Confused between Stripe vs Merchant Account? Here’s what you need to know

Selecting the right payment method is critical for any online business, yet many entrepreneurs are often left confused when comparing Stripe vs merchant account. Both systems will allow for the acceptance of payment, but they differ widely in function and use; therefore, Trinity Consultings is important to have an understanding of the differences to help guide you toward a better decision for future growth.

What does the term Stripe mean?

Stripe provides payment processing services (as a payment solution provider or PSP), allowing users to quickly accept online transactions without establishing a traditional merchant account. Stripe operates as one integrated solution that provides everything needed to process credit card transactions, take care of security, and comply with the Payment Card Industry standard. This is why they are so attractive to both start-ups and small businesses; the ease of use creates an immediate return on investment in just a few minutes.

As soon as you create a new account on Stripe, you can begin accepting credit cards right away; they do not require a lengthy process for you to receive approval to do so. However, because Stripe combines all of their merchant users under one master account for purposes of collecting and aggregating funds, it may put holds and/or restrictions on users' accounts and/or funds if it observes unusual or high-risk behaviour on an account.

What does the term Merchant Account mean?

A Merchant Account is a special kind of bank account that allows businesses to be able to accept credit cards or debit cards for payment of their products or services. Merchant Accounts normally involve both a payment processor and a bank (or other financial institution) to provide this service. Setting up a Merchant Account can be a lengthy and involved process due to the amount of documentation involved; however, it does provide much more control over your business's payment process than accepting cards through an online service such as Stripe.

Merchant Accounts are typically best for businesses that have a high volume of credit/debit transactions or businesses that are considered to have a higher-than-normal risk of fraud or credit card chargebacks. Additionally, many Merchant Accounts allow for custom pricing, provide lower processing costs over the long term, and help to reduce the risk of frozen Merchant Accounts.

Comparison of Key Differences Between Stripe vs Merchant Account

The first difference is the amount of control and flexibility that each provides. Stripe provides convenience and speed, while a Merchant Account affords the business owners more long-term reliability and flexibility. If your business will be growing rapidly or processing large dollar amounts of transactions, a Merchant Account may provide you with a better option.

Another important difference is the way that merchant accounts mitigate risk. When a transaction is processed through Stripe, its automated system is set up so that the funds can be held by Stripe until it has been able to verify the transaction. A Merchant Account requires you to perform fraud duplication checks to prevent customer chargebacks and to ensure that you are provided with reliable methods for monitoring your Merchant Account. In summary, Merchant Accounts tend to provide users with more control over their funds than do online services such as Stripe.

What are you trying to accomplish with your payment processing solution?

Choosing between Stripe vs Merchant Account will depend on your needs. For example, if you're just starting and don't want to hassle with setting up an account, Stripe is an excellent choice. On the other side of the equation, if you need control, stability, and scalability due to being in a high risk industry, then you may want to consider a Merchant Account.

Conclusion

Whatever way you choose, both solutions have their pros and cons; but the final decision will ultimately come down to your business model, your risk, and what you want to achieve in the long term. Once you know how each of these options works, you'll be able to make an informed decision about which payment processing option best supports the growth of your business and provides you and your customers with secure and frictionless transactions.