What is the difference between virtual terminal and payment gateway?


Businesses of all sizes operate according to their own needs, whether they are quick-service restaurants (QSRs), doctors’ offices, freelance web designers, or large corporations. Yet they all need a solution for accepting credit, debit, and ACH/eCheck payments securely and easily with a payment solution designed to fit their business needs. A variety of payment solutions are available on the market, such as virtual terminal solutions, payment gateways, and card machines for businesses.
You may have difficulty choosing the right solution for your payment processing needs. A common misconception is not knowing the difference between a payment gateway and a virtual terminal. The virtual terminal is an application that lets merchants accept payments with a credit card, or other payment methods, through an online portal.

The key benefit of virtual terminals is that they allow businesses to accept payments even when customers aren’t present. Your business can move forward more quickly and more efficiently when you accept payments virtually, over the phone, or by link with the help of virtual terminal solutions. Businesses such as sole traders, fast food restaurants, independent retailers, pharmacies, and small businesses that want to accept low-to-medium value, low-volume payments can benefit from this solution.

The payment gateway, on the other hand, is a technology that captures, stores, and transmits customer credit card information. When the payment gateway processes the transaction, the customer is notified whether the payment was accepted or declined. Payment gateways are essentially gateways that connect merchants and customers. Using an online payment gateway as the interface between their website and acquirer can simplify merchants card payment processing. 

In other words, Payment gateways act as a medium of transaction between merchants and consumers. You can use a payment gateway on your offline store or website or through one of the payment services such as UPI, NEFT, or RTGS. Customers, merchants, issuing banks and receiving banks all participate in the payment gateway process. Processes are straightforward. Merchants and acquirers use encryption to protect sensitive payment data when customers use a payment gateway to make a payment. The gateway follows several strict security procedures to ensure compliance with PCI-DSS, including annual audits and recertifications.

Difference between virtual terminal and payment gateway?

Based on the definitions and characteristics mentioned above, payment gateways and virtual terminals are crucial for merchants who sell goods and services in modern era. To determine when to use a payment gateway over a virtual terminal, let’s compare them side by side.  

A major difference between virtual terminals and payment gateways is their working procedure. To use virtual terminals, you need to have a virtual merchant account. While virtual merchant accounts are similar to traditional merchant accounts, they differ from conventional methods of processing.

In the world of electronic payments, a virtual terminal functions as a coordinator of digital payments, such as credit cards, via the internet. Virtual terminals let you accept and process electronic payments remotely from your computer or smartphone via the internet. Unlike credit and debit cards, you don’t have to swipe a credit or debit card; therefore, you don’t need any additional equipment. As discussed above, virtual terminals are very similar to physical card machines, but they use software instead of hardware.  
A merchant must first log into the virtual terminal portal of their payment provider using a virtual merchant account. You must enter the customer’s credit card details on the secure web page (this can be done while the customer is on the phone) and click submit to process the order. Besides the owner, employees can also access the site, and there are different levels of authority.   

Purchasing over the phone, in person, through the mail, or on the go is made possible by virtual terminals. It is not possible to make purchases through them in an online. To make internet purchases, you must have an internet merchant account, regardless of whether you have an in-store merchant account. Alternatively, an online payment gateway handles online purchases as an ecommerce payment solution, in which the customer initiates the transaction. Customers use your online store’s shopping cart to submit payment information, which serves as a checkout solution. To accept online payments, every ecommerce business needs an online payment gateway. 
To elaborate when the customers click on the purchase button after selecting the products/services they wish to purchase on your ecommerce site they will proceed to the payment page of your ecommerce website. In the next step, the customer must enter the details of their credit or debit card on the payment page, including the name of the cardholder, their card number, and the expiration date of their card. As soon as the payment gateway receives the card data, it encrypts it and performs fraud checks on it. Afterward, the payment data is transferred to the card schemes, which perform additional fraud checks, and the schemes transmit it to the issuers, who authorise the transactions.   

The merchant will receive an approval or decline message once the authorisation is complete, which is then transmitted to the payment gateway. It depends on the message whether the merchant displays a payment confirmation page or asks the customer to use a different payment method. When the authorisation process is complete, the merchant can capture the amount for the purchase from the buyer and transfer it to the merchant account. It is possible to need both a virtual terminal and an online payment gateway based on the nature of your business. In that case, you may want to consider purchasing an all-in-one system that combines the virtual terminal and the payment gateway to enable you to process a variety of transaction types.  

To summarise, in virtual terminals, merchants are the ones who have the most control. They enter payment information from the customer’s card and initiate the payment process. Payment gateways, however, give customers more control over their transactions. Virtual terminals are payment solutions for small businesses, and payment gateways are essential if you want to sell goods online. 

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