The Differences Between a traditional Merchant account and a “Newer” Payment Processor

The payment processing method that you choose is vital for the success of your business. This is why you need to understand how these two payment processing models work and their differences. It will help you make a more informed decision to protect your business from any future losses.

In this article, we will look at the differences between a newer payment processor and a traditional payment processor.

What is a 'newer' payment processor? (Payment aggregator)

A payment aggregator is a payment processing company that allows several businesses or clients to run payments through a single merchant account. Some of the popular examples of payment aggregators include PayPal, Square, and Stripe. They are also referred to as payment service providers (PSPs).

PSP’s do not issue you with a merchant ID from a processing bank. Instead, they issue you with their own virtual account and act as the middle man between you and the processing bank. Once you sign up for an account with them you become a “Sub-Merchant”.

A PSP provides all the necessary tools to handle transactions for your business. They charge you a specific percentage of the transactions they handle your business. Since you are now operating under their payment network you will never have to deal with the processing bank.

How does it work?

Typically, you will have to integrate the payment aggregator's code on your website in order for it to work. This is usually a very quick process that can be done with their helpful support team or documentation. Payment aggregators are mostly used alongside an eCommerce store (like Shopify).


Instant approval

Users get approved instantaneously by payment service processors. Since no paperwork is required when registering an account you can start transacting right away. All the registration process is automated hence making it fast compared to a manual approval process.

No vetting process

As long as you have a valid email address and a phone number you can get an account with any payment aggregator. The only thing that you will need to complete is a KYC verification after reaching a certain threshold.

Easy to integrate

Integrating payment processors such as Stripe and PayPal is very easy. All you need is to copy a piece of code and paste it to your website to create a buy button.



A chargeback refers to the return of funds to the customer after a dispute. Chargebacks have become a nagging problem for businesses operating with the PSPs. Some customers may request a chargeback after you deliver your product or services. If this happens regularly then you will end up suffering huge losses. While some may be genuine a lot of others will be from a customer trying to deprive you.

Temporary Hold

PSP’s holds money if they perceive your business model to be risky. Sometimes money can be held for weeks. This can cause inconveniences because your business will face challenges processing transactions or delivering products for cash that you have not received.

Outright fraud

If you violate the slightest terms your account can be limited or disabled completely. It’s not a guarantee that the money in your PSP account will be released to you. Sometimes it will be returned to the buyer while other times they may keep it to pay for damages caused. If this happens to you then it means that your business will be unable to run as usual. You may be forced to open a new account with a different PSP.

Poor Customer Service

Payment aggregators receive many complaints every day. If you visit their social media pages, you will notice that they use bots or auto responders to help manage the situation. However, bots cannot solve custom problems that you may run into your account. When you decide to call, you might be forced to wait long in line. Manual customer service is always the best as they will understand your queries better.

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