Payment gateway vs. virtual terminal vs. shopping cart

Editorial Team

4 min read
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If you are ready to begin accepting credit cards, all of the options and programs available may be confusing. Three common components of a credit card processing platform are a payment gateway, shopping cart, and virtual terminal, but understanding their differences and how they can potentially work together can be difficult to understand.

Join us as we explore what makes each of them unique so you can better determine which solution or combination of solutions best suits your business’s needs.

What is a payment gateway?

Think of a payment gateway as an online point-of-sale terminal for your business. The most common use of a gateway is to authorize payments for an eCommerce store on the internet. However, today’s gateway technology enables businesses to also accept payments in a brick-and-mortar retail environment using a credit card reader, POS system, or integration with accounting or CRM software.

Here’s how a payment gateway works:

  • Credit card information is swiped, dipped, or tapped at a terminal or manually entered into an online 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 facilitate secure payment processing.

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 a credit card reader via USB to a desktop or laptop, if they so desire.

What is a shopping cart?

The functions of a payment gateway and a shopping cart are quite different. A shopping cart is a virtual equivalent to the grocery cart you wheel through your favorite store. You put your goods into the cart and drive it to the cash register that then tallies your order and gives you a total amount due.

Here’s what an online shopping cart does:

  • It totals the costs of your goods.
  • It adds in applicable sales tax and delivery fees.
  • It subtracts discounts via coupon codes and applicable credits.
  • It then displays a total amount due.

The online shopping cart is integrated to a payment gateway, usually via an API, to complete the payment process.

An alternative to a shopping cart integration is a hosted payment form. This approach is ideal for businesses where each transaction typically has just one item or charges the same amount consistently. A secure hosted payment form can be designed to match the look and feel of your eCommerce website, yet is hosted on a third-party secure server to help reduce liability and PCI scope.

Payment gateway vs virtual terminal features

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. It can also help merchants save money without the need for any upfront hardware costs.

Why are payment gateways and shopping carts often confused?

It’s easy to understand how a business owner could be confused by technical terminology if they are unfamiliar with their meanings. Many components of eCommerce and credit card processing work together. In some cases, they’re integrated as part of an all-in-one solution. Some websites and companies use these terms interchangeably, which doesn’t ease the confusion. Using the overviews outlined above can help businesses better understand their differences and find the best solution for their needs.

The right payment processing solution can help your business grow

With Clover’s innovative processing solutions, we can help you accept payments the way your business needs to in order to grow.

Why wait? Get started with a Clover POS System today to elevate your business.

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