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What is a Virtual Terminal and How to Ensure Security

Convenience is everything today. Customers expect to use credit and debit cards for their purchases, and companies can process these payments many different ways. Businesses that use the Web to take payments can use a virtual terminal to facilitate transactions (1). Merchants simply log in using a standard Web browser, navigate to a menu to process the transaction and then manually enter customer data on a dashboard. Some systems will allow you to swipe credit cards, as well, by plugging a card reader into your device’s USB port.

What are the advantages of a virtual terminal?

In essence, a virtual terminal is a Web-based program that functions like a credit card processor or POS machine. Because the software runs online, a virtual terminal offers many distinct advantages over a physical terminal, such as:

  • Portability – Mobile payments are no problem with a virtual terminal. As long as you are able to connect to the Internet, you can process payments.
  • No equipment rental fees – POS systems often require specific hardware to process payments, including a cash register, printer, barcode scanner and credit card readers (2). While this equipment is essential for businesses that need physical checkout stations for customers, virtual terminals can run on any computer that meets system requirements and has Internet connectivity.
  • Instant reporting – Like other modern POS solutions, virtual terminals offer real-time reporting data. Managers can quickly access sales reports that are current up to the last transaction. This is very useful to small businesses that need to keep a close eye on sales, pricing, inventory and other important pieces of data. You can track this information and share it with other departments in your organization, helping them create better processes that will align with your objectives.
  • Automated billing – Some virtual terminals also include the ability to set up recurring billing for clients you work with on a regular basis.

Which businesses are best suited for virtual terminals?

Businesses that need to process electronic payments but do not have access to customers’ physical credit cards are usually good candidates for virtual terminals. In the past, mail order and telephone order (MOTO) storeowners comprised most virtual terminal users, although that has changed in recent years (3). As more payment processors offer card readers that connect to computers, retail businesses can use virtual terminals to collect payments. The only difference is they cannot collect customer signatures or take payments using debit cards.

Today, there are many different small businesses using virtual terminals, including call centers, non-profits, jewelers, home appliance merchants, doctors and even beauticians.

Reducing fraud

Virtual terminals present unique challenges to reducing fraudulent transactions. When a customer phones in an order rather than presenting the card in person, it’s more difficult to detect fraud. However, there are ways you can identify and stop criminal activity. First and foremost, merchants should watch incoming orders for any signs of suspicious behavior, including:

  • Risky shipping addresses – Watch for orders that are going to a country or region that has a reputation for fraudulent transactions. For example, some areas in Russia are notorious for fraud. If international orders are rare in your business, and you suddenly see many come through in a short time, this is a warning sign.
  • Strange quantities and types of items – Orders that seem unusually large are often a sign of suspicious activity, particularly when the customer is ordering multiple types of the same item, varying only by size and color.
  • Many orders with the same address – Some credit card thieves will use multiple cards to have products shipped to the same location. If you see this happening, it should raise a red flag.
  • Odd shipping addresses – Fraudsters will usually ship items to anonymous locations so they can hide their own identity. Stay on the lookout for strange commercial addresses and P.O. boxes.

In addition to watching for strange activity, you should also add steps to the checkout process that can help stop fraud from occurring, such as:

  • CVV codes – Ask your customers for the CVV code on the back of the credit card or billing ZIP code. This is a great way to head off a fraudulent transaction before it processes.
  • AVS – You should also use an Address Verification Service (AVS) to make sure the billing address the customer gives you matches the one the credit card company has on record.
  • Tokenization – Data encryption is a great way to add extra security to your payment process for both card-present and card-not-present customers. Using tokenization, the customer’s information is hidden in a virtual vault while the data is replaced by a substitute “token.” Doing so makes it much harder for thieves to steal your customer’s information during the transaction.

Virtual terminals offer many benefits to small businesses, including portable and flexible payment processing without an investment in standard POS hardware. If your small business gets a great deal of card-not-present orders, a virtual terminal might be the solution for you. Just remember that regardless of the payment processor you choose, your business is only as stable as the security measures you put in place.

  1. https://www.cardpaymentoptions.com/glossary/virtual-terminal-definition/
  2. http://www.ebay.com/gds/Must-Have-Point-of-Sale-Equipment-for-Your-Small-Business-/10000000177627220/g.html
  3. http://www.merchantmaverick.com/virtual-terminal/

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