Virtual terminal payment processing offers a centralised way to process debit and credit card payments anytime, anywhere. Virtual terminals function online, eliminating the need to purchase additional software and hardware to accept payments even in a brick-and-mortar store.
If you regularly process mail orders and telephone orders, or simply want a backup in case your regular system fails, understanding how virtual terminal payments work and the additional features that they offer can help you decide whether this payment processing tool is right for you.
What Is a Virtual Terminal?
As the name suggests, a virtual terminal is a payment processing terminal that operates online rather than via a physical point-of-sale system that’s hardwired to the landline telephone network.
To use a virtual terminal, you simply:
- Sign in to your payment processing account.
- Manually key in the customer’s credit card information or bank account details and the payment amount into the form.
- Click on the payment button to process the transaction.
- The terminal will then encrypt this information and send it through a secure global payment gateway to the card and banking networks for authorisation.
If desired, you can also connect a card reader to your computer, tablet or mobile phone so that customers can swipe, dip or tap their cards. When the reader is used, you won’t need to enter the customer’s card details manually.
How Much Does a Virtual Terminal Cost?
You’ll usually get a free virtual terminal with your subscription to a payment processing company’s services, whether that’s a merchant aggregator like Block (formerly Square) or a dedicated merchant account provider like Unicorn Group. While you might pay a monthly fee for merchant services, you won’t pay for software because the software is hosted online.
Transaction Fees When Using a Virtual Terminal
Processing credit card and debit card payments through a virtual terminal typically comes with higher per-transaction fees than using a card reader because keyed-in payments are considered card-not-present transactions (CNP transactions), which are less secure and present a higher level of risk.
As an example, Stripe’s EU card-present transaction fees are 1.4% + €0.10 whereas their card-not-present transaction fees are 1.5% + €0.25. Cross-border transactions, rewards cards and buy-now-pay-later transactions come at an even higher cost.
Now, if you need to accept remote payments because of the nature of your work, the higher processing fees for CNP credit card processing may be worth it compared to waiting for a cheque in the mail or risking the loss of the sale.
- Delivery and curbside pick-up businesses can use a virtual terminal to charge customers over the phone before the goods are dispatched—eliminating the risk of not being paid upon delivery.
- Automotive garages can charge clients over the phone during business hours, giving the customer the flexibility to pick up their vehicle in the evening after the garage’s administrative staff have gone home.
- Freelancers who work remotely can charge clients over the phone and receive payment in one or two days rather than waiting to receive a cheque.
- Door-to-door salespeople, multi-level-marketing consultants and people who sell merchandise at conferences and events can accept payments then and there rather than risk losing the sale.
Takeaway: If you often charge via telephone, fax or mail order, a virtual terminal will boost your sales compared to relying on paper cheques. However, if you plan to use a virtual terminal as your regular point-of-sale system in a physical store, consider buying a card reader to connect to the virtual terminal so that you can take advantage of card-present rates and lower your processing costs.
Other Capabilities of a Virtual Terminal
In addition to processing credit card transactions from your computer or mobile device, virtual terminals enable you to:
- Register payments by cash and cheque
- Process electronic bank transfers and other alternative payment methods
- Utilise CVV, AVS and two-factor authentication to verify customers’ cards
- Generate text, email and print receipts
- Set up recurring payments from regular customers
- Issue refunds for items that have been returned
- Feed transaction data into your accounting software program
- View a given customer’s purchase history
- Generate sales reports
- Gather customer contact details for SMS and email marketing (remember to give customers the choice to opt out)
Pros and Cons of Virtual Terminals
Like any technology or tool, virtual terminals have advantages and disadvantages and will be more suitable for some merchants than others.
- Virtual terminals have a low upfront cost.
- Using a cloud-based terminal to register all of your transactions centralises payment processing for a complete data set.
- You can accept credit and debit cards anywhere that you have an internet connection.
- You can process returns on the spot.
- You can set up recurring billing quickly and easily.
- You’ll save time entering transaction data into your accounting system manually.
- A virtual terminal can be paired with a card reader for in-person payments.
- A stable internet connection is required when using a virtual terminal.
- Card-not-present transactions come with higher fees.
- You’ll still need a cash register if you accept payments in cash or by cheque.
- A cloud-based system can make transaction data visible to hackers (although customers’ card details are tokenised, which according to data from Visa, can reduce fraud by around 26%).
To work around these limitations, it’s a good idea to have a manual backup system for payments such as the systems we recommend in our article on how to handle a credit card processing outage. You can also download transaction data onto your hard drive as a backup in case the internet is down.
As far as security, there are measures you can take to keep your account safe, like choosing a strong password (and changing it frequently) and limiting employee account access to checkout functions only.
What to Look For When Choosing a Virtual Terminal Provider
So, you’ve decided to try a virtual terminal? Congratulations! We’re confident you’ll have a great experience. When you’re looking for the best virtual terminal merchant account for your needs, look for a provider that:
- Is PCI-DSS compliant
- Securely encrypts transaction data using SHA-256 encryption
- Tokenises card details before sending them through the payment gateway
- Offers fraud and chargeback prevention tools
- Offers a wide variety of payment methods
- Has a highly responsive customer service team
- Provides sales reports and financial analytics to help you grow your business
Reduce Your Upfront Costs and Increase Your Sales with Virtual Terminal Payment Processing
Whether you use a virtual terminal as your main payment processing tool or have it as a backup in case your point-of-sale hardware system malfunctions, you should find that it’s easy to use, doesn’t add much (if anything) to your payment processing bill and allows you to do everything you need to do.
If you need more information about virtual terminals and how they compare to other payment systems, it’s a good idea to talk with a few different merchant account providers and clients who have used these providers’ systems. This will give you a better idea about the pros and cons of virtual terminals and help you work out which system might be best for you.