What is a virtual POS? What businesses should know about virtual payment terminals

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  1. Introduction
  2. Virtual POS components
  3. How does a virtual POS work?
  4. How to choose a virtual POS
    1. Phase 1: Preliminary assessment
    2. Phase 2: Requirement mapping
    3. Phase 3: Vendor analysis
    4. Phase 4: Decision and implementation
  5. Does Stripe offer a virtual POS?

A virtual point of sale (POS) is a software-based system that allows businesses to process transactions without using physical hardware, such as cash registers or card readers. A virtual POS means that businesses can enter payment details, such as debit or credit card information, into a web interface or application. Typically, virtual POS systems can be accessed via a computer, tablet or smartphone with an internet connection. According to a report from Expert Market Research, the virtual POS terminals market was valued at over US$20 billion globally in 2023 and is projected to reach almost US$220 billion by 2032, highlighting the growing importance of virtual POS systems for e-commerce businesses.

Below is a rundown of what businesses should know about virtual POS setups, including their components, how they work and how to choose the right virtual POS terminal for them – as well as how Stripe can help.

What's in this article?

  • Virtual POS components
  • How does a virtual POS work?
  • How to choose a virtual POS
  • Does Stripe offer a virtual POS?

Virtual POS components

A virtual POS is made up of several components to facilitate transactions and manage different business operations. They include:

  • User interface: This is the screen where transactions take place. It is usually web-based and can be accessed via a browser. It also requires login credentials for secure access. Staff can input payment details, process refunds and manage other transaction types through this interface.

  • Payment gateway: This component is responsible for verifying payment details and confirming transactions. It communicates between the virtual POS and financial institutions to authorise or decline payments.

  • Database: Transaction details, customer information and product listings are stored here. An effective database allows for the quick retrieval of information and facilitates a variety of activities, such as returns or historical sales tracking.

  • Inventory management: Many, but not all, virtual POS systems include features that allow businesses to monitor stock levels. Some can even send alerts when stock reaches a predefined low level, thus simplifying inventory management.

  • User management: This component allows businesses to assign roles and permissions for different users. For example, a manager may have access to more advanced functions, such as analytics and reporting, while a cashier may only have access to process transactions.

  • Analytics and reporting: Many virtual POS systems come with built-in analytics. This feature helps businesses to track key performance indicators (KPIs), such as sales trends, most-purchased products and seasonal demands.

  • Invoicing and billing: This allows businesses to create and send digital invoices. Often, it also includes options for customisation, so that businesses can include their logo, terms and conditions or other branding elements on their invoices.

  • Tax calculations: Some systems provide automatic tax calculations based on product type and location. This simplifies tax compliance for businesses.

  • Multi-currency support: For businesses that handle international transactions, this feature allows customers to make payments in different currencies. Typically, conversion rates are updated regularly to reflect market conditions.

  • Subscription management: For businesses with subscription-based models, this feature helps with scheduling and managing recurring payments. This keeps track of which subscriptions are active, which are due for renewal and which have lapsed.

  • Security features: Security protocols, such as encryption methods and two-factor authentication, help to protect both the business and the customer.

  • Customer relationship management (CRM) integration: Some virtual POS systems can connect with CRM to store customer details, purchase history and communication logs. This data can help businesses to improve personalised marketing and customer service.

Each of these components help to facilitate transactions, safeguard data or improve operational oversight.

How does a virtual POS work?

Here are the steps that take place when a business uses a virtual POS to facilitate transactions:

  • Initial setup: First, businesses must sign up for the virtual POS service. This involves creating an account, setting up users, and configuring payment and operational settings.

  • User login: Staff access the system by entering their credentials into the user interface. Usually, the interface can be accessed through a web browser or a dedicated app.

  • Transaction initiation: At the start of a transaction, the staff member selects the products or services that the customer wants to purchase and enters the customer's payment details into the system manually.

  • Payment verification: Once the customer's payment details have been entered into the system, the transaction moves to the payment gateway. This step involves various verification processes, such as card validity checks, available balance enquiries and anti-fraud measures.

  • Payment authorisation: Once the payment gateway has verified the transaction, it sends the information to the respective financial institution for final authorisation. The virtual POS system receives the response, which either confirms or denies the transaction.

  • Transaction completion: If authorised, the transaction is then completed and the customer receives a digital or paper receipt (depending on whether a printer is connected).

  • Data storage: Information about the transaction is stored in the system's database. This includes various details, such as which items were purchased, the transaction amount and the customer's information (when applicable).

  • Inventory update: If the virtual POS has an inventory management component, stock levels for sold items are updated automatically.

  • Invoice generation: Some systems allow for immediate invoicing. This is especially useful for service-oriented businesses which bill after the service has been performed.

  • Tax application: For transactions that involve taxable goods or services, the applicable tax rate can be automatically calculated and included in the total transaction amount.

  • Analytics update: Once the transaction has been processed, sales data feeds into the analytics component and helps businesses to monitor performance metrics.

  • User logout: Once transactions for the session have been completed, the user logs out to keep the system secure.

The entire process is designed to be quick and user friendly, while still accommodating the needs of different types of businesses and industries.

How to choose a virtual POS

Selecting the right virtual POS demands a multi-faceted evaluation of your business needs, market conditions and technical constraints. Here's a detailed road map for this process:

Phase 1: Preliminary assessment

  • Scope of operations: Evaluate the scale and scope of your business operations. Do you have a single brick-and-mortar location or multiple locations? Do you operate internationally?

  • Transaction types: What types of transactions are most common in your business? Credit cards and digital wallets? Cryptocurrency?

  • Team skill level: Consider your team's technical expertise, as complex systems can require more in-depth training.

  • Budget constraints: How much are you willing to invest initially and over time? In addition to considering the setup cost, examine subscription fees and other ongoing expenses.

Phase 2: Requirement mapping

  • Features inventory: List the features that are must-haves for you, such as inventory management, analytics or multi-currency support.

  • Compliance needs: Conduct research on the required legal and financial compliance in your industry, such as the Payment Card Industry Data Security Standard (PCI DSS), for payment card security.

  • Integrations: Will you need to integrate the virtual POS with existing systems, such as accounting software or a customer relationship management (CRM) system?

  • Customisation options: Will you need to modify the system to better match your operations?

  • Vendor reputation: Seek out vendors known for excellent customer service, consistent uptime and good performance.

Phase 3: Vendor analysis

  • Free trials and demos: Experiment with a few systems that seem like good fits. Use the features, check the user interface, and test speed and responsiveness.

  • Customer reviews: Read reviews from other businesses in your industry.

  • Cost-benefit analysis: Compare the benefits and costs of each system, both in the short and long term.

  • Contractual obligations: Read the fine print for termination fees, data migration support and other potential issues.

Phase 4: Decision and implementation

Vendor selection: Choose the vendor that best fits your mapped requirements.

  • Contract review: Examine the contract closely and make sure that it meets your needs.

  • Training: Provide your staff with extensive training so that they can use your system of choice to maximum effect.

  • Pilot testing: Run a pilot test to iron out any issues and gather user feedback for adjustments.

  • Rollout: Once you're satisfied, roll out the system to the entire business.

  • Ongoing evaluation: Continue to track performance metrics and return on investment (ROI).

This type of structured evaluation and selection process can help businesses to choose a virtual POS that fits their operational profile, technical requirements and growth goals.

Does Stripe offer a virtual POS?

Stripe offers a virtual terminal, which is an online POS system that allows businesses to enter credit card details and other payment information manually into an online interface. Unlike hardware POS systems, a virtual terminal doesn't require any physical equipment other than a computer and an internet connection.

Here are some important benefits that come with using a virtual terminal:

  • Accessibility: A virtual terminal is accessible from any device with internet access, meaning that you can process transactions from anywhere.

  • Low setup costs: Given that a virtual POS setup doesn't require specialised hardware, it usually requires a lower initial investment.

  • Fast onboarding: Because a virtual terminal is a web-based application, training new employees to use it can be faster than training them to use non-virtual POS systems, which can save time and resources.

  • Flexibility: A virtual terminal can be particularly beneficial to businesses that don't rely solely on in-person transactions, or for freelancers and consultants who work remotely.

  • Data integration: Stripe's virtual terminal can be integrated into other Stripe services and even some third-party applications. This provides a single dashboard from which to manage multiple aspects of a business's financial transactions.

  • Invoice creation: Many virtual terminals, including Stripe's, allow you to create and send invoices directly from the terminal. This function can be useful for businesses that provide services rather than goods.

  • Payment methods: The system supports multiple forms of payment, including credit and debit cards. This makes it easier to accommodate customer preferences.

  • PCI compliance: Stripe's virtual terminal complies with Payment Card Industry (PCI) standards, helping to reduce the risk of data breaches and fraudulent activities.

  • No long-term contracts: As the virtual terminal is a service that Stripe provides, it doesn't usually require long-term commitments. Businesses can remain agile and adapt to changing conditions.

  • Multi-currency support: The ability to process transactions in different currencies is particularly important for businesses that operate internationally or those that have a diverse customer base.

  • Scheduled payments: Some virtual terminals allow for scheduled payments, which can be beneficial for subscription-based business models.

Learn more about how Stripe's virtual POS terminal offers businesses a flexible and accessible option for handling financial transactions.

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