What Is a Virtual Terminal? Complete Guide to Payment Processing
Written by Lee Hart
Imagine trying to take a phone order from a customer who wants to pay by card, but you don't have a physical card machine nearby. A virtual terminal is an online payment processing platform that turns any internet-connected device into a payment centre, allowing businesses to process credit card transactions without specialised physical hardware.
Unlike traditional card machines that require customers to physically present their cards, virtual terminals handle card-not-present transactions by allowing merchants to manually enter payment details through a secure web interface. This makes them perfect for taking payments over the phone, through the post, or even in person when a physical terminal isn't available.
Whether you're running a small business from home or managing a large call centre, virtual terminals provide the flexibility to accept payments anywhere with an internet connection. They've become essential tools for businesses that need to process transactions remotely whilst maintaining the same level of security as traditional payment methods.
Key Takeaways
- Virtual terminals transform any internet-enabled device into a secure payment processor without requiring physical card machines
- Businesses can accept credit card payments over the phone, by post, or remotely by manually entering customer payment details
- Advanced security features and compliance standards protect both merchants and customers during card-not-present transactions
What Is a Virtual Terminal?
A virtual terminal is a web-based payment tool that turns any internet-connected device into a card processing terminal. It allows businesses to manually enter customer payment details and process transactions remotely without physical hardware.
Definition and Core Functionality
A virtual terminal is a secure, web-based tool that enables businesses to process credit and debit card payments through their computer, tablet, or smartphone. Unlike traditional payment methods, it requires no physical card readers or specialised hardware.
The system operates through a simple web browser interface. Merchants log into their payment processor's dashboard and access the virtual terminal feature.
To process a payment, businesses manually enter the customer's card details including:
- Card number and expiry date
- Cardholder's name and billing address
- CVV security code (three-digit code)
- Transaction amount
Virtual terminals process transactions in real-time, just like in-person payments. Once approved, the system can generate digital receipts and send them to customers via email.
This payment method works particularly well for businesses that accept orders over the telephone or need to bill customers remotely.
Key Differences from POS Terminals
A POS terminal is physical hardware used for face-to-face transactions where customers insert, tap, or swipe their cards. A virtual terminal is software-based and designed for remote transactions where the card isn't physically present.
POS systems typically include additional features like cash drawers, barcode scanners, receipt printers, and inventory management. These systems handle the complete point-of-sale experience for in-person retail environments.
Virtual terminals focus specifically on payment processing. They offer a streamlined interface for entering card details manually, making them ideal for phone orders and remote billing.
Cost differences are significant. POS terminals require hardware purchases and ongoing maintenance. Virtual terminals use existing devices and internet connections, eliminating equipment costs.
Transaction types also differ. POS terminals process "card-present" transactions with lower processing fees. Virtual terminals handle "card-not-present" transactions, which carry slightly higher fees due to increased fraud risk.
Role in Payment Processing
Virtual terminals serve as the bridge between businesses and payment processors for remote transactions. When a merchant enters payment details, the virtual terminal communicates with the payment processor to authorise the transaction.
The payment processing flow follows these steps:
- Data entry - Merchant enters customer payment information
- Encryption - System securely encrypts the sensitive data
- Authorisation - Processor contacts the customer's bank for approval
- Settlement - Approved funds transfer to the merchant's account
Security measures include PCI compliance standards and encrypted data storage. This protects both businesses and customers from data breaches and fraud.
Integration capabilities allow virtual terminals to work alongside other payment tools. Businesses can combine them with online invoicing, recurring billing, and customer management systems for comprehensive payment processing.
Most payment processors include virtual terminal access with merchant accounts at no additional monthly cost, making them accessible for businesses of all sizes.
How Does a Virtual Terminal Work?
A virtual terminal processes payments by allowing businesses to manually input customer card details through a secure web interface. The system works across any internet-connected device and follows a standardised transaction workflow to authorise and complete payments.
Manual Entry of Payment Information
Virtual terminals require users to manually input transaction and payment information, unlike physical card readers that automatically capture data. Business operators must type in essential payment details for each transaction.
The core information includes the customer's card number, expiry date, and CVV code. Most systems also require the billing address for verification purposes.
Additional transaction details must be entered manually:
- Transaction amount
- Customer name
- Purchase description
- Invoice or reference number
This manual process increases processing time compared to automated card readers. However, it provides flexibility when physical payment terminals aren't available.
The card verification value (CVV) serves as a crucial security measure during manual entry. This three or four-digit code helps verify that the person entering the details has physical access to the card.
Supported Devices and Access Methods
Virtual terminals work on any device with an internet browser, making them highly accessible for businesses. The web-based software eliminates the need for specialised hardware or card readers.
Compatible devices include:
- Desktop computers
- Laptops
- Tablets
- Smartphones
Access requires only an internet connection and login credentials to the payment processor's secure portal. Most businesses can process payments from virtually any location with internet connectivity.
The only hardware necessary is the computer or mobile device used to access the virtual payment terminal portal. This eliminates equipment costs and maintenance requirements.
Mobile accessibility proves particularly valuable for businesses operating in multiple locations. Sales staff can process payments at trade shows, client visits, or remote locations using their smartphones.
Typical Transaction Workflow
The virtual terminal transaction process follows a structured sequence from login to completion. Merchants access the virtual terminal through a secure web interface provided by their payment service provider.
Step-by-step workflow:
- Login - Access the secure payment gateway portal
- Enter details - Input customer card information and billing address
- Add transaction data - Include amount and purchase description
- Submit - Send information to payment processor for authorisation
- Receive response - Get approval or decline notification
- Complete - Generate receipt and update records
The payment gateway securely transmits card details to the payment processor for verification. The processor checks the card validity, available funds, and fraud indicators before responding.
Authorisation typically occurs within seconds for standard transactions. The system returns an approval code for successful payments or an error message for declined transactions.
Merchants can immediately provide customers with transaction confirmations via email or phone. The virtual terminal maintains transaction records for reporting and reconciliation purposes.
Accepted Payment Methods
Virtual terminals support multiple payment types to help businesses serve different customer preferences. Most platforms process traditional card payments whilst offering modern digital alternatives for greater flexibility.
Credit Card Processing
Virtual terminals accept all major credit cards including Visa, Mastercard, American Express, and Discover. Businesses manually enter card details such as the 16-digit number, expiry date, and CVV code into the web-based interface.
The processing works similarly to online checkout pages. Staff type customer information during phone orders or when processing mail-in payments. Virtual terminal credit card processing eliminates the need for physical card readers.
Most providers charge standard credit card processing fees. These typically range from 1.5% to 3.5% per transaction depending on the card type and business category.
Common credit card features include:
- Real-time authorisation
- Fraud detection tools
- Recurring payment setup
- Refund processing capabilities
Debit Card Payments
Debit cards process through virtual terminals using the same method as credit cards. Customers provide their card number, expiry date, and security code for manual entry.
Debit transactions often carry lower processing fees than credit cards. Many UK debit cards work through the Maestro or Visa Debit networks.
The main difference lies in how funds transfer. Debit payments withdraw money directly from customer bank accounts rather than extending credit. This reduces chargeback risks for merchants.
Some virtual terminals offer separate debit card processing rates. These lower fees can improve profit margins on debit transactions.
Alternative Payment Options
Modern virtual terminals extend beyond traditional cards. Virtual terminals allow businesses to accept a variety of payment methods including digital wallets and bank transfers.
Popular alternative methods include:
- Digital wallets: PayPal, Apple Pay, Google Pay
- Bank transfers: Direct debits, standing orders
- Buy now, pay later: Klarna, Afterpay options
- Contactless payments: NFC-enabled transactions
ACH payments represent another common option. These allow direct bank account debits with lower processing costs than card payments.
Some providers integrate cryptocurrency processing. However, this remains less common due to regulatory concerns and price volatility.
The range of accepted methods depends on the virtual terminal provider. Businesses should verify which payment types their chosen platform supports before signing up.
Industries and Businesses Benefiting from Virtual Terminals
Virtual terminals help various industries and businesses accept payments without physical card readers. Service providers, retailers, restaurants, and traditionally cash-based businesses use them to improve payment flexibility.
Freelancers and Professional Services
Freelancers and consultants benefit greatly from virtual terminals because they often work remotely or travel to client locations. Web designers, accountants, and marketing consultants can process payments immediately after completing work without needing physical payment equipment.
Virtual terminals eliminate the need to wait for cheques or bank transfers. Clients can pay by phone whilst the freelancer enters card details through any internet-connected device.
Professional services like solicitors and estate agents use virtual terminals for retainer fees and deposits. They can accept payments during client meetings using tablets or laptops.
The technology works particularly well for home-based businesses. Tutors, fitness trainers, and beauty therapists can process payments on-site without carrying bulky card machines.
Virtual terminals also help professionals handle recurring billing. Monthly retainers and subscription services become automated, improving cash flow predictability.
Retailers and Ecommerce
Physical retailers use virtual terminals alongside traditional payment methods. Independent shops and market stalls benefit when card readers malfunction or for taking phone orders from regular customers.
Ecommerce businesses rely on virtual terminals for processing refunds and handling payment issues. Customer service teams can quickly process adjustments without accessing the main payment gateway.
Pop-up shops and seasonal retailers find virtual terminals cost-effective. They avoid purchasing expensive point-of-sale systems for temporary locations whilst still accepting card payments.
Retailers taking custom orders or deposits use virtual terminals to collect partial payments. Furniture shops, jewellers, and art galleries commonly process deposits this way.
The flexibility helps retailers expand their payment options without significant hardware investment. Small businesses can compete with larger retailers by offering similar payment convenience.
Restaurants and Hospitality
Restaurants taking orders by phone rely heavily on virtual terminals for delivery and collection orders. Staff can process payments whilst taking order details, streamlining the entire process.
Catering businesses and food trucks use virtual terminals for advance bookings and deposits. Event catering requires upfront payments that virtual terminals handle efficiently.
Hotels and bed-and-breakfasts process bookings and security deposits through virtual terminals. Reception staff can handle payments without guests being physically present.
Event venues and function halls collect deposits and final payments using virtual terminals. Wedding venues particularly benefit from processing large payments over the phone.
Room service and table-side payments become possible with tablets or smartphones running virtual terminal software. Staff can process payments directly at the customer's location.
Handling Mail and Telephone Orders
Businesses processing mail orders use virtual terminals to handle payments from postal applications. Insurance companies, subscription services, and catalogue retailers regularly process payments this way.
Telephone sales teams enter card details directly into virtual terminals whilst speaking with customers. This immediate processing reduces abandoned sales and improves customer satisfaction.
Call centres handling customer service can process refunds and additional charges through virtual terminals. The system integrates with existing customer service workflows.
Charitable organisations collecting donations by phone rely on virtual terminals for secure payment processing. Fundraising campaigns become more efficient with immediate payment confirmation.
Virtual terminals help businesses handle seasonal order spikes without additional hardware investment. Christmas catalogue orders and holiday bookings process smoothly through existing computer systems.
Advanced Features and Capabilities
Modern virtual terminals offer various features that extend beyond basic payment processing. These capabilities include automated billing systems, comprehensive record-keeping tools, and enhanced security measures that protect both merchants and customers.
Recurring Payments and Subscriptions
Virtual terminals enable businesses to set up recurring payments for subscription-based services or regular billing cycles. This feature automatically charges customers at predetermined intervals without requiring manual input each time.
Merchants can configure different billing frequencies including weekly, monthly, or annual payments. The system stores customer payment details securely and processes transactions automatically on scheduled dates.
Common recurring payment applications include:
- Monthly subscription services
- Annual membership fees
- Instalment payment plans
- Utility bill payments
Recurring transactions reduce administrative workload whilst ensuring consistent cash flow. Customers benefit from the convenience of automatic payments without needing to remember due dates.
Failed payments trigger automatic retry attempts and notification systems. This helps maintain subscription continuity whilst alerting both parties to payment issues that require attention.
Transaction History and Management
Virtual terminals provide detailed transaction records that merchants can access through web-based dashboards. These systems maintain comprehensive logs of all payment activities with searchable databases.
Transaction management features include filtering by date ranges, payment amounts, and customer information. Merchants can export data for accounting purposes or generate reports for business analysis.
Key management capabilities include:
- Real-time transaction monitoring
- Payment status tracking
- Refund and void processing
- Customer payment history
The systems typically retain transaction data for several years to support accounting requirements and dispute resolution. Merchants can quickly locate specific transactions using various search criteria.
Detailed reporting helps businesses identify payment trends and customer behaviour patterns. This information supports decision-making for pricing strategies and customer service improvements.
Address Verification Service (AVS) and Two-Factor Authentication
Address verification service (AVS) compares billing addresses provided by customers against addresses on file with card issuers. This security measure helps prevent fraudulent transactions in card-not-present environments.
AVS checks specific address components including street numbers, postal codes, and geographic regions. The system returns match results that merchants can use to assess transaction risk levels.
Two-factor authentication (2FA) adds an extra security layer by requiring additional verification steps beyond standard card details. This might include SMS codes, email confirmations, or authentication apps.
Security verification methods include:
- SMS verification codes
- Email confirmation links
- Biometric authentication
- Security question responses
These security features work together to reduce fraud risk in virtual terminal transactions. Merchants can configure security settings based on transaction amounts or risk assessment criteria.
Enhanced security measures build customer trust whilst protecting businesses from chargebacks and financial losses. However, additional verification steps may slightly extend transaction processing times.
Security and Compliance Considerations
Virtual terminals handle sensitive payment data, making robust security measures essential for protecting customer information and maintaining business credibility. Modern virtual terminals employ multiple layers of protection including tokenisation, encryption standards, and strict compliance frameworks.
Tokenisation and Encryption
Tokenisation replaces sensitive card data with unique digital tokens that have no exploitable value. When a customer's card details enter the virtual terminal, the system immediately converts them into meaningless strings of characters.
These tokens can move safely through business systems without exposing actual card numbers. If hackers intercept tokenised data, they cannot use it for fraudulent purchases.
Virtual terminals use encryption and tokenisation to keep cardholder data secure throughout the entire transaction process. The original card data stays locked in secure vaults managed by payment processors.
Most virtual terminal providers combine tokenisation with additional encryption layers. This dual approach ensures that even internal system breaches cannot compromise customer payment information.
End-to-End Encryption Standards
End-to-end encryption protects payment data from the moment customers enter their details until the transaction completes. The encryption begins at the virtual terminal interface and continues through every system that handles the data.
Strong encryption uses advanced algorithms like AES-256 to scramble payment information. Only authorised systems with proper decryption keys can read the protected data.
Some virtual terminal providers offer tokenisation and end-to-end encryption to protect sensitive data throughout the entire transaction process. This comprehensive protection prevents data theft during transmission between different systems.
Payment processors maintain secure channels that encrypt all communications. Virtual terminals never store unencrypted card data on local devices or browsers.
Compliance with PCI DSS and Best Practices
PCI DSS (Payment Card Industry Data Security Standard) sets mandatory security requirements for all businesses that handle card payments. Virtual terminal providers must achieve and maintain PCI compliance to operate legally.
PCI compliance and end-to-end encryption are must-have features for any virtual terminal provider to safeguard sensitive customer data. Businesses should verify their provider's current compliance certificates before processing payments.
Key PCI DSS requirements include:
- Secure networks with proper firewall configurations
- Access controls limiting who can view payment data
- Regular monitoring of all system access and activities
- Vulnerability testing to identify security weaknesses
Card not present fraud accounted for 73% of total card payment fraud losses in the U.S., highlighting the elevated risk of virtual terminal transactions. Implementing two-factor authentication and regular staff training strengthens security measures beyond basic compliance requirements.
Choosing a Virtual Terminal Provider
Selecting the right virtual terminal provider requires careful evaluation of payment gateway options, costs, and support services. The best providers offer competitive rates, robust security features, and reliable customer service to meet business needs.
Comparing Payment Gateway Options
Different payment gateways offer varying features and capabilities for virtual terminal processing. Payment providers in the UK offer virtual terminals, but quality and value differ significantly between options.
Key features to evaluate include:
- Security protocols - Look for PCI compliance, encryption, and fraud protection
- Payment methods - Ensure support for major credit cards, debit cards, and alternative payments
- Integration capabilities - Check compatibility with existing business systems
- User interface - Simple, intuitive design reduces training time and errors
The payment processor should handle transactions quickly and reliably. Processing speeds typically range from instant to several seconds for authorisation.
Mobile compatibility is essential for businesses that need flexibility. Most modern virtual terminals work on smartphones, tablets, and computers through web browsers.
Examples: Stripe and Leading Providers
Stripe stands out as a popular choice for virtual terminal services. The platform offers comprehensive payment processing with competitive rates and developer-friendly features.
Other leading providers include:
- PayPal - Widely recognised with simple setup process
- Square - User-friendly interface with transparent pricing
- SumUp - Requires no specialised payment processing equipment
Each provider has different strengths. Stripe excels in customisation and technical flexibility. PayPal provides brand recognition and customer trust. Square offers straightforward pricing with no monthly fees.
Consider your business size and technical requirements when comparing options. Smaller businesses often prefer simple solutions, whilst larger enterprises may need advanced features and integrations.
Evaluating Costs and Support
Virtual terminal pricing varies significantly between providers. Monthly subscription fees range from £15 to £45, whilst transaction fees typically cost 2.5% to 2.95% per payment.
Pricing Models:
- Monthly fees only
- Per-transaction fees only
- Combination of monthly and transaction fees
Manually typing card details costs more than card machine payments due to higher fraud risk. Factor this premium into your cost calculations.
Support quality matters for payment processing issues. Look for providers offering 24/7 customer service through multiple channels. Phone support is particularly important for urgent payment problems.
Technical support should include setup assistance, troubleshooting, and staff training resources. Some providers offer dedicated account managers for larger businesses.
Frequently Asked Questions
Virtual terminals raise common questions about credit card processing methods, security measures, and business implementation strategies. These concerns often focus on transaction safety, practical usage scenarios, and how virtual systems compare to traditional payment methods.
How does a virtual terminal facilitate credit card processing?
A virtual terminal processes credit card payments by allowing merchants to manually enter card details through a web browser. The system connects to payment processors through secure internet connections rather than physical card readers.
Merchants type the customer's card number, expiry date, and security code into the online interface. The virtual terminal then sends this information to the payment processor for authorisation.
This method works for telephone orders, postal payments, and situations where customers cannot physically present their cards. Businesses can process transactions from any device with internet access.
Can you illustrate a scenario where a virtual terminal is used?
A restaurant receives a large catering order over the telephone during busy dinner service. The customer wants to pay immediately with a credit card, but the staff cannot access their main point-of-sale system.
The manager uses a virtual terminal on their smartphone to process the payment. They enter the customer's card details manually whilst still on the phone.
This allows the restaurant to secure the payment immediately without losing the sale. The transaction processes through their regular payment gateway, ensuring proper record-keeping.
What are the security implications of using a virtual terminal for financial transactions?
Virtual terminals present security concerns because employees manually handle sensitive card information. Unlike chip readers that encrypt data automatically, virtual terminals rely on secure connections and proper staff training.
The main risk involves card-not-present transactions, which typically face higher fraud rates. Businesses must ensure their virtual terminal provider maintains PCI-DSS compliance standards.
However, reputable virtual terminal providers use encryption and secure servers to protect payment data. Many systems also include fraud detection tools and verification features.
How does a virtual terminal differ from a physical payment terminal?
Physical payment terminals read card information directly through chip readers or magnetic stripe scanners. Virtual terminals require manual data entry through web browser interfaces instead.
Physical terminals typically offer better security through encrypted card reading technology. Virtual terminals provide more flexibility but require careful handling of sensitive information.
Cost differences also exist, as virtual terminals usually involve lower upfront expenses. Physical terminals require hardware purchases but may offer faster transaction processing for high-volume businesses.
What are the advantages of integrating virtual terminal capabilities into an e-commerce platform?
E-commerce platforms benefit from virtual terminals when processing telephone orders or handling payment issues. This flexibility captures sales that might otherwise be lost due to technical problems.
Customer service representatives can process refunds or additional charges without accessing separate payment systems. This streamlines operations and improves customer experience.
Virtual terminals also help businesses handle international payments or unusual payment scenarios. The system integrates with existing merchant accounts and reporting tools.
In what ways can businesses implement virtual terminals for efficient payment handling?
Restaurants can use virtual terminals for telephone orders and delivery payments when drivers lack card readers. Staff access the system through tablets or smartphones for immediate processing.
Retail businesses implement virtual terminals for craft fairs, pop-up shops, or remote sales locations. This eliminates the need to carry multiple pieces of payment hardware.
Service providers like consultants and freelancers use virtual terminals as their primary payment method. PayPal offers virtual terminal services that integrate with existing business accounts for streamlined operations.
About The Author
Lee Hart
