By cardaccept March 25, 2025
In today’s digital world, businesses have more ways than ever to accept payments, but choosing the right payment solution can be tricky. If you’ve come across terms like virtual terminals and payment gateways, you might be wondering: What’s the difference, and which one do I need?
A payment gateway is the go-to solution for online businesses—it’s what powers secure checkouts on websites, mobile apps, and eCommerce platforms. It automates transactions, encrypts sensitive payment data, and makes online shopping seamless for customers.
A virtual terminal, on the other hand, is a more hands-on approach. It’s a web-based tool that lets businesses manually enter card details, making it perfect for phone orders, email invoices, and payments where customers aren’t present.
While both tools serve the same ultimate purpose—getting you paid—they work in different ways. In this guide, we’ll break down how they work, their pros and cons, and which one best suits your business needs.
What Is a Payment Gateway and How Does It Work?
A payment gateway is the digital equivalent of a checkout counter, allowing businesses to securely accept online payment. Whether customers pay with credit cards, debit cards, or digital wallets like Apple Pay and Google Pay, the right payment gateway for your business ensures a smooth and secure transaction process.
When a customer enters their online payment details, the gateway encrypts the information for security and sends it to the payment processor. The processor then communicates with the customer’s bank to approve or decline the transaction. If approved, the funds are transferred, and both the business and customer receive confirmation. Payment gateways can be integrated into websites, mobile apps, or used via direct payment links, making online transactions fast and hassle-free.
The Key Benefits of Using a Payment Gateway
Payment gateways are essential for businesses looking to streamline transactions and provide a seamless payment experience for their customers. They offer numerous advantages that enhance efficiency, security, and global reach.
Better Customer Experience
Today’s shoppers expect fast, secure, and convenient payment options. A payment gateway allows customers to make purchases anytime, anywhere, using their preferred payment method—whether it’s a credit card, debit card, or digital wallet. A smooth and hassle-free checkout process leads to higher customer satisfaction, encouraging repeat business and fostering long-term customer relationships.
Stronger Security Measures
Protecting customer payment information is a top priority, and payment gateways come equipped with advanced security protocols. They use encryption and fraud detection tools to safeguard sensitive financial data, reducing the risk of fraud and unauthorized transactions. By providing a secure transaction environment, businesses can build trust and encourage customers to complete their purchases with confidence.
Faster Payment Processing
Unlike manual payment handling, which can be slow and error-prone, payment gateways automate transactions, significantly speeding up the checkout process. This not only improves the customer experience but also ensures that businesses receive funds more quickly, helping with cash flow management.
Access to Global Markets
For businesses looking to expand internationally, payment gateways support multiple currencies and cross-border transactions. This allows companies to accept payments from customers around the world, providing a more localized shopping experience and increasing their potential customer base.
Incorporating a payment gateway into your business operations can drive efficiency, boost customer satisfaction, and enable secure, seamless transactions. Whether you’re operating locally or scaling globally, a payment gateway is a crucial tool for modern digital commerce.
What Is a Virtual Terminal and How Does It Work?
A virtual terminal is a secure online dashboard that allows businesses to process payments manually, making it especially useful for phone or mail orders. Unlike a payment gateway, which is customer-facing, a virtual terminal is used by merchants to enter transaction details on behalf of customers.
Accessible from any internet-connected device, a virtual terminal allows businesses to input card information, process one-time or recurring payments, and manage transactions without the need for a physical card reader. Advanced features often include fraud detection, automated payment retries, and detailed reporting tools, helping businesses streamline operations while ensuring secure and efficient transactions.
Benefits of Using a Virtual Terminal for Payments
Virtual terminals provide businesses with the ability to process transactions anytime, anywhere, making them a valuable tool for those who need flexibility in payment processing. However, like any payment method, they come with both advantages and risks.
Convenience
Virtual terminals provide unparalleled ease of access since they work on any device with an internet connection. This means businesses can process payments seamlessly whether they are in an office, at home, or on the go. Unlike traditional payment methods that require dedicated hardware, virtual terminals eliminate the need for physical card readers, making setup simple and cost-effective.
Additionally, businesses can streamline transactions by integrating virtual terminals with accounting or inventory management software, reducing administrative workload and improving efficiency.
Flexibility
Virtual terminals accommodate a wide range of payment scenarios, making them an adaptable solution for different business needs. They can handle:
- In-person transactions where a merchant manually enters card details.
- Phone orders for customers who prefer to provide payment details verbally.
- Email invoices that enable businesses to send digital payment links, allowing customers to complete transactions at their convenience.
- Mail-in payments, which are useful for customers who prefer to send checks or card details via mail.
This versatility makes virtual terminals an ideal choice for businesses that operate in multiple sales channels, such as retail, hospitality, healthcare, and professional services.
Preventing Lost Sales
One of the most significant benefits of virtual terminals is their ability to ensure businesses never miss a sale due to payment restrictions. With traditional point-of-sale systems, businesses might lose revenue if customers are unable to pay in person or during non-business hours. Virtual terminals solve this problem by enabling remote payments, allowing customers to complete transactions anytime and from anywhere.
This is particularly beneficial for service-based businesses, subscription models, and industries with clients in different time zones. Additionally, by offering more payment options, businesses can cater to a broader audience, improving customer satisfaction and boosting revenue.
Virtual terminals provide businesses with a flexible and convenient way to process payments, but they also come with security risks. Unlike chip-and-PIN or contactless payments, which use encrypted transactions, virtual terminals require manual entry of customer payment details. This makes card-not-present (CNP) transactions more vulnerable to fraud and data breaches.
Additionally, the lack of physical card verification increases the risk of chargebacks, where customers dispute transactions, potentially leading to financial losses. To mitigate these risks, businesses should implement robust security measures such as encryption, fraud detection tools, and strict access controls to ensure safe and secure transactions.
Virtual Terminal vs Payment Gateway
A payment gateway and a virtual terminal both facilitate online transactions, but they serve different purposes. Both require a merchant account, which connects to your business bank account and ensures seamless fund transfers. A payment gateway is primarily used for eCommerce transactions, integrating with your website to securely transmit payment data to the processor. This automation streamlines online sales, reducing the need for manual data entry.
In contrast, a virtual terminal allows businesses to manually enter customer card details, making it a practical solution for phone or mail orders where payments aren’t processed through a standard checkout page. While both tools enhance payment processing, a gateway is ideal for automated online transactions, whereas a virtual terminal is best for handling payments that require direct merchant input.
Which Is the Right One For You
Deciding between a payment gateway and a virtual terminal depends on how your business handles transactions. A payment gateway allows customers to enter their card details online, making it ideal for eCommerce businesses that want an automated checkout experience. On the other hand, a virtual terminal lets businesses manually input card details, which is useful for phone or mail orders.
However, a virtual terminal cannot function without a payment gateway, as it relies on the same processing system to complete transactions. Many merchant service providers offer both as part of a bundled solution, ensuring businesses can accept payments in multiple ways. If your business operates purely online, a payment gateway is all you need. But if you also handle phone payments or process transactions manually, a virtual terminal can be a valuable addition.
Conclusion
Both virtual terminals and payment gateways are valuable payment solutions, but they serve different needs. Payment gateways are ideal for automated online transactions, while virtual terminals allow businesses to manually process payments, making them great for phone and mail orders. Many businesses benefit from using both to maximize flexibility. Choosing the right solution depends on how you handle transactions, but combining both can ensure seamless, secure, and efficient payment processing.