Running a small business requires handling a lot of moving factors, especially with regard to payment acceptance. Though traditional point-of-sale (POS) systems and online payment choices abound, the virtual terminal is a tool often disregarded. For small and medium-sized businesses (SMBs), who are looking for simplicity and flexibility, payment processing is a lifesaver.
This lesson aims to provide you with all the knowledge you need about virtual terminals, including their operation and the reasons for its great suit for small businesses.
What Is a Virtual Terminal?
Virtual terminals are one kind of online payment method that let businesses accept credit card payments even in the lack of an actual card reader. Think of it as the digital equivalent of a cash register. To handle transactions from a distance, you might manually enter a secure web-based interface containing customer payment information.
As published in the Virtual Payment Global Market Report 2024, the virtual payment market size will grow exponentially in the next few years. It has already grown from $13.7 billion in 2023 to $18.18 billion in 2024 at a compound annual growth rate of 32.7%.
How Does a Virtual Terminal Work?
Here’s a step-by-step overview:
- Login to Your Account: Access your virtual terminal via a web browser or payment platform.
- Enter Payment Details: Input the customer’s credit card information, including card number, expiration date, and CVV.
- Confirm the Transaction: Double-check the details and confirm the payment.
- Receive Funds: The payment is processed, and the funds are deposited into your business account.
Who Uses Virtual Terminals?
Virtual terminals are especially useful for:
- Phone Orders: Take payments from customers who prefer ordering over the phone.
- Invoices: Accept payment for emailed invoices without requiring a physical reader.
- Mobile Services: Ideal for businesses like HVAC technicians or florists where payments occur outside of traditional settings.
Why Should SMBs Use Virtual Terminals?
Regarding payment processing, small businesses may face particular challenges that are just theirs. Virtual terminals fit very well in this sense:
1. Flexibility for Remote Payments
Whether you are traveling or working, you may gather money from any place using virtual terminals. For Valentine’s Day, for example, I helped a friend running a flower company up a virtual terminal to handle orders submitted at the last-minute. For them, this would have been hundreds of dollars lost sales!
Consider services given by professionals like electricians and plumbers. They are always on the run, hence it is impossible for them to pack heavy technology. By means of a virtual terminal, their workflow is streamlined and they are certain to get money immediately after a job.
2. Low-Cost Setup
Unlike conventional point-of- sale (POS) systems, virtual terminals do not need somewhat expensive hardware. If you already have a laptop or a smartphone, that will be enough. Even companies running on a restricted budget might benefit from this service as many suppliers offer minimal rates per transaction instead of any upfront expenses.
3. Security Features
Most virtual terminals include built-in security systems like PCI compliance and encryption in order to protect client data. Two more fraud protection strategies with further degrees of security are tokenization and address verification services, or AVS.
In order to ensure compliance and lower the likelihood of chargebacks, always make sure your employees are taught secure payment procedures.
4. Customer Convenience
Offering plenty of payment choices improves the consumer experience. Whether consumers pay by phone or email invoice, virtual terminals simplify the process for them to complete. Particularly helpful for individuals with limited time, consumers no longer need to physically visit your website in order to complete payments.
Comparing Virtual Terminals to Other Payment Methods
Virtual Terminals vs. Mobile Payments
Mobile payments and virtual terminals have different purposes even if they are frequently confused with one another:
- Virtual Terminals: Best for manually entering card details for remote transactions.
- Mobile Payments: Ideal for in-person transactions using a smartphone or tablet
In the real world, for instance, a mobile food truck may rely on mobile payment systems to enable quick sales in person at events. Conversely, if a customer phones to schedule a large catering order and wishes to pay in advance, a virtual terminal is the perfect solution.
Virtual Terminals vs. Payment Links
Virtual terminals and payment links both support remote payments, but there’s a key difference:
- Virtual Terminals: You input the customer’s information.
- Payment links (Email / SMS payments) : You send a link for the customer to complete the transaction themselves.
For businesses that send frequent invoices, combining virtual terminals with payment links can offer ultimate flexibility.
Virtual Terminals vs. POS Systems
Traditional point-of- sale (POS) systems, which have actual card readers and registers, center face-to- face interactions. Though they are required in retail or restaurant environments, they may not be able to meet the criteria of companies with operations carried out remotely or on the move. Conversely, virtual terminals allow one to handle payments outside of a particular location within the company, therefore freeing from limitations.
For example, a construction contractor working at a customer’s site may utilize a virtual terminal to collect final payments or deposits, therefore eliminating the need to carry cash or checks with them.
Benefits of Virtual Terminals for SMBs
Increased Payment Accessibility
You are not limited to doing transactions in person for whatever reason using a virtual terminal. For businesses that run remotely, including construction companies or consultants, this is very useful.
Many small and medium-sized companies started to understand the need for remote payment choices in front of the COVID-19 outbreak. By means of contactless payment options, virtual terminals become very important in helping businesses to keep their financial stability. Regarding maintaining a consistent cash flow, it became quite essential to have the choice to be paid over the phone or by email.
Improved Cash Flow
Faster access to money follows from faster processing of payments. Results of a PYMNTS study show that businesses which use digital payment systems have significantly higher revenue flow.
Consider this: a freelancing web designer finishes a project and then turns in the invoice. Using a virtual terminal, the data on the customer’s credit card is captured over the phone, therefore removing the need for several weeks’ waiting for a check to arrive and clear. The cash showed up in their account right within a few days.
Cost Savings
Pay-as-you-go pricing is offered by many virtual terminal providers, hence you only pay for the resources you really use. Small and medium-sized companies (SMBs) with varied sales levels will find this to be a great substitute.
This saves businesses not just money but also the requirement for labor-intensive point-of-sale (POS) systems and card readers. These savings might find their way into opportunities for growth, like marketing or inventory restocking.
Simplified Payment Management
Since most virtual terminals interface without any issues with accounting software, monitoring payments and reconciling transactions is significantly easier. Small company owners that must wear many hats will find great use for this feature. It lowers the requirement for human data entry and the possibility of error.
Environmentally Friendly Option
Using virtual terminals reduces the paper waste. Companies may save money on consumables like paper and ink as well as help to promote more ecologically friendly methods by sending receipts and invoices online.
How to Choose the Right Virtual Terminal
Key Features to Look For:
- Ease of Use: A user-friendly interface is essential.
- Security: Ensure the terminal is PCI-compliant.
- Integration Options: Check if it integrates with your existing tools.
- Customer Support: Reliable support can save you a lot of headaches.
Questions to Ask Providers:
- What are the transaction fees?
- Is there a monthly subscription cost?
- Can it handle international payments?
- Are there limits on the number of transactions per month?
For a more comprehensive comparison of payment options, check out our Guide to Online Payment Systems for Small Businesses.
The Role of Virtual Terminals in Customer Relationships
By giving customers greater comfort and reliability, virtual terminals not only streamline payment processing but also help you to establish better relationships with them. For example, repeat customers like the ease with which they may make payments without physically visiting a business or completing a labor-intensive process. Virtual terminals might potentially be coupled with customer relationship management (CRM) systems to allow companies to track consumer preferences and payment histories, therefore offering customised service and follow-ups. Small and medium-sized companies (SMBs) might gain from this degree of attention in order to build trust and loyalty, which are prerequisites for long-term success in competitive markets.
Setting Up Your First Virtual Terminal
Step 1: Choose a Provider
Look for a payment processor that offers virtual terminals as part of their services. Popular providers include PayPal, Square, and Stripe. Additionally, explore niche options that cater specifically to your industry for tailored solutions.
Step 2: Create an Account
Sign up and provide your business details. Most platforms offer quick onboarding. Make sure to verify your identity and business credentials to comply with anti-fraud measures.
Step 3: Test the Terminal
Before going live, process a test transaction to ensure everything works smoothly. This is also a good time to train your team on how to use the system effectively.
Step 4: Monitor Transactions
Keep track of transactions regularly to identify any discrepancies or opportunities for optimization. Most virtual terminals offer reporting tools to make this process easier.
Real-Life Applications of Virtual Terminals
Case Study: Florist Handling Rush Orders
A local florist uses a virtual terminal to manage orders made at the last-minute during times of great demand. The virtual terminal ensures that, even in a highly busy business, the great volume of phone orders that arrive will never cause a sale to be missed.
Case Study: Construction Business Collecting Deposits
A small construction company uses a virtual terminal to help with project client payment acceptance over the phone. This helps to minimize delays and acquire client commitments prior to the commencement of operations.
Case Study: Freelancers and Consultants
For freelancers, money usually takes some time. By using a virtual terminal, which lets them get payments straight after a project has been finished, companies may increase their cash flow and cut the number of administrative difficulties they have.
Case Study: Nonprofit Fundraising
Many times, non-profit groups employ phone-a-thon events to raise funds. Virtual terminals enable these organizations to gather credit card payments during phone calls, therefore enhancing the efficiency of their fundraising activities.
Overcoming Common Concerns
“Is It Secure?”
Security is a top priority for virtual terminals. Features like tokenization, encryption, and fraud detection ensure that customer data remains protected. Choose a provider that is PCI DSS compliant for added peace of mind.
“What If I Make a Mistake?”
Mistakes happen, but virtual terminals often allow you to void or refund a transaction quickly. Always double-check payment details before confirming.
Conclusion: Is a Virtual Terminal Right for Your SMB?
If you are looking for a way to securely and creatively take remote payments, you might consider the usage of a virtual terminal. Whether you handle phone orders, send invoices, or are working remotely, this option can simplify your payment procedure and boost your cash flow.
Would you want to look into more strategies for best payment optimization? Visit Xipster to learn about utilities whose payments could be more quick and safe.