The economy has been on a roar, and consumers are confident and are happily opening up their purses to get out, spend, and plan vacations they’ve been delaying for some time. Today the U.S. economy is bigger than it was at the beginning of 2020, primarily driven by consumer spending. This is giving rise to more and more business starting up. In 2020, 4.4 million new companies were started, increasing 24% from the year prior. 

This is all welcome news for businesses looking to cater to such consumers ready to spend. However, challenges abound for businesses as the spending habits of consumers have significantly changed over the past two years. Cash is no longer king. People just don’t like to use cash as a means of transaction. In fact, three out of ten consumers don’t even use any cash in any given week. While there has been a strong surge of cashless transactions over the past year, not all businesses are prepared to thrive in this rapidly fluid environment. These businesses need to accept noncash modes of payment such as credit and debit cards and ACH/eCheck payments seamlessly and securely.

Point of Sale (POS) systems are aplenty, but not every business needs POS equipment as they may not be client-facing. Or they may not have the wherewithal to outlay cash for such devices just as they are starting to bootstrap their business. For many companies, the best solution is a virtual terminal. Below, we look at a virtual terminal, how it works, and why your business may need one.

What is a Virtual Terminal?

A virtual terminal is an internet-based payment processing application that lets merchants accept payments anytime, anywhere, on any device with an internet connection. Whether a business accepts payments via phone, mail, fax, email, or in person, merchants can use their existing devices such as a desktop PC, a laptop, or a mobile device such as a tablet or smartphone as their POS.

To make life easier, you can purchase a small card reader to plug into your laptop or smart device. However, it isn’t a necessity. All your business needs are internet access, a merchant account, a payment gateway, and a browser.

How does a Virtual Terminal work?

Virtual terminals are set up in coordination with your payment processor/ payment gateway. You start by simply logging into your merchant account or payment gateway and initiate the virtual terminal. From there, you would select the payment type, debit, credit, or ACH, and enter the sales details such as the amount to be processed and any other information pertinent to the transaction.

To enter the card data, you can key it in and any billing/security information required. If the business has a USB card reader plugged into the laptop or mobile device, the card data can easily be swiped. The transaction is then submitted, and within seconds, the merchant receives confirmation of the card either being approved or denied. With a virtual terminal, businesses have the option to email the receipt to the client and process any refunds or track the sales history of the company.

Keep in mind that if a business is not using a card reader to collect card data instead of keying it in, it is classified as a card not present transaction, even if the cardholder is right there in front of you. This results in higher processing rates, which can be mitigated by accepting ACH/eCheck payment and utilizing a card reader.

Why does your business need a Virtual Terminal?

Below are some reasons why your business may need a Virtual Terminal.

Save money on POS equipment – merchants don’t need to buy additional equipment to process payments via a virtual terminal. Businesses can use their laptop, tablet, or smartphone. With a virtual terminal, companies quickly eliminate a major headache of paying hefty upfront equipment costs and reading the fine print of equipment agreements to ensure they are not locked into a long-term non-cancelable contract for outdated POS.

Ease of use – A virtual terminal offers much peace of mind given all the friction it eliminates. A retail business that may have relied on a single POS device to be shared at peak times to get payments processed can now have each of its employees log into the virtual terminal account to process the payment. Businesses can easily track which employee processed which transaction; a level of accountability is not readily available with a single POS passed around.

Recurring Payments – businesses can easily set up recurring payments by scheduling a specific transaction on repeat. Once you process a payment for a particular service or product and enter all the card and billing details, it can be set as a recurring transaction.

Insight: The data stored on a virtual terminal lets business owners track their payment history and can help them plan for peak times in terms of inventory and staffing. Critical data about consumers, what they spent money on during a particular time of the year is also easy to track. This level of insight can help businesses build a loyalty program or run a very targeted marketing campaign.

Over the last few years, consumer spending habits have experienced seismic shifts driven by smartphone technology and a lesser inclination towards the hassle of carrying around currency and coinage. It’s much easier to swipe a phone to pay for something rather than pull out a wallet, hand over cash, and possibly hear that they don’t have change. If they do, count it and stow it all away.

Even as merchants come to terms with the new paradigm, they still loathe spending an excessive amount upfront for POS equipment. Alternatively, virtual terminals are an excellent option for businesses to accept all types of payment methods. Traditional laptops or smartphones can easily be used as the makeshift POS device to settle the transaction as long as you have a payment gateway and merchant account setup up.