If you’re shopping around for a payment processing solution for your business, you may have come across the term “Virtual Terminal.” It sounds fancy enough, but how do you decide whether this web-based Payment Gateway is right for you?
What Is a Virtual Terminal?
As a business owner, you’re likely familiar with processing customer transactions using a credit card terminal. You swipe, enter or key in card details, and the terminal prints a paper receipt so you can record the transaction. It's the old-school, traditional way to process payments.
At a surface level, a Virtual Terminal and the old-school version operate in similar ways, except that the Virtual Terminal stores transaction information digitally. The more significant difference is that Virtual Terminal credit card processing also allows business owners many more options for how they batch, review and store information. This can result in improved security, efficiency and customer experience.
In this guide, we’ll discuss how Virtual Terminals work and how businesses can set up an effective Virtual Terminal payment gateway system, as well as how to derive the greatest ROI from this change. You’ll learn how to use a Virtual Terminal to simplify processing credit card transactions and preparing records. We’ll also review the features that can provide the best advantages for your business.
Virtual Terminals: How Do They Work?
Implementing a Virtual Terminal payment gateway provides you with more options and customization to process and generate reports on customer transactions. Getting started is simple. All you really need to begin is a computer that runs a compatible operating system and a web browser that supports the Virtual Terminal software. Account administrators can then set security and display settings to meet their business’ needs.
Depending on your business, you may wish to set up some custom Virtual Terminal options from the beginning. For example, you can streamline checkout processes by setting up custom fields for different departments, store branches or online vs. in-store transactions. Storing electronic signatures securely for recurring transactions or customizing security settings to minimize fraud risks may also be attractive features.
Before we dive too deeply into using a virtual terminal effectively, it’s worth reviewing how Payment Gateways work.
From the customer’s perspective, a credit card transaction is simple. A customer swipes or inserts the card in the reader, waits a few seconds and sees a message stating whether the terminal has approved or declined the transaction. What most people don’t realize is that swiping or inserting a credit card initiates an authorization process that rapidly passes through several financial middlemen:
- The Merchant Account Provider recognizes the credit card authorization request and communicates details to the Payment Processor.
- The payment processor maintains the technical network that communicates between the merchant account and the banks on both ends of the transaction. It alerts the credit card agency’s network for authorization.
- The credit card network checks its issuing bank account to confirm that funds or credit is available for this card, and reports back to the acquiring bank account.
- The acquiring bank sends this information back through the payment processor network, to the Merchant Account Provider.
- The Merchant Account Provider issues an approve or decline code, and the transaction processes or fails accordingly.
This entire process happens in an incredibly short time, often less than 10 seconds. But it’s worth remembering that this is actually a surprisingly complex transaction, involving multiple accounts and agencies. It’s important for business owners to maintain careful records of credit card transactions to keep operations running smoothly.
Virtual Terminals can also process ACH transactions, in which a merchant uses the customer’s routing and account numbers to debit funds directly between bank accounts. Because ACH transactions generally come with lower associated fees than credit card transactions, business owners who accept large payments may prefer this method.
After a credit card transaction is approved, the money typically hits the business's account within one business day, with a few exceptions. If you batch out the day’s transactions after the processors’ end-of-day cutoff, you can generally expect an extra business day delay before you receive the funds. In the case of ACH transactions, it may take two to four business days for you to receive notification of an unsuccessful payment (which is still much sooner than you’d hear about a bounced paper check). Weekends and holidays that affect the bank’s operating hours can also delay the time between when you batch out transactions and when the money lands in your account.
How to Choose a Virtual Terminal
As a business owner, you need to balance day-to-day operations with researching the best technological investments to help your company succeed. It’s no easy task. Before you decide on a Virtual Terminal, it’s worth reading through a buyers’ checklist to get a clear overview of what the provider can (and should) offer you. Briefly, here are some of the most critical features to consider:
- Pricing: How much you’ll pay per transaction and any applicable monthly fees factor in here.
- Ease of use: Evaluate ease of set up, online tutorial availability and customer support options to ensure you’ll get the support you need.
- Available payment options: A Virtual Terminal should be responsive enough to meet your business’ needs. Look for in-store and e-commerce options, online invoicing, recurring payment setup and other features that would make a difference for your store.
- E-commerce integration: Just because a Virtual Terminal service says e-commerce options are available, that doesn’t guarantee you’ll find the platforms you need. Check whether the Virtual Terminal is compatible with the e-commerce platforms and shopping cart plugins you prefer, so you don’t need to learn a whole new system.
Besides comparing the details between features on different options, it can be handy to consider what you’re really hoping to gain from switching to a Virtual Terminal. A fancy piece of software is only as good as the solutions it provides for your business.
Time, for example, may be a significant driver for businesses to implement Virtual Terminal technology. Eliminating the need to file, manually tally and securely store physical receipts can reduce bookkeeping hours for the company. Automatically generating monthly, quarterly or annual reports instead of preparing these documents by hand gives business owners a birds-eye view of sales trends they need to make strategic decisions.
Security is another feature for business owners to consider. Storing electronic signatures securely may help catch “friendly fraud” in the form of inappropriate chargebacks, while AVS and CVV security settings can prevent fraudulent transactions from going through in the first place. Storing transactions digitally, instead of relying on a filing cabinet of paper receipts that can be damaged or stolen, also adds a layer of information security for the business.
Finally, consider how this tech investment can open more diverse business opportunities. Maybe you’re considering making the leap into e-commerce. Perhaps you’re introducing a subscription service and want to allow customers to set up auto-billing instead of mailing in a payment each month (and possibly forcing you to chase after late payments). It’s worth reviewing your future plans for your business so you can choose a Virtual Terminal service that will deliver value as you continue to develop your company.
Using a Virtual Terminal Effectively
Once you’ve decided on a Virtual Terminal and made your purchase, setting the service up properly will help you achieve the greatest ROI.
Start by securing your Virtual Terminal. Since a virtual credit card terminal operates within your web browser, your first step is confirming that your computer system is set up to guard against malware or cyberattacks, and that you’re using an up-to-date version of a browser with no known security risks.
After checking your computer security, setting user access controls helps secure your Virtual Terminal system. You may wish to restrict some users from performing certain actions (such as processing refunds or settling batches) or viewing sensitive files (like sales reports and transaction histories).
Generally, your payment terminal uses AVS and CVV information to approve or decline credit card transactions. Depending on your circumstances, you may want to adjust what information is required. AVS security settings can match billing address, ZIP code, require either or require both to approve a transaction. CVV settings can be enabled or disabled, or set to run only when the information is available. You can still override settings to process a transaction (as long as it’s not settled yet), but by doing so you assume the associated risks. The right setting for your business depends on where the balance is for you between a streamlined customer experience and the information you need to limit fraud and authorize credit card transactions.
If you’ve been using signed paper receipts to store customer signatures, capturing electronic signatures instead can be a major improvement. A signature is your main proof in case you have to deal with a disputed charge later. Miss out on a signature because the receipt is lost or damaged, or because you never received a signature for an online or phone order, and you lose the dispute by default. Remote signature features let you capture this needed information via email, giving you extra security without creating a hassle for the customer. Setup should be easy; look for virtual terminals that offer a simple, plug-and-play device so you can get started capturing electronic signatures right away. You can still print paper receipts for customers who prefer them, but backing up receipts in a digital format is a better practice to protect your business.
The Benefits of Virtual Terminals
Using a Virtual Terminal for credit card processing offers multiple advantages over a traditional terminal. Here are some of the benefits a Virtual Terminal offers your business:
- Simple e-commerce processing. Some estimates predict that the global e-commerce market will top $4.5 trillion by 2021. The U.S. Department of Commerce reported that more than half of global Internet users made an online purchase in 2016. Paying attention to online sales is an essential aspect of modern business life. Being able to process payments remotely using a computer helps businesses take advantage of the thriving e-commerce market.
- Convenient access from any computer. The Virtual Terminal service can run on many common operating systems, including most recent Microsoft Windows systems, Apple Macintosh and several popular opensource operating systems such as Ubuntu and most Linux distributions. All a business owner needs to do in most cases is check internet connectivity and select a supported browser (Safari, Chrome or Firefox are recommended, although some versions of IE will also work).
- Tracking capabilities. Old-school payment terminals don’t allow business owners to limit access to track staff payment activity. Virtual Terminals log user activity so business owners can connect transactions and refunds with the user who performed the activity. Limiting refund capabilities to supervisors or managers can guard against fraud, and tracing transactions to specific users can help business owners resolve any issues faster.
- Sales monitoring capabilities. Reconciling paper batch reports against the reflected bank deposit amount can be a major headache. Processing fees, chargebacks and other factors can cause a discrepancy between batch and deposit reports, but a paper report won’t help you figure out what’s going on. Businesses with multiple departments and locations may need to employ full-time staff to reconcile reports.
- Streamlined bookeeping. Virtual Terminals expedite bookkeeping by automatically generating batch, deposit and cumulative reports. Instead of tallying records from each payment terminal and manually preparing quarterly and annual reports, you can access necessary data with a few clicks. You can even compare year-over-year records easily. If you’ve set up separate fields by department and location, you can generate even more specific reports to gain insight into your company’s sales trends.
- Easy access on the go. Most Virtual Terminals work with any internet connection (dial-up, TCP/IP Internet or leased). This makes it easier for you to access records and conduct business wherever you need to. Business owners who frequently attend trade shows or travel to different office or classroom settings may benefit from this flexibility.
- Payment flexibility. Virtual Terminals are useful for when customers are uncomfortable providing payment details over the phone. Customers may prefer to pay through a secured site online. You can also store a customer’s credit card information on file securely for future, card-not-present transactions.
- Convenient electronic invoices and recurring billing. Setting up recurring billing is simple and easy to customize. Obtain customers’ payment information once, and you can set a payment schedule to debit funds from their account on a weekly, monthly or custom basis.
- Efficient management of multiple locations. Traditional payment terminals only cover transactions in one location. Virtual Terminals let business owners escape the hassle of tallying paper receipts from each department and store location. Instead, when you run a transaction, you select the appropriate department from a drop-down menu to file the transaction automatically. This helps you compare performance between departments, or generate reports tracking one department’s performance from quarter to quarter, or a custom time period you choose, all from a single Virtual Terminal platform.
Virtual Terminals can offer a more secure and responsive way for businesses to collect credit card payments and handle the associated batching and report generation. If you’re ready to implement this system, make sure to evaluate your options to see which Virtual Terminal can do the most to improve your business.
That was a lot of information! What questions do you have about Virtual Terminals now? We'd love to explain this helpful solution in more detail!
Editor's Note: This post was originally published in December 2017 and has been updated for comprehensiveness and accuracy.