Virtual Payments Explained: How Virtual Credit Cards Work for Business Payments

Virtual payments have been developing and indeed flourishing for several decades, offering businesses of every size the ability to take card payments without adding a card machine to their collection of hardware. How? Essentially, through an app or online portal. Sounds too good to be true! That’s why, today, we’re giving you a walkthrough on virtual payments and how they work for businesses like yours so you can choose whether or not you want them for your business. We’ll cover:

• What is a virtual terminal?

• How does a virtual terminal work?

• Which types of businesses use virtual terminals?

• Key features to look for

• The benefits and risks of online virtual payment tech

• Virtual terminals vs payment gateways

So read on to learn all there is to know about virtual terminal credit card processing and the many advantages it can bring to your business! Let’s do it!

What is a virtual terminal?

A virtual terminal is a web or app-based payment tool that allows businesses to accept card payments without needing a physical card reader or countertop card machine. Instead of tapping or inserting a card into dedicated payments hardware, payments can then be processed on a tablet or smartphone either by manually entering a customer’s card details into the secure software, or, on some devices used for in-person sales, even using contactless payments.

Think of virtual payments technology as turning any internet-connected device into a checkout. It gives businesses the flexibility to take payments remotely, over the phone, or on the go, making it really handy for mobile, service-based, or online-first operations.

How virtual terminals differ from traditional POS systems

While both virtual terminals and traditional point-of-sale (POS) machines process card payments, the way they do it, and where they’re most useful, can be quite different.

How does a virtual terminal work?

A virtual terminal works pretty much the same way as a traditional checkout, just without the physical hardware. Instead of tapping or inserting a card, the merchant enters the customer’s payment details into an online interface, and the system does the rest.

Here’s how the process typically looks from start to finish:

• Access and login. You log in to your payment provider’s virtual terminal through a secure web browser or mobile app using your business credentials. Any good platform will use encrypted connections (HTTPS) and added protections like two-factor authentication to prevent unauthorized access.

• Enter payment details. You or your team manually input the customer’s card number, expiry date, CVV, and then confirm transaction amount. Reputable providers use encryption and tokenization to protect sensitive card data and help businesses stay compliant with PCI standards (PCI Security Standards Council), so when signing up, be sure to check your provider does this.

• Authorization. Once submitted, the system securely sends the payment information to the processor and the customer’s bank for approval. In a few seconds, the bank checks for sufficient funds, looks for any fraud indicators, then either approves or declines the transaction accordingly.

• Confirmation. You receive an instant confirmation on screen showing whether the payment was successful. A digital receipt can be emailed or sent to the customer automatically, creating a clear record for both sides.

• Transaction management. Finally, any completed payments are recorded on your dashboard, where you can track sales, issue refunds, run reports, or manage recurring charges. Access controls and audit trails help keep records secure and ensure only authorized staff can view or edit transaction data.

Which types of businesses use virtual terminals?

Virtual terminals are especially valuable for businesses that don’t operate from a fixed checkout counter or regularly take payments remotely. If you ever accept payments over the phone, via invoice, app or online, or anything outside a traditional environment, a virtual terminal can make things much simpler for you.

Here are the types of businesses that often use them:

Service-based businesses (consultants, freelancers)

Consultants, coaches and private tutors, agencies, and freelancers often invoice clients or take deposits for their work rather than charging on the spot. A virtual terminal lets them securely collect card payments from anywhere, and at a client’s convenience, whether that’s after a call, during a Zoom session, or when they get time before or after a session. It removes the need for extra hardware or a physical checkout, while still offering a professional payment collection system.

Phone order and mail order businesses (MOTO payments)

Businesses that take orders by phone or post rely heavily on mail order/telephone order (MOTO) payments. This may sound dated to those outside the industry, but businesses like wholesalers, pharmacies, or even departments within businesses performing customer service rely heavily on these methods. A virtual terminal lets staff securely key in a customer’s card details while on the call, process the payment instantly, and confirm the order in one step.

Mobile and pop-up vendors (food trucks, craft fairs, events)

Traders at markets, festivals, or temporary locations need flexible payment options that move with them. A virtual terminal allows payments to be taken through a tablet or phone without bulky equipment, perfect for minimalist environments. It’s especially useful as a backup if portable card readers lose signal or battery, which pop-up businesses encounter more often than they’d like!

Healthcare providers (dentists, clinics, therapists)

Practices within the NHS or private clinics often need to take payments before or after appointments or for outstanding balances. Virtual terminals lets reception teams securely process card details without patients needing to be physically present, through reminders, emails, or over the phone. This simplifies billing for follow-ups, deposits, and treatment plans.

Home service providers (plumbers, electricians, cleaners)

Tradespeople working on-site rarely have a fixed till point. An online virtual terminal enables them to accept card payments for their work using just their phone or laptop. They’ll often send an invoice through an email or SMS, and the customer can then reach out to pay their bill. Simple and effective.

B2B companies

Business-to-business sellers often deal with higher-value transactions, custom quotes, or staged payments. Instead of waiting on bank transfers, finance teams can securely process card payments directly from invoices or during account calls simply by taking a virtual terminal payment. These often work better when taking partial payments and processing larger sums, which B2B trading often requires.

Nonprofits (donation processing)

Charities and community groups frequently accept donations remotely or during campaigns. A virtual terminal lets staff take card donations over the phone. This makes giving easier for supporters and charities alike.

Subscription businesses

Memberships, retainers, and recurring services often require card details to be stored securely for repeat billing. Virtual terminals allow businesses to set up initial payments and manage ongoing charges from one dashboard. This is especially helpful for gyms, clubs, app and software companies, or service providers running monthly plans.

Key Features to Look For

When comparing virtual terminal providers, it’s important to look beyond the basics of what’s on offer and dig into the nitty gritty of the tools that you’ll be using every day if you choose that provider. Here are the core features worth thinking about:

• Multiple payment methods (credit/debit cards, ACH, digital wallets). Your virtual terminal should support all major credit and debit cards alongside bank transfers (ACH) and popular digital wallets. Offering people more ways to pay reduces checkout friction and, if it doesn’t win you the sale initially, it helps ensure you don’t lose it needlessly, which can be just as important.

• Recurring billing capabilities. Built-in recurring billing lets you automatically charge customers on a schedule for subscriptions, retainers, or instalment plans. This is a crucial functionality and needs to be reliable. When it works well, it saves hours each week and helps automate the business.

• Customer database with stored payment information. Customer profiles allow you to save billing details, payment history, and contact information in one place. They make repeat transactions faster and helps you improve the overall customer experience with personalisation. However, security is crucial, as data breaches can be damaging to both finances and reputation.

• Reporting and analytics. Real-time dashboards and detailed reports help you track sales trends, refunds, chargebacks, and business performance. With better insights into your numbers, you can make smarter decisions for your business.

• Multi-currency support. If you work with international customers, the ability to charge in multiple currencies is essential. It simplifies cross-border sales and avoids confusion or unexpected conversion costs for your buyers.

• Refunds and void transactions. Quick refund and void options allow you to resolve customer issues without jumping through hoops or complicating the process. Fast reversals build trust and reduce the risk of disputes or chargebacks while increasing the chance of future sales and repeat custom.

• PCI compliance and strong security. Look for encryption, tokenization, two-factor authentication, and full compliance with standards set by the PCI Security Standards Council. These protections safeguard sensitive card data and help your business avoid costly breaches or penalties.

• Integrations with other business tools. Your virtual terminal should connect easily with accounting software, CRM systems, ecommerce platforms, and invoicing tools. Integrations reduce manual data entry and keep your financial and inventory records accurate across systems.

• Email receipts and customer notifications. Automatic digital receipts provide customers with instant proof of payment and cut down on paper clutter. They also create a clear audit trail and ensure your business operates professionally.

Benefits and Risks of Virtual Terminals

Like any payment technology, virtual terminal credit card processing comes with clear advantages as well as a few trade-offs. Understanding both sides will help you decide whether the trade-offs are worth your while, and the setup fits your business model.

Benefits

• Convenience. Take payments using a browser or app without being tied to a physical checkout. This a a big advantage that means you don’t need to worry about your ability to bill a client.

• Flexibility. Virtual terminals are ideal for phone orders, remote billing, invoices, and mobile teams. They let you take payments anywhere and everywhere. 

• No hardware required. Because everything runs through software, you avoid the cost, maintenance, and hassle of card readers or countertop terminals. You can take payments, without being at all weighed down by them.

• Capture otherwise lost sales. Accepting payments remotely makes it easier to close deals immediately, regardless of how they’re made, instead of chasing bank transfers or unpaid invoices.

• Cost-effective. Low setup costs and no equipment expenses make virtual terminals an affordable option for startups and small businesses.

Risks

• Card-not-present (CNP) security concerns. Since the card isn’t physically verified, card-not-present transactions have a higher risk of disputes and chargebacks.

• Higher processing fees. Due to the above point, providers often charge slightly more for manually entered or remote payments due to the increased fraud risk associated with CNP transactions.

• Manual data entry errors. Typing card details by hand can slow down checkout and increase the chance of mistakes that lead to failed payments.

Virtual Terminals vs Payment Gateways

A payment gateway and a virtual terminal both let you accept card payments online, but they play different roles, and need separate positions within the business.

A payment gateway is automated and customer-facing: it connects directly to your website, app, or checkout page and securely processes transactions when customers enter their own card details. Everything happens in the background with little or no staff involvement. Think of the checkout experience powered by providers like Stripe, Epos Now Payments, or PayPal, where the system captures the information, authorizes the payment, and confirms the result instantly. This makes gateways ideal for ecommerce stores, subscription signups, and any scenario where customers pay independently through an automated flow.

By contrast, a virtual terminal is manual and merchant-facing. Instead of the customer entering their details into a checkout page, you or your team key the information into a secure dashboard to process payments taken over the phone, by email, or from invoices. It’s best suited to service businesses, B2B sales, or remote billing where human interaction is part of the sale.

In practice, many businesses use both together: the gateway handles everyday online purchases automatically, while the virtual terminal covers exceptions like phone orders, custom quotes, or one-off invoices. Using the two side by side gives you full coverage, combining self-serve convenience with the flexibility to take payments anywhere, however your customers prefer to pay.

Virtual terminals: essential for some traders, a useful option for others!

Virtual terminals give businesses a simple, flexible way to accept card payments without the cost or limitations of traditional hardware. Whether you’re taking phone orders, sending invoices, or working on the go, they turn any internet-connected device into a secure checkout. Combined with payment gateways for automated online sales, they can be a handy supplemental or backup payment method that minimises downtime, and gives customers an extra option, letting them make their purchases however they like!

Want to give your business more payment options? Try Epos Now Payments! Epos Now’s POS systems integrate with payment gateways, third-party payment processors, and leading business software providers in ecommerce, accounting, marketing and more!