Virtual terminals and payment gateways explained
The following is a guest post (contributed article) by John Rampton, founder and CEO, Due.
The payment processing world is quite complex. This is especially true for all the fancy jargon thrown around the industry. If some of these terms are confusing to you, don’t worry you’re definitely not alone. If you’re shopping around for an online payments solution, it’s probably in your best interest to touch up on a few of these terms.
To simplify things a bit, lets break down two common types of merchant processing services: virtual terminals and merchant gateways. Here’s how to distinguish between the two and how to get started with each.
Virtual Payment Terminals
A virtual terminal is basically an online facilitator of electronic payments. The terminal allows merchants to key in and process transactions using a computer or other electronic device. Most payments providers will offer a virtual terminal through a standard web browser that is typically referred to as the merchant dashboard. Think of this terminal like an online version of a physical card reader you’d see in any brick and mortar store.
A huge bonus of virtual payment terminals is that they typically come jam-packed with awesome features. They’ll typically provide in depth reporting, real-time transactional data, recurring transactions, and much more. Nearly all virtual terminals process credit cards, however some are now able to process electronic checks and even take digital wallet payments.
A merchant gateway facilities the flow of money to and from the processor. The gateway will take data from the virtual terminal, verify it, and then hand it off to the processor. The processor is the next in line after the payment is verified by the merchant gateway.
Payment gateway’s are typically integrated into your website using an API or shopping cart plugin. These gateway’s work hand in hand with virtual terminals as they allow the customer to easily complete transactions on your website.
Similar to virtual terminals, these gateways offer a plethora of added features as well. These include fraud prevention tools, real-time reporting, and most of all highly secure payment processing.
Which Do You Need?
If you’re looking to process payments, you’ll need a merchant gateway included in your payments solution. For nearly all online payments a payment gateway is required. The gateway allows you to seamlessly pass the transactional data onto the processor. This can be done manually, but unless you’re looking for a headache it’s best to automate this.
Virtual terminals are very helpful when processing payments because they give you a means of entering merchant data yourself. In the event that a payment is being made through a shopping cart plugin or checkout solution, you’ll need to have access to a virtual terminal. With these terminals you will have the option to take payments manually, like over the phone or even in person on a mobile device.
Long story short, you’ll probably want both a merchant gateway and a virtual terminal included in your payments solution.
How Can You Get Started?
Both of these solutions will require you or your business to create a merchant account. Merchant accounts are typically offered in an all-inclusive payments solution. A merchant account is a bank account that is designed specifically for deposits from electronic payments. The merchant account will be linked to a designated bank account where you will be able to access your funds. If you’re looking to process online payments a merchant account is typically required. In order to obtain one, you’ll need to submit a merchant application and go through an underwriting process.
Next, you’ll need to inquire with your potential payments providers in regard to their offerings. While the majority will offer packages that contain both gateways and virtual terminals, it’s never safe to assume. For business owners looking for the right payments platform it’s important to ask the right questions. Start by getting a good understanding of the different packages offered and the pricing of each. Every business has different needs, so shop around a bit before settled on a solution.
It will surely take time before you’re well versed in payments terminology. Like any other aspect of business, it’s extremely important to educate yourself on these topics. Now you’ll know what it means when you hear the terms payment gateway and virtual terminal.
About the Author
John Rampton is an entrepreneur, investor, online marketing guru, and startup enthusiast. He is the founder of the online invoicing company Due. John is best-known as an entrepreneur and connector. He was recently named #2 on Top 50 Online Influencers in the World by Entrepreneur Magazine and a Blogging Expert by Time. He currently advises several companies in the San Francisco Bay area.