Virtual Terminals and Card Not Present Transactions

Thu 25th Jan 2018
Virtual Terminals and Card Not Present Transactions

What is a virtual terminal and why do I need one?
Virtual terminals are used to process a credit or debit card transactions. Virtual terminals allow you to securely and efficiently handle additional tasks including the processing, verification, and reporting of credit and debit card payments. A merchant’s Virtual terminal is automatically incorporated in to secure trading payment gateways.

A virtual terminal is a useful method of taking payments for goods or services when you’re not dealing with the cardholder face to face. This is known as Cardholder not Present or Card Not Present (CNP).

‘Card Not Present’ Transactions

What is a ‘card not present’ transaction?
A Card Not Present (CNP) transaction, also known as a remote purchase CNP, is where the card or the cardholder is not present at the point of a sale (POS). In such scenarios, a virtual terminal will enable you to take payments.

When ‘Card Not Present’ transactions be used?
CNP transactions can be used for mail order and telephone orders (MOTO). A virtual terminal is a perfect alternative to a traditional terminal. The virtual terminal is incorporated into the merchant’s payment gateway; however, it can also be implemented as a standalone service.

How to accept MOTO ‘Card Not Present’ payments
1. Mail
Businesses can accept CNP transactions by mail when a customer sends their order by post for example. Customers fill out their order forms which include all their card payment details (everything except their PIN number), as well as a signature to authorise the payment. On receipt these details are then processed by the merchant through their virtual terminal.

If the merchant would like to clarify what card details they require to complete a mail order purchase they can speak to their acquirer (the processer of the card payment transactions).

Mail orders transactions are increasingly rare given the popularity of e-commerce. However, it can be useful to have a virtual terminal payment option available in situations where customers prefer to place their order over the telephone.

2. Telephone
Telephone orders are similar to mail orders, however, the main difference being that the customer can read out their card details to the merchant (who uses the virtual terminal to take payment securely) over the phone or enter their details through the keypad on their phone and so cannot provide a signature.

Instead of a signature, the merchant can ask security questions, for example asking for the three-digit Card Security Code (CSC also known as CVV or CVV2), found on the back of their credit or debit card (or four-digits on the front for AMEX). This can help protect the cardholder as well as the merchant from fraudulent transactions as the cardholder has to be in possession of the card.

How are card not present transactions so beneficial?
Accepting CNP payments enables merchants to expand their business as the use of a virtual terminal offers their customers a better experience. CNP transactions save time, this is a major advantage for consumers as they save a substantial amount of time through shopping online. This can also be a major advantage for the merchant. CNP payments are also a good option as a fall-back for when an e-commerce transaction cannot be completed.

Also, CNP transactions are more secure. Fraud detection is easier when using a virtual terminal. If businesses combine employee training with secure payment processing solutions, then it’s fairly easy to ensure transactions are legitimate. Card issuers such as Visa and MasterCard provide services for authenticating the card in the card not present environment: Verified by Visa and MasterCard SecureCode in combination with Address Verification Services helps further minimise the chance of fraud.

When processing a CNP transaction, we encourage you to obtain the important information from the card owner, for example, the long number on the front of the card, the cardholders name as it appears on the card, expiry date, billing and shipping address and the CVV/CSC code. These details are then entered into the virtual terminal. It’s also important for merchants to keep copies of the order forms and obtain proof of delivery to the shipping address provided by the customer.

Please ensure that all customer information you collate is disposed of in a safe manner. We recommend you shred the order forms and documents as soon as the sales and deliveries are complete. This will also help ensure you remain PCI compliant.