MOTO payments are transactions where customers give their payment card information to businesses over the phone or through mail, rather than in person or online. The acronym stands for “mail order/telephone order.” Businesses use these transactions to process payments when a customer’s card is not physically present. MOTO payments were more common before the rise of ecommerce, though some businesses still use them.

The customer provides their card details, which the business enters into a payment system to complete the transaction. This process requires specific protocols to guarantee the security and authenticity of the payment information provided.

While digital payments might get more attention, a Federal Reserve Payments Study found that 2.6 billion MOTO payments took place in the United States in 2020. Any business that handles mail and phone orders—or is considering adding those options—needs to understand how to deploy MOTO payments securely and strategically. What does that look like in the modern context of digital payments? Here’s what you need to know.

What’s in this article?

• How do MOTO payments work?
  
• Benefits of MOTO payments
  
• Drawbacks of MOTO payments
  
• Best practices for MOTO payments
  
• How to accept MOTO payments as a business
  

How do MOTO payments work?

Online commerce has introduced more technologically advanced payment methods that provide greater security and convenience. However, MOTO transactions remain relevant for certain types of businesses and customers. Despite their simplicity, they require attention to detail and adherence to security protocols to mitigate risks and provide a trustworthy payment option.

MOTO payments happen when a business processes credit or debit card transactions without the physical presence of the card. This is how the process typically looks:

• A customer decides to make a purchase over the phone or through a mail order form. They provide their card information verbally or on the form, including the card number, the expiration date, and sometimes the CVV code.

• The business then manually enters this information into a payment terminal or a virtual terminal (a web-based payment platform accessible on a computer or a device with internet access).

• For phone orders, businesses might use an interactive voice response (IVR) system that prompts the customer to enter their card details using the phone keypad. This can increase security, since the business doesn’t handle the card information directly.

• Once the details are keyed in, the payment processor communicates with the card network and issuing bank to authorize the transaction. This involves checking the card’s validity, ensuring sufficient funds are available, and applying anti-fraud measures.

• After authorization, the transaction is queued for settlement and funds are earmarked for transfer. However, they don’t transfer until the end of the business day when the business sends all the day’s transactions to the processor for settlement.

• During settlement, funds transfer from the issuing bank to the merchant account, minus any fees charged by the payment processor. This step can take a few days, depending on the payment processor and the banks involved.

MOTO payments can also involve other payment methods, such as customers sending paper checks, providing their bank account information for a bank transfer, or even paying with cash on delivery or post-purchase invoicing.

For recordkeeping and dispute resolution—regardless of which payment methods your business uses—you need to maintain thorough documentation of MOTO transactions. This includes the date, amount, description of goods or services, and any customer identifiers.

Benefits of MOTO payments

MOTO payments are not necessary for every type of business, but they are more relevant today than you might first assume. Consider whether they belong in your payment ecosystem. Incorporating MOTO payment methods can bring substantial benefits, particularly in terms of accessibility and market reach. Here’s an overview:

• They don’t require internet access
  MOTO payments break down the barrier of internet access. This is especially important for reaching customers in areas with limited or no online connectivity, or older demographics who may be less inclined to shop online. By providing a phone or mail-in payment option, businesses can serve segments of the population that are otherwise excluded from the digital economy.

• Broadened customer base
  People have diverse preferences for how they pay, influenced by factors such as convenience, trust, and habit. By accommodating these preferences, businesses can attract customers who are hesitant to enter card details online due to security concerns or those who simply prefer the personal touch of a phone conversation. It’s about giving customers a choice and catering to their comfort level.

• Personal communication with prospective customers
  For certain business models, such as high-ticket items or customized services where in-depth customer service is key, MOTO payments can result in a more personalized transaction. During a phone call, for example, staff can provide customized advice, upsell additional services or products, and build a rapport that enhances customer loyalty.

• No dependence on websites or structured checkout flows
  During peak times or high-attendance events, businesses can swiftly handle orders without requiring customers to wait for website pages to load—reducing abandoned carts and lost sales.

While MOTO payments may seem outdated, they are still subject to modern security measures. Businesses must adhere to strict security standards to protect customer information, using tools such as address verification service (AVS) and CVV verification, which can make customers feel safer about their transactions.

MOTO payments complement digital payment systems, allowing businesses to provide a mix of traditional and modern customer service and to demonstrate commitment to customer convenience and inclusivity.

Drawbacks of MOTO payments

There are risks and challenges of MOTO payments that businesses should consider, including:

Increased fraud potential

Without a physical card, it’s harder to verify if the person using it is the legitimate cardholder. Fraudulent actors might attempt to use stolen card details, knowing that there’s no need to present the card itself.

Mitigation strategy: Use security measures such as AVS and require the card’s CVV code. Additionally, implement two-factor authentication wherever possible, such as sending a confirmation code to the cardholder’s phone.

Chargebacks and disputes

There’s a higher likelihood of chargebacks with MOTO payments, as customers might not recognize a charge on their statement or claim they never authorized the transaction.

Mitigation strategy: Keep detailed records of transactions and customer interactions. Recording calls (with consent) and using signed order forms can provide evidence in dispute resolutions.

Data security concerns

Handling sensitive payment information over the phone or via mail involves risks of data breaches and unauthorized access.

Mitigation strategy: Adhere to the Payment Card Industry Data Security Standard (PCI DSS) requirements, train staff on data security, and ensure that any written information is stored securely and then destroyed properly when no longer needed.

Higher processing fees

Payment processors often charge more for MOTO transactions due to the increased risk.

Mitigation strategy: Shop around for a payment processor with competitive rates, and negotiate fees based on the volume of your transactions and the security measures you have in place.

Operational challenges

Accepting MOTO payments can require more effort from employees for order processing and can slow down operations, especially if you experience high call volumes.

Mitigation strategy: Streamline the process with efficient order-taking systems (possibly an IVR for calls), and train staff to handle transactions quickly and accurately.

Limited customer verification

It’s difficult to perform certain verification checks that are possible in person or with digital transactions.

Mitigation strategy: Implement other verification processes designed specifically for MOTO payments, and train staff to look for red flags or inconsistencies in orders that might suggest fraudulent activity.

Businesses that use MOTO payments must proactively understand these risks and diligently employ strategies to mitigate them. While MOTO payments are more accessible, they require increased vigilance and stringent security protocols to protect businesses and customers.

Best practices for MOTO payments

For MOTO payments, consider the following best practices:

• Voice authentication: Implement voice authentication technology. With consent, customers’ voice prints can be used as a unique verification tool for phone transactions, increasing security.

• Caller line identification: Use caller line identification features to compare incoming calls against a database of known fraud risks or previous fraudulent transactions, providing an immediate flag for potentially risky calls.

• Dynamic currency conversion: Offer dynamic currency conversion to international customers. This allows them to hear or see the cost of their purchase in their home currency, which can improve customer trust and experience.

• Dedicated MOTO accounts: Set up dedicated merchant accounts for MOTO transactions to separate them from other sales channels. This can help you track and manage potential fraud more effectively.

• Tokenization for repeat customers: Use tokenization to safely store customer payment information for repeat purchases. Tokens are useless if intercepted by fraudulent actors.

• Customized fraud scoring: Develop a fraud scoring system that is tailored to the profile of MOTO transactions, taking into account factors such as purchase size, frequency, and any anomalies in ordering patterns.

• Intelligent call routing: Intelligent call routing directs repeat customers to agents they’ve spoken with before. These agents can help detect if something is amiss with a regular customer’s transaction.

• Post-transaction analysis: Conduct post-transaction analysis using data analytics to identify patterns that may indicate fraud. This can include analyzing the time taken to place an order, any hesitancy in providing information, or inconsistencies in order details.

• IVR payment options: Offer an IVR system for customers who prefer not to give their card details directly to an agent. This can reduce human error and data exposure.

• Customer education: Proactively educate customers on how a MOTO transaction will proceed, what information they will need to provide, and how they can verify the legitimacy of the call if they’re uncertain.

• Follow-up verification: For large or unusual transactions, employ a follow-up verification call or send a text message with a unique one-time code that the customer must provide to finalize the sale.

• Regular staff assessments: Regularly assess staff handling MOTO payments to confirm that they are following protocols and have not developed lax habits over time that could compromise security.

• PCI compliance: Businesses that accept MOTO payments must comply with PCI DSS to safeguard cardholder data. These standards include securely storing transaction records and not retaining sensitive authentication data post-authorization.

How to accept MOTO payments as a business

Setting up MOTO payments involves understanding the role of virtual terminals, which are online applications that allow businesses to manually enter payment details received via phone or mail. They are secure web-based versions of the physical point-of-sale (POS) terminals used in retail stores, and they are key for processing these transactions.

Virtual terminals facilitate MOTO payments by providing a secure and efficient way to enter and process payment information remotely. They are important for businesses that require a flexible, reliable solution for card-not-present transactions. They also keep transaction records that can be easily accessed for reporting, refunds, or chargeback management.

Businesses interested in accepting MOTO payments should consider them as part of an overall strategy to offer comprehensive payment solutions to their customers. Here’s a step-by-step look at how to get started accepting MOTO payments:

• Set up a merchant account: Begin by establishing a merchant account that is enabled for MOTO transactions. This is a type of bank account that allows businesses to accept credit and debit card payments.

• Choose a payment processor: Partner with a payment processor that supports MOTO payments. The processor should provide a virtual terminal as part of its service.

• Perform a security check: Confirm that the virtual terminal is PCI DSS compliant. Set up additional security measures such as AVS checks and CVV verification to reduce the risk of fraud in card-not-present transactions.

• Integrate the virtual terminal: Integrate the virtual terminal into your business operations. This might involve setting it up on multiple workstations or making it accessible to remote teams.

• Train staff: Train your team to use the virtual terminal. They should understand how to process payments and maintain security and privacy when handling sensitive customer information.

• Process a transaction: To process a MOTO payment, enter the customer’s payment details into the virtual terminal, verify the information, and submit it for authorization.

• Authorize the transaction: The virtual terminal communicates with the payment processor to authorize the transaction, ensuring the card is valid and funds are available.

• Complete the transaction: If authorization is successful, finalize the transaction by completing the payment, which will then settle the funds to your merchant account.

Stripe powers financial interactions for businesses of all sizes, and its virtual terminal is set up to accept MOTO payments. There are a few key steps to follow when handling these transactions with Stripe:

• Create a Payment Intent: This is a declaration to Stripe’s systems that you intend to charge a customer’s card. When setting up a Payment Intent for a MOTO payment, you specify that the payment method will be a card.

• Process the payment: Using the Stripe Terminal or application programming interface (API), process the payment by marking it specifically as a MOTO transaction. This involves entering the cardholder’s card number, CVC, expiration date, and postal code into the system.

• Verify the reader state: If you’re using hardware, you’ll need to ensure that the terminal is in the correct state—such as idle, waiting for input, processing a transaction, or in error mode—to process the payment.

• Capture the payment: To finalize the transaction, capture the payment. If the Payment Intent status is “requires_capture,” then you must confirm the capture to move the funds.

Stripe’s virtual terminal provides a user-friendly interface for manually entering payment details securely. It handles MOTO transactions efficiently while keeping all data encrypted in accordance with PCI compliance standards​​.

Learn more about using Stripe’s virtual terminal.