The Differences Between a Payment Gateway and Virtual Terminal

Read Time: 4 min

Whether you’re a successful business owner or an aspiring entrepreneur, you understand the importance of secure and seamless transactions. Nowadays, there are countless ways to receive compensation, ranging from over-the-phone payments to online, card-not-present payments. But do you know what the perks and drawbacks are of using each platform available to you? The two most common payment solutions used in the eCommerce space are payment gateways, such as those provided by, and virtual terminals, such as those provided by PayPal. Find out what the differences between them are so that you can determine which solution works best for your business.

Payment Gateway vs Virtual Terminal

If you’re currently enabling different types of payments, you may be familiar with the terms “payment gateway” or “virtual terminal”. They are both utilized by business owners online so that they can process customer payments. But there are a few different things that each of these platforms excel at and fall short in when compared to each other.

  • Payment Gateways are Customer Facing

customer entering card information through a payment gateway

Whenever a customer is purchasing a product online without the help of someone else, it is through a payment gateway. This is the main difference between payment gateways and virtual terminals – and also why each of them are essential on their own.

No matter if your business utilizes them as an integrated piece on their site or allows the customer to be redirected off the site to complete the transaction- the gateway is the thing that supports the transaction of money from one account to another.

  • Your Website Shopping Cart Uses a Payment Gateway

Payment gateways on their own are not pretty. This is why they are typically hooked up to website shopping carts which are created with a better user experience in mind. Doing this makes them the most common form of payment for many customers.

But it is not the shopping cart look that defines the gateway. It is the processing power that the gateway provider, such as, has that makes it valuable for high volume businesses and nearly all online merchants.

It requires no time on the merchant end to enter the transaction or verify that it went through. So if a business sees thousands of purchases each day, it is one of the most valuable assets that they have.

Another perk to a payment gateway and shopping cart integration is that it is so simple to do so. Just one click and your merchant account provider is able to start facilitating transactions for the business.

  • Virtual Terminals are Merchant Facing

In comparison to payment gateways, virtual terminals are never in front of a customer. They are the backend platform that only the business and its employees can use. Because of this, eCommerce virtual terminals are very basic and have no significant design to them- they are completely about functionality.

  • Back End Processing Goes Through a Virtual Terminal

Just like a website has a backend, a virtual terminal functions in the same way. Never seen by the end-user but still holds a valuable piece to how well your business runs.

It is a powerhouse for processing because it is hooked up to your merchant account in the same way as your payment gateway. But as much of a powerhouse that it is, it still has drawbacks that cannot be ignored.

business owner entering customer info on her virtual terminal

The main issue that business owners have with this platform is that it does not scale well. You need someone manually entering the cardholder information in order to process the transaction. Without that manpower and the time it takes to key all of the information in, the virtual terminal is useless.

Specific businesses lean heavily on virtual terminals, while many do not due to this fact.

  • Mail Order Telephone Orders Use Virtual Terminals

The biggest reason that a business will use its virtual terminal is to process mail, email, and phone orders. These card-not-present MOTO transactions are steadily growing year over year and require the functionality of virtual terminals.

No other platform functions like a virtual terminal does, which is why it is often used in conjunction with payment gateways and POS systems for in-person transactions.

Gateways and Terminals are Very Similar

As you can see, both of these solutions allow businesses to safely and securely process payments. The main difference is that a payment gateway is connected to the shopping cart which is utilized by the customer. Whereas a transaction processed through the virtual terminal is input by the business owner or an employee. Businesses usually use both solutions for online credit card processing. In fact, many businesses prefer to have both abilities for full security and ease in their online credit card processing.

Utilize The Assets of Both Platforms

Enabling online payment gateways and virtual terminals is easier than you think. Whether you are a small business owner or running a franchise, these solutions will help make your payment processing easier and more secure. Additionally, if your industry is highly vulnerable to credit card fraud, payment gateways and virtual terminals can help add a sense of safety to payment processing.

Finding a virtual terminal and payment gateway provider can help you enable these solutions. By doing so, you’ll be one step closer to safe and secure payments.