Payment gateway vs. virtual terminal

Editorial Team

3 min read
Woman on the phone

We hear it all the time: “Payment gateway vs. virtual terminal…what’s the difference?” The terms can definitely be confusing if you’re new to accepting credit cards. Though the two services are similar, understanding the differences before setting up your merchant account will be key to determining how your business accepts credit card payments.

What is a payment gateway?

A payment gateway works much like a credit card terminal at a brick-and-mortar business. Think of it as an online point-of-sale (POS) terminal. Whereas a traditional payment gateway allows merchants to accept payments for goods and services online, today’s gateway technology enables businesses to accept payments across all channels, including software integrations and POS systems.

Here’s how a payment gateway works:

  • Credit card information is swiped or dipped at a terminal or manually entered into a hosted payment form or shopping cart.
  • The payment gateway encrypts the customer’s credit card information and forwards it to the payment processor.
  • The payment processor routes the payment details through the credit card network to the card-issuing bank.
  • The card-issuing bank approves or rejects the transaction based on funds available.
  • The payment processor communicates the authorization or decline back to the payment gateway.

The gateway notifies the merchant and the customer of the decision.

What is a virtual terminal?

A virtual terminal is another method of accepting credit and debit cards, and even eCheck and ACH payments. Merchants can use a computer, smartphone, or tablet with an internet or data connection to securely process payments.

Here’s how a virtual terminal works:

  • A merchant logs into a payment gateway or online account to access the virtual terminal.
  • Credit, debit, or checking account details for each transaction are entered into a form.
  • The merchant clicks “Process” to complete the transaction.

No additional hardware or software is required, although a merchant can connect an EMV-enabled credit card reader via USB to a desktop or laptop, if they so desire.

Advantages of payment gateways and virtual terminals

The primary difference between a virtual terminal and a payment gateway is that a payment gateway is typically used for eCommerce transactions, which means there’s a customer-facing interface like a hosted payment form or shopping cart checkout form. Virtual terminals are typically used by merchants only. However, some businesses use both means to accept credit cards if they have a brick-and-mortar and an eCommerce presence.

Each solution offers its own advantages. A secure payment gateway allows merchants to accept credit cards, debit cards, and ACH payments online. It also enables recurring billing, accounting software integration, and more. A virtual terminal simplifies the payment process for mail and telephone order sales, as well as off-site events. And, it helps merchants save money without the need for any upfront hardware costs.

Looking for a payment gateway or virtual terminal?

With our payment gateway and virtual terminal solutions, we can help you accept payments the way your business needs to. Contact the Clover sales team to find out which Clover or partner solution is right for you.

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