There are three different types of terminals: physical terminals, software terminals, and virtual (Web browser-based) terminals.
Physical terminals: Physical terminals are typically used in retail stores to process credit cards. Physical terminals include a magnetic strip reader and a numeric keypad. Some physical terminals also come with an alphanumeric keypad to allow credit card information to be keyed in when the magnetic strip reader cannot read the swiped card. Physical terminals connect to a telephone line and dial the processing server to transfer the data. Physical terminals may be purchased or leased from a Merchant Account Provider.
Some Internet and MOTO merchants use a physical terminal equipped with an alphanumeric keypad to input credit card information in lieu of using a software or virtual terminal.
Leading manufacturers of physical terminals include VeriFone and Hypercom. Pricing for physical terminals begins at about $400-$500.
Software terminals: Software terminals are software applications that run on personal computers. These software applications allow credit card charges and credits to be processed from the PC. The data is transferred to the processor using your computer's modem and telephone line. Software terminals may be purchased or leased from a Merchant Account Provider.
Software terminals are used primarily by MOTO merchants where credit card information is received via mail, fax, or telephone. However, they are also used by some Internet merchants by collecting credit card information online and then processing the credit card transactions offline.
The primary advantage of software terminals is that they have a lower operating cost since you can avoid the monthly gateway fees associated with virtual and gateway terminals. There are two major disadvantages to using software terminals. First, they do not allow the online customer to receive any feedback when a credit card transaction cannot be approved by the processor. This must usually be performed by emailing or phoning the customer regarding the problem and providing some method for the customer to resubmit the information. The second disadvantage is that you must have some method for accepting, transferring, and storing the customer's credit card information securely until you can enter the information manually using the software terminal.
Leading manufacturers of terminal software include IC Verify and Tellan. Pricing for software terminals begins at about $300.
Virtual terminals and gateways: A gateway is simply an application that runs on the processor's server that allows a secure method for transferring the credit card information from the user's browser to the processor in real-time. Most gateways provide a simple means of calling the application server directly from your Web site by using standard HTML forms. Gateways also are incorporated into many online shopping cart applications.
Gateways store the obtained credit card information on the processor's server. This places the burden of information security and protection on the processor and removes this potential liability from the merchant. Stored transaction data may be accessed and managed by the merchant using a virtual terminal.
A virtual terminal is usually included with the processor's gateway service and allows the merchant a means of entering credit card charges and credits by using a standard Web browser. This browser-based interface also allows the merchant to manage other aspects of the account such as reviewing and approving previously collected transactions, running reports, etc.
The greatest advantage to a payment gateway is that the credit card information can be collected and stored on the processor's server when the customer completes the sale transaction. This eliminates the merchant having to establish methods of securely storing credit card information, an almost impossible task for a publicly hosted Web site.
There is a large and growing number of virtual terminal and gateway service providers including Cybercash, Cybersource, Network Solutions (Authorize.Net), and Signio (Payment.Net). Pricing for gateway service, including a virtual terminal, begins at around $500 for setup fees plus a monthly gateway fee of $25-$50.
