Payment Gateway vs. Merchant Account
Know the Difference

If you are a merchant planning to start accepting credit card payments, it is pertinent to understand the key terms associated with payment processing solutions such as a virtual terminal, payment gateway, etc. In this post, we will learn about the difference between a merchant account and payment gateway. While both services have a lot of similarities, knowing the difference between the two before you set up your merchant account will help you determine the best methods to accept credit card payments for your business.

Payment gateway: Well, a payment gateway works quite like the credit card terminal at a physical (brick and mortar) store. Just think of the payment gateway as an online POS (point of sale) terminal. While traditional payment gateways let merchants accept to accept payments online, modern payment gateways allow them to accept payments via all channels and that includes POS systems and software integrations as well.

This is how payment gateways work:

Step #1

A credit card is dipped/swiped at a terminal or entered manually into a shopping cart or a hosted payment form.

Step #2

The gateway encrypts the information on the customer’s credit card and forwards it to the credit card payment processors. The payment processing solutions provider routes the payment details via credit card network to the card-issuing bank.

Step #3

The bank can approve/reject the transaction based on the available funds.

Step #4

The payment processing company conveys information about the authorization/decline to the payment gateway which notifies the customer and the merchant of the decision.

Having understood what a payment gateway is and how it works, it is important to learn about the virtual terminals as well.

Virtual terminal for merchants: A virtual terminal allows merchants to accept credit cards, debit cards, e-checks, and ACH payments through a computer, tablet, or smartphone with data or internet connection for secure processing of payments.

This is how a virtual terminal for merchants works:

Step #1

The merchant logs in to the online account or payment gateway for accessing the virtual terminal.

Step #2

Credit card, debit card, or checking account details are entered in a form for each transaction.

Step #3

The merchant clicks on the “Process” button for completing the transaction.

Step #4

There is no need for additional hardware or software. However, a merchant may connect an EMV-enabled card reader through USB to a laptop or desktop, if desired.  

Virtual terminals and payment gateways

The main difference between a payment gateway and a virtual terminal is: payment gateways are used for online transactions. Hence, there is a customer-facing interface such as a shopping cart checkout form or a hosted payment form. Typically, only merchants use virtual terminals. However, many businesses use virtual terminals as well as payment gateways if they have an online presence (e-commerce site/app) and a physical (offline) store.

Merchants can accept credit, debit, gift cards, and ACH payments online through a secure payment gateway. The payment gateway also enables accounting software integration, recurring billing, and more. On the other hand, a virtual terminal facilitates mail and telephone order sales (MOTO) and off-site events. Merchants end up saving their money because virtual terminals don’t require any additional hardware.

Get your merchant account to start using a virtual terminal for merchants…

As a merchant, you need payment processing solutions and virtual terminals to accept online and offline payments. To use virtual terminals and payment gateways, you must, first of all, have a merchant account. Other than this, the benefits of having a merchant account for merchants include:

Traditional payment processing solutions and payment gateways are ideal for mobile and e-commerce retailers. However, they can be used by other merchants of other types as well for providing a smooth buying experience across all channels such as:

Whether you are a small business, a startup owner looking for selling your goods and/or services online, or a mobile business owner in need of on-the-go payment processing solutions, you need a merchant account to enjoy the benefits of a virtual terminal and/or a payment gateway.  

Looking for a merchant account and/or
payment processing solutions provider?

With Payment USA’s merchant account, payment processing solutions, and virtual terminals, merchants can take their business to newer heights of success by making payments & transactions faster, easier, and securer. For more information, you may reach out to the merchant account and payment gateway specialists at Payment USA.

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