Businesses with customers located virtually everywhere need the capability to accept payments everywhere. Virtual terminals are an option for businesses to accept payments at the office or on the go. Customers don’t even need to be physically present to make a payment.
A virtual terminal is flexible and cost-efficient and while it may not be your primary payment channel, it’s a useful tool to have access to. Here we’ll cover all the basics of virtual terminals: who can benefit from them, how they work, and how you can use one in your business.
Why Use a Virtual Terminal?
A virtual terminal is a web-based software that allows businesses to accept payments by manually entering payment information. Virtual terminals are generally accessible through any device with an internet connection and a web browser. Unlike credit card terminals, there’s no hardware, which allows businesses to accept payments via over the phone, through email or fax, or in-person.
Many types of businesses can take advantage of a virtual terminal:
- Online retailers: Stores can accept and process payments from customers all over the world. Even brick-and-mortar stores can use a virtual terminal to accept phone or email orders.
- Service providers: Consultants, coaches, and other professional service providers can process payments remotely, often at the point of service.
- Mobile businesses or pop-shops: Businesses that operate in temporary locations can benefit from the portability of a virtual terminal. For instance, retailers exhibiting at trade shows can use a virtual terminal for in-person purchases.
- Non-profit organizations: Charities and religious organizations can use a virtual terminal to accept donations online, over the phone, or in-person at fundraising events.
- Subscription-based businesses: Businesses that run on a subscription or membership model can use virtual terminals to set up recurring billing.
- B2B companies: If your customers are other businesses, you can use a virtual terminal to accept large invoice payments.
Of course, this is just a short list of businesses that benefit from virtual terminals. Almost any business that needs to accept card payments could take advantage of the accessible payment software.
How Does a Virtual Terminal Work
A virtual terminal processes payments similar to a physical terminal. The difference is that businesses manually entering payment information rather than having a customer swipe their card. Here’s a breakdown of the payment process:
- Login Access: Merchants can access the virtual terminal through a web browser or mobile app. Many terminals include advanced security protocols like multi-factor authentication to keep consumer data safe.
- Transaction Detail Entry: Enter the product, service, or invoice description and amount. Some virtual terminals offer the functionality of both a quick charge option for streamlined processing or a more detailed itemized sale, providing businesses with flexibility in how they handle transactions.
- Payment Information Entry: Input the customer’s card or bank information and their billing address.
- Data Encryption: To ensure the security of the transaction, the virtual terminal encrypts customer and payment data before it is transmitted. Encryption converts the sensitive information into a code that can only be deciphered with the appropriate decryption key.
- Transaction Processing: After encryption, the virtual terminal connects to the payment processor or payment gateway to initiate the transaction. The payment processor verifies the payment details, checks for sufficient funds (for credit and debit cards), and performs fraud detection checks.
- Authorization: The payment processor sends an authorization request to the customer’s issuing bank (the bank that issued the card). The bank reviews the request and either approves or declines the transaction based on available funds, fraud risk, and other factors.
- Transaction Response: The payment processor relays the authorization response to the virtual terminal. If the transaction is approved, the funds are reserved in the customer’s account for later settlement. If the transaction is declined, the customer will have to provide another payment method to complete the transaction.
- Receipt Generation: Once the transaction is approved, the virtual terminal can generate and email a receipt for the customer.
- Settlement: The transaction isn’t complete until it’s settled, which involves transferring funds from the customer’s account to the merchant’s account. Some merchants opt to manually settle transactions in batches. Others use automated processes to complete the settlement.
Features of Virtual Terminals
In addition to payment acceptance, virtual terminals may come with a variety of other features that can help businesses manage their payments and customer data. Features vary depending on the provider.
- Multiple payment options: Virtual terminals support various payment methods, including credit cards, debit cards, e-checks, and even gift cards, giving customers flexibility in their transactions. Some terminal may even allow customers to split a transaction across multiple payment options.
- Recurring Billing: For businesses offering payment plans or subscription-based services, virtual terminals can automate recurring payments, saving time and effort.
- Reporting and Analytics: Virtual terminals often provide comprehensive reporting and analytics tools, allowing businesses to gain insights into sales trends, transaction volumes, and customer behavior.
- Integration Capabilities: Virtual terminals can integrate seamlessly with other business systems, like accounting software or customer relationship management (CRM) platforms.
The Pros and Cons
Businesses considering a virtual terminal should be aware of both the advantages and disadvantages of using the software. The disadvantages aren’t necessarily deal-breakers, but it’s important to understand them so you can plan around them.
- Convenience: Businesses can accept payments from anywhere, eliminating the need for physical payment terminals or specialized hardware.
- Cost-Effectiveness: Virtual terminals often have lower upfront and ongoing costs compared to traditional point-of-sale systems, making them a more affordable option for businesses.
- Flexibility: Businesses of all sizes and industries can take advantage of the the flexibility to accept payments in various environments.
- Manual Entry: Having to manually enter payment details can be time-consuming, especially for businesses with a high volume of transactions.
- Internet Reliance: A stable internet connection is necessary to process transactions. Any disruptions in connectivity could impact payment processing capabilities.
- Security and Compliance: The manual nature of virtual terminals means businesses have to put more effort into data security and becoming PCI compliant.
Getting Started with a Virtual Terminal
Businesses that primarily operate from a computer, like attorneys or property managers, may find it useful to have a virtual terminal for accepting payments. HealPay’s cloud-based V-TERM offers easy-to-use payment forms, user management controls, data encryption, and more. Check out our virtual terminal features or contact us to learn more.