The end is near for single-use hardware devices as software continues its quest to rule all aspects of the business world. For retailers, the device in question is the formerly ubiquitous credit card terminal, which is quickly being supplanted by its virtual counterpart.
Virtual credit card terminals are as popular with consumers as they are becoming with retailers.
- According to Finances Online, 28% of all consumer purchases of goods will use digital wallets for payment by 2022. This is second only to the use of debit cards (30%) and more than both standard credit cards (22%) and cash (17%).
- Total worldwide digital payments were worth $5.2 trillion in 2020, 63% of which was spent on digital commerce.
- In 2021, digital payments are forecast to reach $6.68 trillion–$4.20 trillion from digital commerce and $2.49 trillion from mobile POS payments.
Retailers who fail to adopt virtual credit card terminals risk losing customers to competitors who make shopping as simple, safe, and convenient as possible for their clients. The good news is that modern cloud-based POS systems provide all the virtual credit card features that you’ll need to stay ahead of your competition.
How Virtual Credit Card Terminals Work, and Why They’re so Popular
Virtual credit cards offer consumers all the features of their physical counterparts while being both safer and more convenient. The most common forms are digital wallets such as Apple Pay, Google Pay, and Samsung Pay that work as apps loaded onto smartphones and other mobile devices. The software uses Near Field Communication (NFC) sensors to link to the retailer’s network to complete the transaction.
The other half of the connection is the retailer’s virtual credit card terminal, which links to a payment processor’s website or mobile app. While security is one important benefit of virtual credit card transactions, the systems are also much simpler and more affordable than traditional credit card services, which typically entail long contracts, high termination fees, and other restrictions.
- Standard credit card fees range from 1.75% to 3.5% per transaction. This is in addition to their monthly fees, which are usually based on transaction volume.
- By contrast, virtual credit card services typically waive the monthly fees and are less expensive and less troublesome to set up. Their per-transaction fees are generally less than 3%. For example, PayPal’s per-swipe fee is 2.7%.
- In addition to faster checkouts and transfer times, virtual credit cards save retailers money by sending customers their receipts electronically.
Using a virtual credit card terminal is as easy as signing in to your online merchant account and entering the customer’s card number and other information on the secure payment page. For sales completed via your store’s mobile app or website, the credit card information is entered automatically by the customer via their digital wallet.
The Benefits of Virtual Credit Card Terminals for Customers and Merchants
Mobile shopping was gaining steam before the COVID-19 pandemic ran roughshod over the retail industry–the technology is expected to become even more popular in its aftermath. Consumers expect the merchants they deal with to come to them through the store’s custom mobile app and branded website. Mobility benefits retailers by providing them with more insight into their sales, their markets, and ever-changing customer preferences.
The foundation for virtual credit card terminals is your business’s POS system, which makes it simple for stores to connect their mobile app and website to their operations. This gives retailers an all-encompassing view of their sales activity, employee schedules and performance, inventory counts, and customer histories. While many stores and restaurants choose to combine their mobile POS operations with conventional POS hardware, more stores tend to go fully mobile.
Aspects that retailers need to consider when implementing virtual credit card services include finding the right payment service, whether to support both traditional and virtual credit card terminals, and the number of transactions your business processes on a given day. A major benefit of cloud-based POS systems for virtual credit cards is their ability to automatically link the transaction information with your business’s accounting and sales analysis functions.
Putting the Virtual Credit Card Pieces Together
These are the three basic components of a mobile POS system that supports virtual credit card acceptance:
- Smartphones, tablets, or other mobile devices that run the store’s mobile app
- Secure data storage and 24/7 data access via the POS system’s cloud components
- Mobile peripherals such as barcode scanners, receipt printers, and traditional credit card readers for sales transactions that can’t be completed virtually
The devices connect to the cloud and to each other using wireless (Bluetooth, WiFi, or the cell network) or wired links (Ethernet, USB, lightning, or other cable type). An added benefit of accepting virtual credit card payments is the ability to add features as your business grows and in response to market trends and customer preferences.
When shopping for a virtual credit card terminal, keep these functions in mind:
- Payments can be made from any location without high upfront or ongoing hardware and software costs.
- Returns, refunds, and other transactions are supported and combined in real-time with on-site sales.
- Applied tax, inclusive tax, or flat tax can be calculated automatically based on where the sale occurs.
- Discounts and service charges are applied automatically based on the customer’s purchase history or the services provided, such as delivery fees or automatic tips.
Marc Andreessen, creator of the Netscape browser, once wrote that “software is eating the world.” Ten years later, it may be more accurate to say that software is feeding the world, not to mention clothing it and providing every other type of service we desire. Virtual credit card terminals are an example of software that will firmly move the retail industry into the digital realm. Don’t let your business be left behind!
In a period of change, talech has a number of POS solutions that can help your retail business adjust operations smoothly. From reaching new audiences to engaging with your existing customers more often, we give you the tools to adapt quickly and with confidence.
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