A critical part of building a successful business is creating a payments ecosystem that can accept customer payments and process sales—anytime and anywhere. But what about sales that come your way when you don’t have access to your usual payment processing terminals?

Virtual terminals are one popular answer to this problem. For most businesses, a virtual terminal is not a standard part of their payments arsenal, but it can be an important one. The popularity of virtual terminals is growing: by 2029, the global virtual payment terminals market is expected to reach $118.31 billion.

Below, we’ll explain what a virtual terminal is, how it works, why you might need to use one, and what Stripe users should know about setting one up.

What’s in this article:

• What is a virtual terminal?
  
• How do virtual terminals work?
  
• What types of businesses use virtual terminals?
  
• Benefits and drawbacks of using virtual terminals
  
• Does Stripe offer a virtual terminal?
  
• How Stripe Payments can help
  

What is a virtual terminal?

Virtual terminals operate using web-based software, giving you the ability to process payments electronically—without using a physical point of sale (POS) terminal. Even for businesses that normally use POS terminals, virtual terminals offer another way of processing customer transactions from a range of sources when traditional payment terminals aren’t available. Virtual terminals are often used for mail order/telephone order payments (also called MOTO payments or mail request/phone request transactions), when the customer and their card are not physically present for the purchase. Businesses also have the option of using a virtual terminal and physical card reader together. This creates a unified platform where businesses can handle MOTO payments and secure in-person transactions all on the same dashboard and merchant account.

Businesses can set up a virtual terminal by selecting a payments provider that aligns with their needs and applying for a merchant account. Once a merchant account is approved, the business can request virtual terminal access via the payments provider. Then, they can choose their settings, such as types of cards accepted and receipt delivery, and begin processing payments.

In ecommerce, a virtual terminal is sometimes confused with a payment gateway, but they’re not the same. A virtual terminal, which often runs on top of payment gateways, is a browser-based interface that allows a business to manually key in a customer's payment details, typically for MOTO payments where the customer isn't physically present. A payment gateway is the underlying tech infrastructure that securely transmits payment data between the merchant, the acquiring bank, and the card networks. The virtual terminal is the front-end tool a merchant interacts with, while the payment gateway is the back-end technology powering the transaction.

How does a virtual terminal work?

Businesses can use virtual terminals to accept payments from customers via telephone, email, fax, or in person through an internet-equipped device such as a laptop, tablet, or smartphone. Most virtual terminals accept credit and debit cards, as well as ACH payments. Unlike in-person transactions made with a card reader, virtual terminals require the merchant to manually input the transaction and payment information. This manual entry process is inherently less secure than other methods, so it’s important to be aware of the risk of fraud or chargebacks.

Virtual terminals can also process refunds. Generally, this option is offered alongside the original transaction in the virtual terminal dashboard’s payment history, without requiring re-entry of the customer’s card details.

Which types of businesses use virtual terminals?

Most businesses that accept payments from customers could benefit from access to a virtual terminal. Even if you don’t use it frequently, having a virtual terminal as part of your overall payments setup means you’ll never have to delay processing a transaction that comes up unexpectedly. For many businesses, virtual terminals can be an ideal fit for day-to-day operations. Here are a few examples:

• Restaurants
  It’s common for restaurants and other food-based businesses to accept customer orders online, over the phone, and in person—all within the same minutes-long span. Virtual terminals can serve as a key piece in a restaurant’s overall payment system, with the ability to field transactions from many input sources.

• Retailers
  Retailers who sell in a variety of settings can also benefit from virtual terminals. For instance, if you sell handmade ceramics and have a permanent brick-and-mortar location but also regularly sell at craft fairs or informally to friends, having a virtual terminal means you can process payments anywhere.

• Freelancers and consultants
  If you’re a freelancer or consultant who rarely sees clients in person—think writer, designer, accountant, and countless others—a virtual terminal allows you to accept payments easily, without investing in physical POS terminals and card readers that you might not use.

Benefits and drawbacks of using virtual terminals

It’s clear that there are benefits of being able to process customer transactions anytime, anywhere, but this convenience comes with risk. Here’s a rundown of the pros and cons of using a virtual terminal to process payments:

Benefits

• Convenience and flexibility
  Virtual terminals work on any device with an internet browser and can be used in almost any setting to accept payments from a range of sources—in person, over the phone, by email, or even by postal mail. Since it’s common for people to have their smartphone on them most of the time, virtual terminals are convenient to access.

• Capture sales that might otherwise be lost
  The biggest upside to virtual terminals is that they give business owners (or designated employees) the power to easily accommodate a customer transaction even if they are away from the business’s physical or online payment terminal. This means your business won’t lose sales due to the inability to process a payment—a potential loss not just in revenue, but in customer lifetime value (LTV).

• Launch quickly with low setup costs
  Virtual terminals require no specialized hardware, software installation, or lengthy procurement process. A merchant can sign up with a provider and begin accepting payments from any browser within the same day. The low barrier to entry means minimal up-front capital investment, since there's no POS hardware to purchase or lease.

• Reduce manual errors
  Modern virtual terminals generally feature built-in validation tools, such as real-time card number checks, address verification service (AVS), and card verification value (CVV) verification, that catch errors at the point of entry before a transaction is submitted. This can reduce the likelihood of failed payments caused by manual errors.

Drawbacks

• Security concerns
  The main argument against virtual terminals is their lower level of security. With in-person card payments made using a card reader, the card reader securely transmits the card information to the merchant’s POS and then onto their payment processor. With payments made manually with a virtual terminal, the merchant inputs the payment details, which is inherently less secure than other payment methods. This method comes with a risk of fraud or chargebacks and weaker customer authentication mechanisms.

• Dependence on internet and system uptime
  Virtual terminals rely on a stable internet connection and the availability of the provider's servers, meaning that an outage—whether from a local network issue or a platform-wide disruption—can halt payment processing.

• Not ideal for high-volume retail
  Virtual terminals are designed primarily for manual payment entry, making them less ideal for high-volume situations where speed at the point of sale is critical. Businesses that process hundreds of transactions per day are often better served by dedicated POS systems.

Does Stripe offer a virtual terminal?

Businesses that use Stripe can add a virtual terminal to their Stripe platform. However, they are not part of Stripe’s out-of-the-box solutions primarily because they make it harder to ensure adherence to our uncompromising standards for security and PCI-DSS compliance.

Adding a virtual terminal on your Stripe account requires an API, which we can help set up for you. After creating your virtual terminal, you’ll be able to access it from any browser via your Stripe Dashboard. Our goal is to balance a business’s ability to accept payments anytime and anywhere while ensuring payments are as secure as possible. To maintain high security standards, virtual terminal payments should be considered a useful but rare backup method for accepting payments via email, fax, or telephone.

How Stripe Payments can help

Stripe Payments enables businesses to set up and accept 125+ payment methods, including ACH Credit Transfers. It provides a unified, global payments solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world.

Stripe Payments can help you:

• Reconcile payments automatically: Easily reconcile ACH Credit Transfers to a specific payment or invoice with an automatic reconciliation engine that uses virtual bank accounts for each customer and tools for troubleshooting.

• Simplify refunds: Make refunds or return excess funds to the customer.

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs and Link, Stripe’s digital wallet.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.

• Improve payments performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.