Stripe vs Merchant Account Explained: Fees, Features, and Flexibility Compared

A common way to compare options for business payment processing is through Stripe vs merchant account. Both will allow you to process online payments, yet there are some key differences between them in terms of setup and pricing, and also options for customizing how you use these services, as well as how flexible they may be overall. Startups (and businesses looking at getting started) as well as SaaS and eCommerce companies will benefit most from understanding these differences, as they can provide insights into choosing between the two options that best match the business’s operating model and long-term growth strategy.

1. Stripe

It is a PSP that consolidates multiple merchant accounts into a single, larger master account. Instead of needing to apply for and be approved for each merchant account that a business would like to use, Stripe provides an easy onboarding process that includes immediate activation for businesses that wish to begin processing payments right away. Stripe also provides integrated support through tools for invoicing, subscription billing, fraud detection, and multi-currency capabilities, making it a complete end-to-end payment solution specifically created with today’s digital marketplace in mind.

2. What is a merchant account?

A merchant account refers to a business-specific bank account that allows merchants to perform credit/debit card transactions on behalf of their customers, whereas Stripe does not require underwriting or other requirements for approval from a payment processor or acquiring bank, and as a result the time to complete the creation of a Merchant Account is normally longer than for Stripe, and offer businesses more control over things like negotiability of transaction fees. Moreover, as a Merchant Account requires integration with a payment gateway (which likely handles secure routing of transactions), these accounts generally provide stability to high-volume or high-risk merchants.

3. Fees: Flat-rate / custom fees

The pricing structure used by Stripe is considered "transparent" because it uses a flat-rate pricing model, in which all transactions are assigned a specific percentage plus a nominal fee for every transaction completed within a particular month. Small or medium-sized businesses often benefit from this predictable method of payment processing; however, for businesses that process large numbers of transactions in a given month, this pricing model can become expensive.

In contrast, most merchant accounts use an interchange-plus or tiered pricing structure. Interchange-plus pricing structures are typically more complex; however, because these pricing structures are usually negotiable, they tend to be cheaper than flat-rate structures for businesses that process high-volume transactions. Additionally, large businesses and businesses transacting internationally can save significant amounts of money with merchant accounts by implementing custom pricing structures.

4. Features and Tools

In this comparison of features and tools, Stripe is far superior in its built-in features. Stripe is a popular choice among tech-savvy companies because it has an API and a range of developer tools available. Stripe's platform offers subscription billing, dashboard analytics, fraud detection, and global payment capabilities. Stripe also offers integration with digital wallets like Apple Pay, Google Pay, etc.

Merchant accounts, on the other hand, are typically provided by a variety of third-party vendors that offer services such as fraud detection, gateway services, and reporting systems. While third-party services provide more options for customizing the services to the specific needs of the business, it means that the business has to create its own custom integration between each of the different service providers it works with. This modular style may provide benefits to businesses that require complete control over their payment systems.

5. Flexibility and Scalability

Stripe provides startup and fast-growth businesses with the most agility and pace, with little to no additional integrations needed. Stripe is able to handle many different types of currencies, as well as seamlessly integrate with virtually any of the top platforms.

In contrast, merchant accounts will provide more flexibility in terms of pricing structure, compliance, and stability. Merchant accounts are typically more beneficial for businesses with high-risk industries or unique transaction styles; therefore, they are often a better long-term solution.

Conclusion

In conclusion, Stripe offers rapid, easy-to-use, and powerful built-in tools, while merchant accounts are best for businesses looking for lower fees over time, more control, and tailored solutions. Ultimately, the best option for the business will depend on Trinity Consultings risk level, growth potential, and overall business model.