If your sales happen in person, you may save costs with virtual terminal
When a credit card transaction needs to be processed, most businesses reach for traditional point-of-sale (POS) equipment.
It's a time-tested, reliable process that your customers have come to expect. However, a growing number of businesses are relying on new ways to process credit cards using a computer or a smartphone. This is done using a "virtual terminal", which enables you to process credit cards using equipment your business already owns.
For businesses that invoice customers, or that do not conduct in-person sales, a virtual terminal is often more cost effective than traditional POS hardware.
The term "virtual terminal" may sound complicated, but it's a very simple web-based tool that businesses can use to process credit cards.
When an order needs to be processed, instead of keying or swiping the card into POS hardware, you would log into a secure web portal and type in credit card details and get an authorization. This is good for situations when you are interacting with your customers over the phone, or by fax or mail.
The actual functionality in a virtual terminal can vary significantly between providers. Some may support recurring billing, security checks such as AVS (address verification) or other features. The goal of all virtual terminals is to allow orders to be keyed in, and for immediate approval online in a secure environment.
Is POS hardware better?
POS hardware is better in certain situations. If you are in a traditional retail setting or in-person with customer, you are far better to use dedicated POS hardware. You will get more people through the checkout faster because there is no manual keying, and when the customer types in their pin code they can no longer dispute the transaction as fraudulent. These are huge benefits that speak to the use of POS equipment for in-person sales. It's important for Canadian merchants to note that Interac debit payments cannot be processed unless through an EMV certified device, so you need some sort of dedicated POS equipment if Interac debit transactions are critical to your business.
When is a virtual terminal better?
Inversely, the hardware that increases your security during an in-person transaction is a disadvantage during a card-not-present scenario. Most POS machines won't have additional security checks that are common online such as AVS checks or CVV (the 3 digit security code on the back of the card).
There is also a rate consideration. You should receive a better processing rate if you use a virtual terminal for card-not-present transactions. For clarity on this point, most retail/POS-based credit card processors will increase the processing rate if a card is keyed (not physically entered) into a POS machine. With a virtual-terminal-based payment processor, your rate should never be penalized because the card was not present. That's the entire point of the service.
What are the advantages to using a virtual terminal?
No setup fee – for businesses that want to minimize upfront costs, the virtual terminal can be a good fit because there is no hardware to purchase. Some credit card processors – including Stripe.com and Merchant-Accounts.ca – don't charge upfront fees to set up the account.
Lower rates – since a virtual terminal is obviously used in situations where the card is not present, it means that your payment processor will not charge a higher rate for card-not-present transactions.
Immediate use – since there is no hardware to ship, it means that you can begin as soon as your merchant account is approved.
Multiple users at once – because it is an online service, you can have as many people using it at the same time as you want. If you have multiple salespeople, each can have their own login to use the system.
Can't break it – you can't drop, break or damage a virtual terminal, so it will never need a replacement.
There is no magic bullet that's best for every business, but this article should help you understand when a virtual terminal may be a good fit for your business.
David Goodale is CEO of Merchant-Accounts.ca. He can be reached at 888-414-7111 ext. 5, (905) 901-2254 (direct), or david@merchant-accounts.ca