Payment Gateway vs. Merchant Account for Parks and Rec Software

Written by Jennifer Elliott

Learn the difference between a payment gateway and a merchant account, and why it matters.
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An essential component of your parks and recreation management software is the ability to accommodate payments for registrations, classes, activities, and events. When it comes to digital payment transaction functionality, you may have heard two terms used interchangeably: payment gateway and merchant account. They do not mean the same thing, however. Instead, they are two components of a secure, digital transaction completion and approval process. To ensure your parks and rec software integrates the transaction system you need to manage citizen payments, learn the difference between these two terms, and how they work together to enable online transactions for your community.

What is a Payment Gateway?

Merchants (that’s you) are not permitted to send payment information directly to a payment processor. For this reason, payment gateways have been designed as intermediaries to ensure secure customer and payment information is encrypted before being transmitted. Payment gateways allow parks and rec departments to process payments online via credit card, debit card, or an alternative payment method. They are used for facilitating online transaction approvals.

When your citizen completes an online purchase using your parks and rec software system, the first step toward verification occurs using a payment gateway. From there, the transaction data is sent to a payment processor, then, if necessary, through the credit card network to the citizen’s credit card issuer for authorization. If approved, the data is transferred to a merchant account.

Okay, so Then What is a Merchant Account?

A merchant account is similar to a bank account. It is a kind of holding tank used to reconcile approved funds and transaction data, whether payment was made via a credit card, debit card, or another transaction method. All approved citizen payments eventually reach your business bank account after a temporary stop in your merchant account. The transfer typically takes place on a recurring schedule. Do not think of a merchant account as an unnecessary step in the process. It is critical to ensuring approved funds reach your bank account safely and securely.

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What Else Do I Need to Know?

Not all payment gateway solutions are created equal. It will be essential, especially as a municipal entity, to choose a highly secure, reputable, and trustworthy payment gateway provider. Similarly, for your merchant account, be sure to select a solution with proven reconciliation functionality, and that will seamlessly integrate with your payment gateway for efficient transactions.

Also, choose a payment gateway that is PCI-compliant. Payment card industry (PCI) Data Security Standard (DSS) require all merchants in the public and private sectors to adhere to specific security standards. Any payment gateway you choose must conform to these requirements to protect your civic and citizen data.

If you are in the process of researching parks and recreation management solutions, make sure that before you commit to any software, you understand what options the software includes for payment transactions, and if it integrates with any existing payment gateway that you utilize today. For more on what to ask when choosing parks and rec software, click below to download our white paper, 12 Questions to Ask When Switching Recreation Software Systems.

What to look for when switching recreation management software