Virtual point-of-sale terminals, or virtual terminals, allow merchants to process payments using only a computer, providing one of the most flexible forms of payment processing services available.
Key Takeaways
- Virtual terminals allow merchants to manually input payment information, like credit card details, to process a transaction.
- Virtual terminals do not require any special hardware, with the platform being accessed on a computer or phone through a web browser.
Virtual Terminal Payment Processing
A virtual point-of-sale terminal, also called a VPOS or virtual terminal, is a web-based application that allows you to take payments for your business without any additional hardware or devices.
Virtual terminals allow employees to run credit card payments on a computer without having a dedicated card reader or other POS hardware—simply log in to your merchant account dashboard and process the transaction.
These payment processing solutions also allow businesses to run card-not-present transactions, such as MO/TO payments (mail order and telephone order payments). Because of this, VPOS terminals provide flexibility to merchant services without purchasing additional hardware.
Virtual terminals typically process credit card transactions and debit card transactions, with some providers of VPOS terminals also processing other payment types like ACH and eCheck payments.
Additional VPOS Features
Virtual payment terminals can also offer features including:
- Inventory management
- Customer relationship management
- Analytics and reporting
- Invoicing
- International payment processing
- Software integrations
Virtual Terminal vs. Payment Gateway
Virtual payment terminals and payment gateways are two separate steps of the payment process, although they are often confused for one another. Both virtual terminals and payment gateways allow merchants to complete transactions, but they serve different functions.
To put their differences simply:
- Virtual payment terminals are the interface where merchants can manually input credit card or other payment information to initiate a transaction.
- Payment gateways are the intermediary between the merchant and the associated financial institutions when a transaction occurs, authorizing and transmitting the appropriate information securely.
How a Virtual Payment Terminal Works
On an operational level, virtual payment terminals work just like physical POS terminals do in brick-and-mortar stores. Here are the basic steps for a virtual terminal payment.
- The merchant accesses the virtual terminal by logging in to its website on a phone, computer, or tablet’s web browser.
- The merchant inputs the details of the customer’s payment method into the virtual terminal.
- Any relevant taxes are applied to the transaction automatically, and the merchant submits the payment.
- The transaction is authorized and finalized by a payment gateway.
- If the transaction is approved, a receipt is generated. For virtual POS terminals, an email or text receipt may be offered, or that virtual terminal may be able to transmit a receipt to a printer.
- The transaction information is stored within the virtual terminal platform and transmitted to any integrated software.
- The merchant logs out of the virtual terminal dashboard.
The payment processing experience with a VPOS terminal is meant to be quick and user-friendly.
Benefits of Virtual POS Terminals
VPOS terminals serve a unique function in the payment processing landscape. Their primary benefits for merchants are outlined below.
Seamless Implementation
The biggest benefit of a virtual point-of-sale terminal is in its name—it’s virtual! There’s no software or hardware needed in order to start using the system for payment processing. Merchants will log in to their online account, which may include a dashboard of reports and key information, and they can immediately complete transactions.
Ease-of-Use
The simplicity of this type of payment processing means that there are fewer components that can fail. You can’t run out of receipt tape, and you won’t need to download updates for a physical POS terminal.
Better Customer Experience
Customers want to make payments without any obstacles, and virtual terminals can provide an easy way to accomplish just that. Virtual terminals are also great as a backup payment processing solution when other payment channels are offline or fail.
Operational Flexibility
With a virtual terminal, merchants do not need to have specific hardware on hand in order to process payments. The payment processing industry is constantly updating with the latest and newest technology, which means some tools may need frequent replacement. Additionally, virtual terminals allow for easy payment processing for remote billing when the customer is not at the same location as the merchant.
Affordability
Virtual POS terminals have comparably low costs compared to other payment processing solutions. Some payment service providers offer virtual terminals as an add-on or free service alongside other payment channels, although processing fees and subscription fees may still apply.
Loyalty Features
Some virtual payment terminals offer loyalty-building features for customers, such as points and rewards programs. For recurring billing, customer payment information can be stored with some virtual terminal providers, allowing for quicker transactions.
Virtual Terminal Security and Fraud
When considering a virtual terminal payment solution, merchants need to keep in mind the risk of fraud that any card-not-present transaction carries. VPOS transactions can carry higher fees due to their higher risk.
In order to mitigate this fraud, merchants should select a VPOS terminal provider that prioritizes security and follows the Payment Card Industry (PCI) standards. Additionally, virtual terminals can use address verification services (AVS) and card verification values (CVV) for another layer of security.
What Types of Businesses Use VPOS Terminals
Certain industries and business types find virtual terminals particularly useful for their payment processing needs, like those businesses that frequently take phone payments.
Delivery and Mobile Services
Businesses that do a lot of deliveries or offer mobile operations can benefit from VPOS terminals for payment processing. These businesses can include florists, caterers, and gift shops who frequently take orders for delivery over the phone. Vendors who operate from vehicles or at changing locations like mobile pet groomers or photographers can also leverage the flexibility of virtual payment terminals.
Professional Services
Accountants, lawyers, doctors, and other professionals often find virtual POS terminals effective for their payment processing needs. These professional services providers may bill their clients outside of any in-person meetings or need to send out recurring invoices.
Restaurants
Both dine-in restaurants and quick-service restaurants (QSRs) can take orders over the phone for pickup or delivery utilizing virtual payment terminals. Virtual payment terminals can be helpful during the restaurant’s rush to ensure orders can continue to be taken easily, especially in the case of any software or hardware failure.
Freelancers
Contractors and freelancers in all types of industries can rely on virtual payment terminals as their sole payment processing solution. Many modern creative service freelancers, for example, work entirely remotely, meaning they do not need an in-person payment processing service for their business. VPOS terminals that also include invoicing services can work well for freelancers.
Non-Profit Organizations
Non-profit organizations may take donations over the phone with a virtual POS terminal to process the transaction. Those same organizations can use their virtual terminals at in-person events by simply bringing a smartphone, tablet, or computer to log in to the virtual terminal.
Build Your Payment Processing Ecosystem with FirsTech
At FirsTech, we know the ins and outs of payment processing, including how to best leverage the unique benefits of virtual point-of-sale terminals. Whether a virtual terminal is right for your business or not, we can help you build the right unified payment processing system based on the needs of your customers and your goals.
To get started creating a better payment experience, contact our team today.