protect your website.

It’s not wide open to fraud when you’re using PayPal, they have a gateway too. It’s just, Come, you know, just one big piece. Mm-hmm. Right? Whereas with other, with everything else, it’s all, it’s basically two pieces, right? So it comes, but basically if you sign up for a merchant account with us, we get the whole thing all set up for you and based on what kind of shopping cart you have.

So people use WooCommerce, Magento, big commerce, all different kinds of things. And then we, whatever we see what gateways they have and then we. Get them on the gateway and it’s gonna work with their shopping cart. Got it. So that’s how, that’s what it is. And also, so if you were in, in the sense of setting up my business, the gateway part of it, that’s, that’s later down the road, right?

Well, when you’re getting your merchant account, we did. And it’s e-commerce, we determine what you need, and then we set it all up at the same time. Right, right. So the other, I’ll give you another example of what. We’re using a, so I have this guy with an oil change business and because of like it’s, they have several locations and they need a different level of reporting.

We’re taking the credit card machine and running it through the gateway, which is a small extra cost. Right. But they’re gonna be able to see the transactional data. Mm-hmm. Differently because when you process a transaction today and it’s tip at the time of the sale, right? It’s processed as one transaction.

Mm-hmm. So if you’re using a point of sale system, you’re not gonna get the tip reporting from the credit card processor. Cuz let’s say the bill’s a hundred, you leave a $25 tip, the credit card processor only sees 1 25. They don’t see the hundred and the 25 separate. Got it. Right. Because it was. It’s at the same time, the authorization, it’s one authorization.

But in the point of sale system, you can see that you could get your tip reporting. Got it. So for this client, they don’t have a point of sale and they need to have tip reporting. So with the, with being that we hook it onto the gateway, you’ll be able to log in. You’re giving tips to the oil change guys now?

Yeah, the tipping is everywhere. It’s crazy. We did a whole podcast about tipping. Yeah, we did. It’s tipping is everywhere. Like we were at the show, right? We just did a podcast about the show we went to, there was a bunch of, there was quite a few point of sales there and one we, you know, and I talked to a few of the people, I was like, yeah, you guys need to add on.

One of them doesn’t have tips. You know, they don’t have tip at the time of the sale. I was like, we have people asking for that all the time. So, Tip at the time. I mean, I like the feature. It makes tipping a lot easier. I don’t like the fact that they can add that on top of the gratuity though. Oh, if you can add, what do you mean?

Oh, mean if you have automatic gratuity, I do not like the fact that you can, there’s a tip line. There are after it’s automatic gratuity and if, well that’s, I don’t like it when restaurants do that. If that’s automatic gratuity. I think that the, the. I think that if they have automatic gratuity, the server should say, oh, the gratuity is already on the bill.

If you want to leave extra, you can leave extra, but they should explain it so it’s not, I don’t think that should be illegal. How many people. I know for a fact I used to do it all the time until I started really paying attention to it. I had, it happened to be once where, but how many people are like still giving a tip, not knowing that gratuity is added in there.

I’m sure tons of people, because I don’t pay attention to the, I’m a, and even my wife always says I tip too much. But my dad always told me, you treat the janitor the same way as you treat the ceo. And even with like the, the kiosks things we saw at the show, right? Yeah. You, a lot of them have tipping on there.

So you can leave a tip cuz. Really you’re ordering from the kiosk, but then you’re gonna get served, but the person’s not taking your order, but you’re still kind of getting served. Yeah, no, I’m good on that. So the, so you know, there’s tips on there and it’s connected to a software and then the software is able to see like the tips.

But when you’re doing it just on the credit card machine, unless you’re running, using the report from the machine that comes out of the machine, there’s no other tip reporting. Because it’s tip at the time of the sale, it’s one solid authorization which cuts down on chargebacks. All right. I see. We’re lots of industry jargon happening here.

There’s lots of ways that, where there’s lot of stuff going on. So let’s get back to gateways. Right, but I’m just saying, so the gateway can be very functional for your business because you need the gateway to help with fraud controls. Avs, you know, which is a fair, so when someone puts in their credit card, they put in their address, okay?

And the city state zip code, right? Security digits. So that the gateways, what’s helping the credit card processor authorize all of that and gives it the ability to do that and keep, and, and make sure like somebody’s trying to charge their credit card 10 times, that the gateway’s gonna catch it and put it into, like, we call it a queue.

Okay. You know, it’s gonna put it off to the side. Okay. So that the merchant can go look and go, oh, some guy tried to charge his car 10 times. That’s a mistake. They can go in and hit void, void, void, void, void, void them all out. Versus they all go through, if you didn’t have a gateway there, the charges would just go through.

Then you’d have to go back and refund them all. Very important. It’s very, so it’s a very functional, you know, we did another podcast about how PayPal’s. Doesn’t have that feature at all for voiding, right? So that’s what the functionality, the advantage to having a regular merchant account and having a gateway.

It gives you, as the business owner more control over the charges and everything running through your website. Or you know, like let’s say you have a multi-location business, right? Mm-hmm. And you want your credit card machines to go through a gateway. That way, let’s just say by accident, you overcharge somebody.

Now the person at the location doesn’t have to go deal with that. Someone in the corporate office can log in, find the location, find the transaction, and, and give the person a partial refund, or even void a transaction because you don’t, you might not want the people at the location doing that. So it has a lot of different functions.

That can be used to enhance the way you run your business mm-hmm. And give you more security. Got it. So it makes it e makes it easy for bus, makes it easier on businesses to use a gateway. And you need a, you know, you need a gateway if, depending on what level of reporting that you need. Okay. Does it make gateways?

Gateways? And then a merchant account is basically a bank account where when you process your credit cards, all your money, at the end of it, you authorize cards all day. Then at, at the end of the day, you run a batch. Mm-hmm. And then that goes into your merchant account. And then the, from the merchant account, it goes directly to your bank account.

And a merchant account is A F D I C. Insured account. Mm-hmm. Unlike if you’re using things like PayPal, cash App, Venmo, Stripe, those are not F D I C insured accounts. Terrible choices. So, you know, and, and, and also, you know, you people leave balances in there with, with a merchant account. We’re not, we don’t hold the balance.

You just, you process a thousand dollars. If you’re on daily discount, some fees come out. If you’re on end of the month discount where then your fees come out at the end of the month, then you get, you did a thousand, you get a thousand. So it can be set up either way and then that way, and then you can see, you get a statement, you see everything on your merchant account, the deposit, and then that’s gonna match what went into your bank account.

Got it. So it just gives you a whole nother level of reporting and everything’s going into your bank account. I’m trying to, we’ve covered the merchant account quite a bit. Um, yeah, I just, you know, merchant accounts, Did you need one? Yeah, you need one. You know, you using the same thing over. You know, we, we, we kind of sound like broken records cuz we keep telling you guys to stop using like the main PayPal squares or stripes.

Right? But, you know, how else do we get it? We gotta beat you in the head with it. Right? So I’ll give you another example of like some gateway, like where I was talking to a guy with a moving company, right? Mm-hmm. So he, he was looking at the, uh, software for the. Have on the phone with a little dongle so you can put the card in mm-hmm.

Process, you know, process your credit card in person. Right. So as explaining to them, oh, we could give you a special, you know, gateway software, right? Were basically your in-person payments, and then the payments you do on your invoicing and the payments you do on your website would all be in one place.

So it’s very customizable. From like that standpoint where you can, you can ha link all your payments in one place. Right? So they’re all in, in one software and you don’t have to worry about it. It’s a good thing. Yeah. So like, you know, we have places that have like a machine in the store and then they’ll have, they’ll have a place on their website for people to pay their invoices.

Mm-hmm. Like we have like these, uh, car dealerships, you know, buy here, pay here, kind of car dealership. Where you’re paying your payment either weekly, biweekly, or monthly. Yes. And so the car dealership has it where you can walk in and then they run it on the machine or, and they finance the, the car through them themselves as opposed of you doing it finance through a bank.

Right. You know, they’re financing it themselves and so you gotta pay them. Right. And then online, you can do it online. So for them it’s all going through the same software. And then they can reconcile. Somebody says, oh, I made my payment. No, you didn’t. They, they don’t have to go look at multiple systems.

They can just look at one system Nice. And they can see that everything is in there. So that’s the advantages of using gateway software. When you’re, when you’re, no, I mean, you can, for your business, it’s not just e-commerce, right? No, it’s not just e-commerce. It can be used for retail. I mean, we have, we are using it in a retail store too.

The same software. You can put your inventory items on there, and then you can click, click, click which one somebody’s buying. It’s good for you have a small amount of stuff, like a food truck. Oh, okay. Or like at this one place where we use it, they have like 25 items. They’re selling shirts and souvenirs.

Mm-hmm. At a big, uh, event, at a hos at a hotel for like the next five months, and then it’s gonna move to another hotel after that. You know, they’ll tear it down, set it up somewhere else. So they have, what is it, like a seasonal thing or something? It’s a, it’s an exhibit. It’s some, it’s like some kind of a art of, of motion moving art exhibit and then you’re gonna move it around.

That’s cool. Country. So they have different That’s super cool. Yeah, so they have, they have the, they have it set up and then that way, you know, they only have to deal with one batch at the end of the night. It all auto automatically batches out. They don’t have to go around to all the tablets and all the machines.

So that’s the advantage of, of using something like that. And then the people are in another state, that bookkeeper, oh yeah, it’s not even there. They can just go online, download the, you know, what the sales were, download the inventory, so on and so forth. So it gives you a lot of advantages from, from a working standpoint of, you know, you don’t have to physically be at the location.

Like I was saying with the oil change place, you know, have to physically be there to do some of the functions that might need to be done. There you have it. Yeah. So a lot of people like to use, even though it adds a little bit of extra cost, right? Right. It does. To add functionality. And that’s one of the things like we talk about, you know, techno, you know, look at technology today.

You know, people will tell me, oh, that costs too much money. Oh, that technology’s too much money. Yeah, but look how much time it saves you. Like we use gateways on the ATM machine. You have an ATM machine down, down, could be in another town, right? Mm-hmm. And that’s a problem or an issue. The techs can literally go through the, through the gateway online to the wireless box on the machine.

Okay. And see all the reporting. We don’t have to wait for the machine to like batch out at the end of the day, like we did 15, 16 years ago when we started doing ATMs and there was no wireless box. They were all on phone lines back in the day. Got it. So there’s a lot of advantages to that technology.

Sure. It’s a small layer of cost and things like that, but the advantages are, hey, someone can fix your ATM over the phone or they can. Or you could fix it from your house by logging in and rebooting it, or you put your money in the ATM machine and then you forgot to put the, um, the correct number of bills in, you could change it.

So those, those are the advantages of using a, you know, using a gateway. It’s all relative to what you’re doing in your business. And, you know, can also stop, gateways can also stop like fraud. Someone’s attacking your website. And all of a sudden, you know, somebody got a robot on there trying to run a thousand credit cards, right?

If you have your velocity setting set up correctly and you’re monitoring your site, all of a sudden you see a whole bunch of transactions coming through, you can go in and shut off your, you know, call the gateway up and have your gateway shut down, or just take your website offline so that people can’t do your stuff.

But it. It’s sending you the information quickly, right? Mm-hmm. Not waiting till the end of the night to find out, oh, someone ran a thousand credit cards on my website. So like, when it’s doing transactions, it tells you, but you can set the velocity settings to like watch for multiple transactions from an ip.

Somebody uses the same card more than two times, right? Mm-hmm. They can block those transactions, so. And then that way you can control what’s going on in your business and not have a catastrophe. There you go. So that’s the difference between a gateway and a merchant account. Yeah. You need a merchant account and then you can use the gateway to help with more technology and more features.

And things like that streamline your business. Right. And depending on what kind of business you have, there’s different fraud features. You know, if you’re doing hundreds of thousands of transactions and you need, you know, there’s other fraud features you can add in there. Well, I’m sure that they’re doing hundreds of thousands of transactions that they already have a gateway set up.

Well, they usually use, they usually use a gateway and then they add enhanced security on top of it. Got it. So you can. Add, enhance, enhance those things that are, when the card’s being authorized, uh, that’s doing, you know, more checking so that you don’t get, uh, you know, people can do it. You can do a lot if you’re doing, if you’re doing a hundred thousand transactions a week or something.

Yeah. You might have more than one gateway account linked onto your website so that if you do get a decline, you can run it. Some, run it somewhere else. So there’s different things you can, that’s what what I’m saying, and some of them, let’s say you require more than one merchant account. Mm-hmm. You can do load balancing.

So with load balancing, let’s say you need three merchant accounts for your website, because of the amount of volume you do, right? You can have it set up where, you know, let’s say you have a hundred hundred grand altogether, you have. 40 grand on one, 20 grand on the other one, and then the other one has 30 grand.

You can have it set up where it’s 40%, 30%, 40%, whatever adds up to a hundred, a hundred percent, and then that way it goes through, it switches through each merchant account. All right. If you have any questions about what a gateway is, you know, hit up Allen at Allen Pelman on Twitter. He’ll be happy to, uh, get into this.

He, you know, he is definitely all about educating, uh, the, the people about merchant services and he’s got a lot of knowledge about it. Um, thank you. If you made it through this entire podcast or video on YouTube, we appreciate you. Uh, hit that like and smash. I know I nerded out today on the gateway. Whoa.

Yeah, man. Um, check us out, uh, on Spotify, you know, on all the major DSPs. Check us out on Twitter, Instagram, LinkedIn, TikTok, uh, Facebook, and if you need a merchant account and you wanna find out more about gateways, Hit us up, hit me and Justin up, and we will, uh, explain it to you some more. Yes, I, I definitely will explain it to you more.

Okay. In a lot faster. And everybody hope you by the time you watch this Father’s Day will be over. So Happy Father’s Day and hope you enjoyed the Father’s Day. Don’t burn your burgers, bro. Don’t burn the, don’t burn the house down with the grill. Yeah. Take it off. Take off that day. See you guys soon. Peace.