Virtual Terminal | B2B Finance Glossary

What is a Virtual Terminal?

A virtual terminal is a software-based application allowing your business to accept customer payments in card-not-present scenarios. Virtual terminals can also process electronic payments via phone, email, or person.

Virtual terminals are just like physical credit card terminals. Still, because virtual terminals are hosted online, they can turn any computer into a credit card terminal and allow your business to accept payments from any place at any time. As a result, virtual terminals allow businesses to expand their customer bases and increase their revenue streams because they can be accessed from any computer without additional hardware.

How Does a Virtual Terminal Work?

When customers use a physical card machine, they tap or insert their cards and enter their PINs or sign to confirm the payment. Then, the transaction is processed, and the funds are transferred from the payer to the payee on the backend.

Virtual terminals can be accessed from computers, laptops, tablets, and phones, allowing customers to enter their card details into the corresponding prompts on the web page. After the customer hits “submit,” the payment process is initiated, and the customer will be automatically debited to complete the transaction.

Virtual terminal technology processes payments in a PCI-compliant and highly secure way, making them a very safe form of payment.

How Does a Virtual Terminal Differ From a Payment Gateway?

A payment gateway is important to virtual transactions because it allows businesses to accept customer credit and debit card payments. Payment gateways act as the gatekeeper of customer data by reading and transferring payment information from the customer’s bank account to your business’s bank account by capturing the necessary data and verifying that the funds for the desired transfer are readily available.

However, there are very distinct differences between payment gateways and payment terminals. Payment gateways are usually customer-facing, while payment terminals are used directly by the merchant.

What Are the Different Types of Virtual Terminals?

Virtual terminals allow customers to make payments without being physically present at a retail location. Here are the different types of virtual terminals that exist:

• Mobile and desktop apps. Merchants must key credit card information into a mobile or desktop point-of-sale app. The app allows the payment process to be completed so that the funds travel from payer to merchant.
• Web-based. With web-based virtual terminals, merchants must enter their customers’ information and payment details into a payment portal or web browser to initiate the payment process.
• Card machine screens. Merchants can use card machine screens that allow customers to manually enter their credit or debit card information right onto the terminal.

How to Choose a Virtual Terminal for Your Business

To accept online payments, it’s necessary for your business to have a virtual terminal. When choosing a virtual terminal, keeping security in mind is important. The best virtual terminals will be PCI-compliant and include end-to-end encryption to hide the customers’ account numbers and create an anonymous token that can be used to store each customer’s information.

A good virtual terminal will also use outstanding fraud management and include an address verification service (AVS), card identification number (CID), card verification value (CVV), or two-factor authentication. Keeping security at the forefront when choosing a virtual terminal will help protect your customers and your company’s data throughout the transaction process and at all subsequent times within the payment system.

Choosing a virtual terminal accepting more than just credit card payments is important to save on transaction fees. The right virtual terminal solution will allow your business to collect ACH and eChecks, which means you can eschew the high interchange fees that are tied to credit card transactions (these fees can be as high as 3.5% per transaction, which means they can cause your company to lose out on as much as 3.5% of all of its revenue that comes in via credit card payments).

Remember that virtual terminals can go beyond just payment processing: the right virtual terminal will also help your business organize your customer and inventory management in a single location or effortlessly plug into your existing ERP system.

Additionally, the right virtual terminal will allow your business to access revenue quickly. If an invoice is paid immediately, but your company can’t access the funds immediately, it can be very inconvenient. If your business is tight on cash flow, being unable to access funds right away can keep you from paying employees and making other crucial payments.

What are the Advantages of Virtual Terminals?

Virtual terminals allow your business to accept payments faster, offer secure transaction processes, run a more streamlined payment experience, and reach new customers. Especially in the age of online payments, virtual terminals are becoming all the more important. Virtual terminals can offer a leg up for businesses that want to keep up with customer demand and ensure that they are tapping into multiple revenue streams.