In 2021, e-commerce retail sales totaled $5.2 trillion U.S. dollars worldwide. This figure is expected to grow by 56 percent over the next three years, reaching $8.1 trillion by 2026.  If you’re looking to integrate payment solutions into your e-commerce business, the jargon used in payment processing can be confusing.  

Individuals often find it difficult to differentiate between a payment gateway and a virtual terminal, two of the most common terminologies. You must understand the similarities and differences, what they do, and how they interact before deciding on which to use. To better understand them, let’s delve into the definitions and characteristics of each. 

The difference between payment gateway vs. virtual terminal 

What’s a payment gateway? 

A payment gateway is a solution used by customers to make payments on e-commerce websites. The payment gateway market is valued at $22.8 billion and is expected to reach $52.8 billion over the next five years. They’re integrated into a business’ website and used in conjunction with checkout and shopping cart solutions. 

Here’s how a payment gateway works:  

1. The gateway obtains data from a virtual terminal, authenticates it, and routes the information to the payment processor.  

2. The payment gateway allows customers to input their cardholder data and complete an online purchase or payment transaction. 

3. Customers add items to their cart, proceed to the checkout, and are prompted to key in their credit card information.  

4. Once entered, the card information is encrypted and sent through the payment gateway for processing at the merchant bank.  

5. Lastly, the customer’s bank authorizes the payment/charges, and the payment gets sent to the merchant’s bank account. 

Payment gateways can function without a virtual terminal, but those transactions are only accepted from the customer end. There are payment gateways that come with additional capabilities, such as real-time notifications, instantaneous payment authorization, and cloud reporting. 

Most payment gateways support all kinds of transactions, including authorization and capture, authorization only, refunds, and voids. When used with a virtual terminal and POS system, a payment gateway offers secure processing for all business needs. 

What’s a virtual terminal? 

A virtual terminal is a facilitator of internet-based electronic payments. It allows individuals to process transactions with computers or devices with an internet connection. Usually, you log in to a secure web page with your credentials and process payments using the built-in merchant dashboard. This dashboard is similar to a card reader or physical swiper. The difference is the card data must be entered manually instead of swiping or reading the card’s chip. 

Virtual terminals usually come with smart options such as insightful reporting, automatic recollections, real-time validation of transactions, or recurring transactions. Most virtual terminals can process credit card payments, but some have additional capabilities, such as processing electronic checks and using fraud prevention tools. The virtual terminals market is expected to reach $34.71 billion in 2026 at a CAGR of 34.6%. 

Comparison of payment gateways and virtual terminals 

Both payment gateways and virtual terminals are internet-based and require individuals to create a merchant account to accept funds. It’s also linked to a normal business account so that business owners can withdraw their funds. The merchant account is also required for the backend processing of transactions and the transfer of funds to your bank account. 

Before a business or individual can process or receive electronic payments, a payment gateway must be integrated with the website. This allows payment card data to be routed to the processor. The merchant could do this manually, but the stress of continuously keying customer card data can be overwhelming. 

The benefit of having a virtual terminal is that it enables merchants to enter card data themselves. This feature is helpful in cases where the source of the electronic payment is not a checkout or shopping cart. Merchants can obtain card information from their customers and then use the virtual terminal to take payments. 

How PAYARC can help streamline your payment processing operations 

PAYARC can streamline your operations by integrating with multiple payment gateways, automating billing and invoicing, detecting, and preventing fraud, providing robust reporting and reconciliation features, and offering customization and flexibility. This can help reduce costs, improve efficiency, and enhance the customer experience. 

We want to help you streamline your payment processing operations. Reach out today to get started! 

Finding the right payment processing provider is a bit like preparing for a Black Friday sale. It takes due diligence and the right knowledge to look past flashy offers. A great provider doesn’t just provide services; they help determine the best ways to streamline payments and grow your business. It’s important for any business to stay on top of the latest credit card processing tips. 

Why is credit card processing important? 

Credit card processing is a crucial aspect of running a successful business. It’s essential to understand the best practices and strategies for processing payments efficiently, securely, and cost-effectively. Whether you’re a seasoned entrepreneur or just starting out, it’s important to know how to streamline your payment processing. Knowing how to streamline your payment processing will ensure a smooth experience for both you and your customers.  

8 Credit card processing tips to change the future of your business 

To help you create the best payment process for your business, we’ve identified eight credit card tips that are sure to help you make more sales.

Weigh convenience against cost 

The first of the many credit card processing tips to write home about is weighing convenience against cost. For example, all-in-one services like Quickbooks seem great, but they come with a price tag. Quickbooks is designed to work only with other Inuit software, and Intuit’s merchant services charge premium rates.  

Inuit also expects users to pay tiered rates for their services and doesn’t offer interchange plus pricing. Many card processors offer integrated plugins for Quickbooks but have a varied success rate and may require extra steps. If you’re considering using Intuit/Quickbooks software to process payments, ask yourself if convenience is worth the cost. You wouldn’t be alone, as 18% of small businesses don’t use accounting software. 

Look for competitive interchange rates 

It used to be hard to get competitive interchange pass-through processing rates unless they had a high sales volume. Luckily, times have changed.  

Look around carefully for competitive interchange rates as you shop for a processor. You can even get free, instant credit card processing quotes to determine your own eligibility. If your business makes physical payments where you accept cards in-person, the average interchange rate is around 1.71%. If you’re an eCommerce business, your average interchange rate will be about 1.91%. 

Follow PCI DSS guidelines 

PCI DSS (Payment Card Industry Data Security Standard) are guidelines set by credit card companies. Because businesses are liable for losses of cardholder data, PCI DSS guidelines help merchants safeguard customers’ banking information. Lack of PCI compliance can result in huge fines if the information is leaked or stolen.  

Know your PCI standards and make sure both you and your processor remain compliant. Following PCI DSS guidelines isn’t just one of the credit card processing tips to follow, it’s necessary for all merchants. Typically, PCI DSS compliance costs small businesses $300 per year, while large businesses may spend up to $70,000 or more. 

Don’t confuse “low rate” With “best deal” 

A low rate doesn’t always mean the best deal for your business. Low rates and interchange pass-through prices are great, but that’s only part of the best processing solution. Get a credit card processor that can help your business get and keep low interchange charges with interchange optimization. The feature alone will save you in the long-term and is well worth a small markup. 

Use knowledgeable sales representatives  

A good sales representative should be able to help set up your merchant account with everything needed. That includes the right sales volume, ticket declarations, and lowest interchange rates. Many credit card processors only teach sales representatives the bare minimum about merchant accounts, which results in serious errors. Look for Independent Sales Organizations (ISO) with knowledgeable sales teams and avoid working with ignorant sales representatives.  

Be prepared for chargebacks 

Every business should have a thorough chargeback prevention plan in place to maintain an acceptable level of chargeback ratio. Having a high chargeback ratio (1% or more) can get a merchant account canceled and funds withheld. Chargebacks can be issued for up to six months, so it’s important to keep previous order information handy as evidence. 

Keep up with interchange updates 

Visa, MasterCard, and Discover have interchange updates twice each calendar year. These updates can include adjustments to rates, fees, and guidelines. It’s important not to assume that interchange “updates” means higher fees and tightened guidelines. Instead, keep up with any changes in case they offer better options for your business.  

Understand your statements 

Statements can be confusing, but it’s important to understand them so you can evaluate your processor’s rates and fees. Processors also often post important changes on the first page of your processing statement. If you’re not sure how to read your statements, contact your sales representative for assistance. 

Stay up-to-date with credit card processing tips 

PAYARC provides payment processing solutions to all types and sizes of merchants. We understand the challenges of managing a business and give our merchants the latest technology and payment options. This helps them so they can focus on what’s important — growing their businesses. Our payment processing solution offers the tools needed to accept payments online and lower the risk of fraud.  

Contact us today to get started on growing your business!  

‍ 

In the era of omnichannel commerce, merchants need to streamline their payment capabilities across every touchpoint. Brick-and-mortar, webpages, apps, and mobile pay — no matter what the touchpoint is, integration is key. Today’s customers will not tolerate delays, and in competitive marketplaces, there are hundreds of retailers waiting to scoop them up. 

What’s the importance of payment processing? 

If you’re wondering, “what’s the importance of payment processing?” let’s look at an example. No retailer wants to inform their customers that it’s “taking longer than usual to process payments.” This happened on Black Friday and it’s possible for any merchant that isn’t staying on top of payment processing operations. 

Not only can you not afford to make payments an afterthought, but it should be your competitive edge. Merchants who prioritize payments and provide excellent customer experience will snag a bigger piece of the pie. 

5 tips to master payment processing 

We’ve outlined some tips to provide insight into the importance of a payment processing provider and how it can help accommodate growing customer expectations and payment technologies.

Market your security 

According to IBM security, data breaches cost businesses an average of $3.86 million globally. It’s no surprise that hearing “data breach” is scary to customers — they threaten their sense of security and their identity. The bottom line? No one wants to shop with a retailer perceived to have relaxed (or no) security measures in place. This is especially true for online merchants that have the added risk of card-not-present transactions. Using multi-factor authentication and other prescribed security measures can help show consumers that you’re secure and that they’re protected. 

Get ahead of cart abandonment  

Online shoppers can start to get anxious about a purchase long before they pull their card out of their wallet. According to Baymard Institute, the average cart abandonment rate is 69.57%, resulting in approximately $18 billion in sales lost yearly. Long checkout processes and forms make online shoppers more likely to abandon their carts.  

Shorten the path to purchase with:

• Eliminating unnecessary form fields 
• Offering explanations of why certain fields are required (question marks that pop up into info boxes would suffice) 
• Not requiring registration for purchases 
• Having a progress bar on the screen so shoppers can see how far they are in the checkout process 

Speed up transactions  

In a post-EMV world, many brick-and-mortar retailers are concerned with the transaction time for new chip card readers. The goal is to have faster card-terminal speeds, allowing the cardholder to insert their card for only a short time. This’ll make the experience like the “swipe” method and decrease the possibility of someone forgetting to remove their card. Merchants should speak to their POS application software vendors as there are several ways to achieve faster transactions.  

Offer convenience for customers  

Mobile order and pay has gained momentum, particularly in the food and beverage industry. Allowing customers to order, pay ahead, and pick-up in-store makes the experience faster, easier, and more enjoyable. Having a seamless mobile experience built with the end-user in mind is key when it comes to this capability.  

Optimize your online gateway 

Online gateway optimization is important for payment processing for several reasons: 

• Improved customer experience: Retailers can ensure a quick and seamless checkout process, reduce frustration, and increase customer loyalty. 
• Increased sales: Provide a fast and convenient checkout experience to increase the number of completed transactions and revenue. 
• Improved payment flexibility: Offer a range of payment options and accept multiple currencies to increase payment flexibility and accommodate the diverse needs of your customers. Optimizing online gateways can help ensure customers that they can pay using their preferred method with ease. 
• Increased mobile commerce: Optimizing online gateways for mobile commerce has become increasingly important. A mobile-friendly checkout process can help increase the likelihood of a successful transaction and improve customer satisfaction. 

So, what role does PAYARC play in all of this? 

PAYARC plays a crucial role by offering a payment processing solution that meets the needs of businesses of all sizes. With 24/7 customer support, advanced security features, and all-in-one integrations, PAYARC provides seamless experiences for both merchants and customers. Whether starting out or looking to upgrade your existing system, PAYARC has the tools you need to succeed.  

Are you ready to become a master of your payment processing? Talk to one of our experts to get started today!