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What Is a Virtual Terminal?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedFeb 20233 min read

Where do your business transactions take place? If you accept payments in face-to-face retail settings, you’d need a countertop credit card terminal or POS system. However, if you accept payments from your computer or over the phone, you’ll need to set up a virtual terminal.

Practical and cost-effective, virtual terminals enable card-not-present as well as electronic payments, requiring little more than a smart device and an internet connection. So, what is a virtual credit card terminal and how does it work? Here’s a closer look at this common payment technology.

Virtual terminals explained

The term ‘virtual terminal’ refers to any web-based application enabling businesses to process electronic payments. With its installation, you essentially transform an existing laptop, desktop computer, smartphone, or tablet into a remote POS system. Virtual terminals are ideal for small businesses like takeaways or other delivery services that rely on phone payments. However, they also enable payment processing via mail order, fax, and email.

How does a virtual terminal work?

To get started with using a virtual terminal, you’ll need a credit card processor, payment gateway, or merchant services account with a suitable provider. You’ll also need a solid internet connection and a connected smart device, whether it’s a computer, phone, or tablet.

When a customer wishes to make a payment, you can follow these steps:

Log into the virtual terminal online dashboard or payment gateway.
Select the appropriate payment type, such as credit card or eftpos.
Enter the appropriate transaction amount alongside any other details.
Input the card number or bank account number into the virtual terminal’s online form.
Input relevant billing data when prompted, such as cardholder address or verification code.
Click on the ‘submit’ or ‘enter’ button to send in the details.

From here, the payment details will be sent to the processor for authorisation. When approved, you’ll receive a confirmation on your screen, with the option to email a receipt to the customer. As you can see, the process is nearly identical to any online shopping checkout form. However, the difference is that you’re entering the payment details on the buyer’s behalf.

Which types of businesses use virtual terminals?

We’ve now answered what is a virtual terminal for processing credit cards as well as how it works, but you may still be wondering if your business requires one. Most businesses dealing with customer card payment could benefit from using a virtual terminal. However, there are some circumstances where it really comes in handy:

Restaurants that take delivery or collection orders over the phone
Medical or professional services that might accept phone payments for bills
Freelance service professionals that perform all work remotely
Independent retailers accepting payments from clients at a distance
Companies that offer products through mail order catalogues

Virtual terminals are used to process both one-time payments as well as recurring payments.

Features to look for in a virtual terminal

Some virtual terminal services are more comprehensive than others. Because there is more risk involved with card-not-present transactions, one thing to keep in mind is the need for strong fraud protection and encryption. Here are a few key features to look for when comparing virtual terminals:

Tokenisation: The best payment gateways will tokenise payment details and use end-to-end encryption. This means that the customer’s personal account number is replaced with a randomly generated alphanumeric ‘token’ during processing.
PCI compliance: Tokenisation and end-to-end encryption are all part of PCI compliance, which is mandatory for any business processing credit cards.
Fraud prevention tools: In addition to the measures mentioned above, be sure that the terminal comes with built-in tools including two-factor authentication, address verification service (AVS) and card verification value (CVV).
Recurring payments: While all virtual terminals can handle one-off payments, not all will be able to set up recurring payment plans. If you accept regular payments from your customers, be sure to choose an option with this feature.

If you ever take payments over the phone or remotely, you can probably benefit from using a virtual terminal. Indeed, many merchant account providers will automatically include this service as part of a basic plan.

GoCardless can also help businesses take payments online using Direct Debit. Unlike virtual terminals, which require manual input for each transaction, with Direct Debit payments customers only need to provide their payment details the first time. The business can then collect payments as they’re due, for greater convenience at both ends of the transaction.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.