Most business owners want to know how a virtual terminal compares to a traditional point-of-sale system. However, we’re betting you would like to see a list of benefits virtual terminals have first.
Great! We will start there, then do a comparison of POS systems and virtual terminals. After that, we are going to comb through several business types that are a good fit for these terminals.
14 Virtual Terminal Benefits
- Super-convenient—accept payments anywhere you are if you have internet access
- Payment flexibility, including credit / debit cards and ACH
- Lowers some costs since specific hardware isn’t needed
- Virtual encryption tools protect data (yours and customers’)
- Easy integration with other business software
- Can scale with most types of businesses and any company size
- Opens up opportunities to sell to more customers
- Can process recurring payments (lower cost with ACH)
- Secure customer data to be used for future purchases / payments
- Improve cash flow and open new revenue streams—i.e., subscriptions
- Simple set-up (no downloads or updates as “the cloud” manages this)
- Streamlines invoices and receipts
- Provides insightful reports that are easily understood
- An army of fraud management features
Those virtual terminal benefits cannot be overstated. They have opened huge opportunities for many business owners we serve at National Processing.
Still, we need to look at how these powerful terminals compare to point-of-sale systems.
Virtual Terminals VS POS Systems
Make no mistake. POS systems are powerful payment processing tools too.
But a side-by-side comparison may help you decide which you need for your new business or if you should swap systems in a business you’re already operating.
First off, a typical point-of-sale system is going to require you to buy or lease equipment. You may need a card reader, a POS terminal, mobile card reader, etc. A virtual terminal only requires a device that can connect to the web. And most people already have that before opening a business — smartphones and laptops.
Oh, you don’t need a speedy laptop with virtual terminals for online payment processing. A decent laptop is fine since most of the processing is done in the cloud (on speedy Amazon servers, for example).
Next, POS systems may limit which payment options you can accept compared to virtual terminals. Both can handle credit card processing and debit cards too. But if you want to give customers access to e-checks and ACH transfers, a virtual terminal may be the ideal option.
DO NOTE THAT YOUR BUSINESS IS UNIQUE
You may have specific scenarios or needs that make one payment processing option a better fit. More on this coming up but let’s continue the comparisons.
Costs play a role in every business decision. Secure payment processing is no different. If your business can avoid buying payment processing equipment by utilizing a virtual terminal, then that might be the best move – especially for a new business.
This also applies to an existing business if you are considering an expansion.
Using the “lean start-up philosophy,” you could test the expansion quickly with minimal investment.
This provides results you can use to decide if the expansion is worth continuing or if a pivot would improve the expanded business. Why invest in more POS equipment when you can test first using your laptop or mobile device connected to a secure virtual terminal?
SECURITY AND SPEED
It’s vital to know that POS systems have an upper hand when it comes to security. There are plenty of fraud-prevention tools woven into virtual terminals, but POS features like chip-and-PIN and biosecurity provide superior security.
As for speed, slow speed kills sales! Point-of-sale systems are inherently faster than virtual terminals since POS are built for in-person transactions. Sure, virtual payment platforms can be great for in-person sales. However, swiping or dipping the credit card is what makes traditional hardware faster.
Lastly, you have to consider how you’ll be using your payment platform. If you want to take orders over the phone, via snail mail, or online, then virtual terminals benefit you since payment info is entered manually versus swiping a card.
In a busy retail space, such as a convenience store, a fast POS is perfect… unless you want a line of unhappy customers being delayed. No business owner wants that, of course.
What else do owners want to avoid?
Outrageous Online Payment Processing Fees
It doesn’t take long for business owners to realize that payment processing fees can add up.
Especially if your payment provider wasn’t honest about how your fees would work.
That lack of industry transparency led National Processing to offer a $500 Guarantee that our rates cannot ever be beaten.
So, whether you plan on a virtual terminal or need payment hardware, always check your processing agreement thoroughly before you sign with a provider.
As For Fee Specifics, Let’s Peel Back The Layers
Transaction fees on each sale are going to be higher on virtual terminals than with in-person payments.
What about monthly charges? Are those avoided by using a virtual terminal? It depends on your merchant services provider. Some offer free virtual terminal access if you are using their processing services.
The same could be true for point-of-sale systems, so it’s smart to negotiate monthly charges.
You could also be charged PCI compliance fees, which may not be of much value. Ask your provider what exactly you get in return for this fee (aka, how do they help you remain compliant?).
BELOW ARE MORE POTENTIAL COSTS WITH VIRTUAL TERMINALS
- Check verification fees (virtual checks)
- Higher interchange fees for keyed-in payments
- Hidden mark-ups
- High-risk fees
- Chargebacks (higher likelihood with manually entered payments)
- Extra verification steps like AVS (address verification service)
Don’t worry. There are ways to lower your payment processing fees.
Options include:
- Compare pricing from multiple processors to get the best rates
- Improve fraud prevention measures
- Settle transactions in timely fashion
- Add a mobile card reader to your virtual terminal
- Negotiate terms with your provider rep
Another thing that impacts how high your processing fees are is whether your business is B2B or B2C.
Oddly, B2C businesses endure more fraud than B2B. One reason is that consumer goods, fraudulently obtained, are easier to resell online and offline. Plus, sneaky B2C criminals have multiple ways to commit fraud.
There are entire networks of gift card scammers. Stolen credit cards have been a problem since the 1980s. More recently, “friendly” fraud has become a scourge on B2C businesses as shoppers abuse return policies and file chargebacks for frivolous reasons.
A recent news article stated that influencers are even giving tutorials on getting free products by filing chargebacks! Another article highlighted two brands that are actively banning customers who abuse the brands’ return and refund policies.
These are challenging times for business owners, so it’s critical to partner with a merchant services company that has your best interests at heart.
Now let’s look at specific businesses that are the best fits for virtual terminals.
Businesses Types Suited For Virtual Terminals
Keep in mind that your business type matters more than being an exact match for the businesses below.
The point of the following list is to highlight why these businesses are well-suited for virtual terminals to take payments. Hopefully the list will spark new ideas for you to take advantage of simplified and flexible payment solutions.
- Repair shops: Can process payments online or over the phone so customers can conveniently pick up their vehicle after hours if needed. Invoices could be sent via text or email and perhaps save on fees since the customer would be entering payment details.
- Professional services: Lawyers and accountants likely can do business without a POS system since they process fewer payments. A virtual terminal could save them money on equipment and make it easy for new clients to be onboarded without visiting in-person (i.e., upload tax information to an accountant from anywhere).
- Subscription services / products: Modern virtual terminals usually have recurring billing features. Top-tier providers will have features to help prevent fraud and chargebacks, while also assisting you in scaling a subscription business.
- Freelancers: Accept payments remotely from clients without physical hardware. This works for writers, artists, designers, etc., who may work in a different location every month.
- Home services: These profitable businesses usually have low barriers to entry, which means lots of new home services businesses start up each week across the U.S. — great! A virtual terminal gives these new business owners instant access to handy payment tools without needing any hardware besides a smartphone, which they already have.
- E-commerce: A virtual terminal is all you need if you have no physical store and sell items online only. Fees will be higher due to card-not-present risks, but when you consider how inexpensive an e-commerce shop is versus a brick-and-mortar store with rent and utilities, those fees shouldn’t be a deal breaker.
Ok, we covered a lot of ground. You now have a clear vision of the best uses for a virtual terminal and the fees that come with it. Also, with the list of ideal businesses for using this type of payment processing, you have new payment insights for making your business run more efficiently.
To wrap up, we’ll talk about businesses that aren’t great fits for virtual terminals in the FAQ section.
Why are high-volume stores not a good fit for virtual terminals?
Too much manual payment entry. It slows down transactions, delaying customers who are in a hurry.
Does business inventory affect choosing a virtual terminal?
Yes. Virtual terminals can manage simple inventories, but POS systems offer more features and tools for complex inventory management.
