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Virtual terminal (payment processing)

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A virtual terminal is a software application (often a web application) for merchants which allows them to accept payment with a payment card, specifically a credit card, without requiring the physical presence of the card (“card not present transaction”).[citation needed] They are called “virtual” terminals in contrast to the physical payment terminals used to process card payments when the payment card is present.

Use of virtual terminals

When a customer wants to pay with a card over the phone, a virtual terminal allows the person accepting payment (such as a call center agent) to enter the customer's credit card details to take a payment. Unlike when accepting payment with a regular payment terminal, the presence of the payment card is not required. The payment data is then automatically sent to the payment processor to handle the payment.

While the physical card need not be presented to the merchant (which would be impossible over the phone), the customer authorising the payment should still be in possession of the card. To verify this, the virtual terminal will often require the card security code to be entered, which the customer must supply. One alternative for merchants to having a repeat customer supply this information over the phone is to utilise a credit card vault. Some processors offer their merchants the use of a credit card vault to securely store their customers' card information.

Virtual POS allows for MO/TO payments, also called Mail request/Phone request transactions. MO/TO are suitable for organizations whose customers are far away and the

refore, are unable to present a credit or debit card physically. The process is also known as card non-present transaction and includes entering the customer's card details into the virtual terminal to handle the exchange.


Features of Virtual Terminals:

  1. Web-based Interface: Virtual terminals are accessed via a secure web browser, allowing merchants to process transactions using devices connected to the internet, such as computers, tablets, or smartphones.
  2. Manual Transaction Entry: Merchants manually enter customer payment information, including credit card numbers, expiration dates, and billing addresses, into the virtual terminal to process transactions.
  3. Recurring Payments: Virtual terminals often support recurring payment functionality, allowing merchants to schedule automatic billing for subscription services or installment plans.
  4. Payment Reporting: Virtual terminals typically provide detailed payment reports, enabling merchants to monitor transaction history, analyze sales data, and generate financial reports for accounting purposes.

Benefits of Virtual Terminals:

  1. Cost-effectiveness: Virtual terminals are generally more affordable than traditional POS systems since they do not necessitate specialized hardware or software installations.
  2. Flexibility: The web-based nature of virtual terminals allows merchants to process transactions from any location with internet access, making them ideal for remote or mobile businesses.
  3. Simplified Payment Processing: Virtual terminals consolidate multiple payment methods, such as credit cards and debit cards, into a single platform, streamlining payment processing.
  4. Improved Customer Experience: Virtual terminals enable merchants to accept payments in various scenarios, including over the phone, via email, or through an online invoice, providing customers with a convenient and secure payment experience.

Limitations and Considerations:

  1. Manual Data Entry: Virtual terminals require merchants to manually enter payment information, which can be time-consuming and prone to human error.
  2. Limited to Card-not-present Transactions: Virtual terminals are designed for card-not-present transactions, meaning they may not be suitable for businesses that primarily rely on in-person payments.
  3. Internet Dependence: Virtual terminals require an internet connection to function, making them potentially unsuitable for businesses operating in areas with limited or unreliable internet access.

Security and Compliance:

Virtual terminals must comply with the Payment Card Industry Data Security Standard (PCI DSS), a set of security requirements designed to protect cardholder data during payment processing. Key security measures include data encryption, tokenization, and secure storage, which prevent unauthorized access to sensitive information.

References

  1. Authorize.Net. (n.d.). Virtual Terminal. Retrieved from https://www.authorize.net/solutions/merchantsolutions/merchantservices/virtualterminal/
  2. Chen, J. (2021, July 30). What is a Virtual Terminal for Credit Card Processing? Investopedia. Retrieved from https://www.investopedia.com/ask/answers/122314/what-virtual-terminal-credit-card-processing.asp
  3. Payment Card Industry Security Standards Council. (n.d.). PCI Data Security Standard (PCI DSS). Retrieved from https://www.pcisecuritystandards.org/pci_security/why_security_matters
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