Virtual terminal (payment processing)
A Virtual terminal or Virtual POS terminal is a software application (often a web application) used merchants to accept payments with a payment card, specifically a credit card, without requiring the physical presence of the card ("card not present transaction").[1][2][3] 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 centre 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.
Security & Fraud
The Payment Card Industry (PCI) has strict standards for taking card-not-present transactions in order to ensure security and to limit liability for fraudulent transactions. By complying with these standards, both merchants and customers are safe to make phone or other related virtual transactions. This will be the case if the merchant has applied standard security measures, while the customer has checked that the merchant, they are paying is a legitimate business. Merchants should also ensure that the cardholder information received is legitimate, as they could face significant chargeback fees from their payment provider. Chargebacks are fees imposed by payment providers on merchants for fraudulent transactions. Payment providers tend to charge higher fees for virtual POS terminals due to the extra layer of security required to prevent fraud.
In the UK, losses from card-not-present transactions amounted to 205.5 million GBP in the first half of 2017. This indicated a 19.7% increase on figures from 2015. Of this amount, 154.5 million GBP was from e-commerce as well as mail and telephone orders. Furthermore, card-not-resent transactions in the UK represent 72% of total credit and debit card fraud. These figures have been on the rise over the past decade.[4]
In order to identify high-risk transactions or suspicious activity, merchants can implement fraud screening tools. Visa and Mastercard are two major card networks which provide the services for "authenticating the card in CNP environment".[5]
Verified by Visa is one type of service for authenticating the identity of registered cardholders when making a payment over the Internet.[6] This service offers the merchant’s site or payment gateway additional software which recognizes the customer’s card. If the card is registered with the Verified by Visa service, the software will prompt the owner to enter a password known by the owner, as it was created when the card was registered. Mastercard offers a similar service called Mastercard SecureCode. Meanwhile, American Express’ solution is called SafeKey.[7][8] Through these authentication methods, the liability for fraud shifts from the merchant to the card issuer, thereby reducing chargeback fees.
Address Verification Service (AVS) is another method of improving security for virtual POS transactions.[9] This service is usually carried out by the card issuer through telephone authorization during the CNP transaction and helps merchant to determine if the transaction is valid by checking elements of the cardholder’s billing address and validating it. This is one of the most common ways of reducing online credit card fraud in the US, while this service is limited to the UK in Europe.
Some Companies offering Virtual terminal services
See also
References
- ^ "Payment Processing: Virtual Terminal for Merchants - PayPal US". www.paypal.com. Retrieved 2018-12-21.
How does Virtual Terminal work? 1. You log into Virtual Terminal. When you're ready to process a payment, go to PayPal.com and log into your account. Click on Virtual Terminal. 2. You enter the order. Enter the order details and credit card information. 3. You complete the transaction. You'll receive confirmation for successful transactions.
- ^ "Virtual Terminal Credit Card Processing | First Data". www.firstdata.com. Retrieved 2018-12-21.
- ^ "What is a Virtual POS Terminal? | myPOS". www.mypos.eu. Retrieved 2016-11-14.
- ^ "Card not present transactions – the absolute basics for merchants | Mobile Transaction". mobiletransaction.org. Retrieved 2018-03-25.
- ^ "Card-not-present transactions | The UK Cards Association". www.theukcardsassociation.org.uk.
- ^ "Verified by Visa | Visa". visa.com. Retrieved 2018-03-25.
- ^ "Mastercard SecureCode® provides enhanced security for online shopping | Mastercard". www.mastercard.us.
- ^ "SafeKey® FAQs | American Express". www.americanexpress.com.
- ^ "Address Verification Service (AVS) | Visa". www.investopedia.com. Retrieved 2011-01-18.