The Difference Between a Virtual Terminal and a Payment Gateway

The payment processing system behind a virtual terminal and a payment gateway both permit merchants to accept credit cards over the Internet.  In both cases, the customer card information is passed from either the virtual terminal or the payment gateway in an encrypted format through a complicated network to ultimately reach the customer’s issuing bank for instant approval. The result is then routed back to the merchant and customer who find out in real-time whether the payment is approved or declined.  But there are also differences between the two.

Virtual terminal

A virtual terminal is an electronic or web version of an physical credit card terminal such as you would typically find at a point of sale. It is a software application that is hosted on a merchant card service provider’s servers and is accessed from any Internet connected web browser of the merchant.

A virtual terminal is integrated with the existing software of businesses that sell online. A virtual terminal does not have a physical card reader and can process card-not-present transactions. Merchants manually input their customers’ card details into the virtual terminal to process card payments for mail order, telephone, or walk-in customers.

Payment Gateway

A payment gateway is accessed through a merchant’s website when a customer submits an order online.  The customer enters their own credit card information, and the payment gateway immediately encrypts the details. The encrypted information is passed through to the banking network for processing by the merchant bank and the card issuer’s bank.

What is the difference?

The main difference between a virtual terminal and a payment gateway is that the merchant enters the card details into a virtual terminal and the customer enters the card details into a payment gateway.

Both virtual terminal and payment gateway services are provided to the merchant by their merchant account services provider.  A payment gateway is required in order to accept credit cards online from a merchant’s website, whereas a virtual terminal is typically used for telephone, mail-order, or face-to-face sales. Thus, by having both a payment gateway and a virtual terminal, a merchant can accept credit cards for any kind of transaction at all.  Both options operate in real-time, and a merchant knows immediately after processing the card details whether a transaction has been approved or declined.

There are also other benefits for merchants who use virtual terminals and payment gateways. These include integration of payment information with their existing accounting system and tools to automatically screen orders for fraud. Tools to detect fraud include geolocation, velocity pattern analysis, OFAC list checks, blacklist checks, delivery address verification, computer fingerprinting technology, identity morphing detection and AVS check.

For more information about virtual terminals and a payment gateways, or to open a merchant account, please call (888) 924-2743 or go to


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