Today’s super-competitive marketplace dictates that small business owners must take a multi-channel sales approach if they want to reach customers and secure more conversions. Shoppers continue to make purchases at brick-and-mortar stores with point of sale or POS systems at a high rate, especially amongst younger generations, 84% of which view shopping as a social pastime. However, you may still find yourself having to accept phone orders from customers who can’t make it to the store.
Yet telephone transactions do have some logistical issues and inherent risks that can make them a less secure payment method. In this post, you’ll get details on security precautions that will increase phone-based transactions’ safety factor.
You’ll also learn about two methods of accepting payments over-the-phone, and view a step-by-step transaction tutorial. By the end of this guide you’ll be able to confidently choose a telephone-based payment processing model that best meets your business’ needs.
Why Is It Important to Accept Phone Payments?
Phone orders might sound outdated in the era of online payments, but they are more common than you might think.
For example, restaurants receive carry-out and delivery orders that require telephone prepayment. Some eCommerce retailers accept phone orders for their merchandise. Many mobile businesses rely on phone-based transactions, especially if they cannot easily offer mobile credit card processing on location. Plumbers, traveling dog groomers, independent vehicle detailers, and mobile marine mechanics are just some of the businesses who benefit from phone payment solutions.
Phone payments offer your customers an additional layer of flexibility and convenience. Not all customers are comfortable with shopping online, and accessibility issues may prevent them from doing so. Moreover, it also doubles as a customer service option by allowing shoppers to ask questions about products and services before committing to a purchase, rather than leaving an email and waiting for a response. It’s a faster, more streamlined payment system that boosts customer satisfaction.
What Is a Merchant Services Provider?
A merchant services provider is a company or financial institution that offers a range of services to facilitate electronic payments. This includes payment gateways, payment processing, merchant accounts, and payment security. Choosing a merchant services provider is essential for any business who wants to process payment electronically, such as credit cards, debit cards, or mobile wallets like Apple Pay or PayPal.
Why Do You Need a Merchant Services Provider to Accept Credit Card Payments over the Phone?
If you plan on accepting credit card payments over the phone, you’ll need a framework in which to process those payments. You’ll also need a way to get those sales proceeds into your business bank account.
That’s where your merchant services provider comes into play. A good payments partner can not only supply you with a merchant bank account, but also maintain the hardware and software that enables you to process card-not-present payments quickly and securely, such as maintaining a virtual terminal for their merchants’ use.
Small business credit card processing costs
Credit card authorization over the phone can generate significant income for your business. During the sale, however, you’ll still incur transaction fees. Your merchant services provider and their pricing model will determine how much you’ll pay for each transaction. As a general guideline, most merchant services providers charge merchants between 2-4% of each transaction.
Because phone-based transactions are considered card-not-present (CNP) transactions, they have a higher risk of fraud than card-present sales. As a result, merchant services providers typically charge more for phone transactions than for a traditional credit card terminal.
Besides a per-transaction processing fee, you may be assessed a monthly service fee and/or virtual terminal access fee. In addition, some providers may also charge set-up, PCI compliance, chargeback, and other fees.
What Else Do You Need to Accept Credit Card Payments over the Phone?
Accepting credit card payments over the phone requires two hardware items and two software applications. Once everything’s up and running, taking phone-based card payments is very easy.
A virtual terminal
A virtual terminal is a type of software interface that allows businesses to manually process credit card payments without the need for a traditional credit card terminal or POS system.
Most Internet-enabled devices can be used as virtual terminals, since terminals often take the form of web-based browsers. Most merchant services providers will supply virtual terminals to business customers.
A POS app
Your merchant services provider may require you to download their proprietary application in order to process payments. This software allows you to manually process credit card transactions, initiate the payment process, and keep customer card details on file for recurring payments. Send this app to your mobile phone or desktop, install the software, and begin processing sales.
A credit card reader
Your merchant services provider should provide you with a mobile credit card reader. A mobile card reader is a small device that can be connected to a smartphone or tablet to enable businesses and individuals to accept credit card and debit card payments. Some processors may offer terminal hardware that contains a built-in mobile card reader, or a separate mobile card reader for a lower fee..
A mobile phone
Your smartphone can also serve as a card-not-present transaction platform, in the case that your business isn’t using a mobile terminal. In this case, the smartphone and the payment software it’s hosting becomes a tool for entering customer card details and initiating transactions. Mobile payment apps should use encryption and tokenization to safeguard payment information and protect cardholder data.
Accepting Credit Card Payments over the Phone: A Step-by-Step Process
If you’ve wondered how to accept credit card payments over the phone, it’s actually a rather straightforward process. By following five simple steps, you can set the stage for seamless phone-based transactions that generate significant income for your business.
Step 1: Choose a merchant services provider
Your business’ merchant services provider will serve as your credit card processing partner. A merchant account provider establishes a dedicated bank account for every business. This account serves as the destination for all credit card payments. The merchant account provider also furnishes all hardware and software needed to facilitate the payments.
To ensure that you select the right provider for your business’ needs, evaluate the size of your business and your financial situation. Maybe you operate a l bootstrapped start-up business, and you anticipate low-volume transactions for the near future. If so, your needs will be different than an established business that does a brisk-to-heavy sales volume on a regular basis.
Next, compare the two types of merchant services providers: Merchant service providers and payment service providers. Each provider will help your business to process credit card payments and funnel the sales proceeds into your business’ bank account. However, the two providers have very different operations frameworks and processing cost structures.
A merchant service provider specializes in setting up and managing merchant accounts for businesses. Typically, a customer must complete a service application, and a longer-term contract is usually required. The advantage is that the merchant account provider has vetted your business before approving your account. For that reason, you can expect few disruptions in your day-to-day credit card processing operations.
In contrast, a payment service provider pools your business’ card processing receipts into one aggregate merchant account. The provider transfers each business customer’s net sales proceeds into the business’ bank account as required.
This payment processing model often appeals to newer businesses that might not have the established financial and operations history to merit an application approval. Customers can quickly open an online account and begin processing transactions. These providers also typically charge fewer fees compared to a merchant account provider. However, business customers may experience account holds and even freezes while payments clear, which can be very disruptive to cash flow.
Step 2: Obtain the card processing hardware and software
In most cases, your merchant services provider will furnish your processing hardware, such as a mobile credit card reader. However, maybe you’ll be processing credit card payments with your smartphone. If you don’t currently have one, purchase it at an electronics or big box store or mobile phone specialty retailer. Your provider will likely instruct you to download their proprietary app that drives the processing operations.
Step 3: Set up your virtual terminal
You’ll be accessing your merchant services provider’s virtual terminal via your computer, tablet, or smartphone. Your provider’s service package should include self-service virtual terminal setup instructions. It’s a good idea to scope out help guides online in advance to speed up the set-up process. To process your first virtual transaction, simply follow the screen prompts. You should do this ahead of an actual customer sale to ensure that the system is working correctly.
Step 4: Determine the required credit card information
Your merchant services provider will tell you what information you need to collect from each customer in order to process a sale. In addition, each major credit card issuer may have information requirements that specifically relate to card-not-present transactions. In all cases, you’ll need the customer’s credit card number and type, its expiration date, and its CVV code. You should also confirm the customer’s name exactly as it appears on the card. In certain cases, you may need their phone number and email. If you’ll ship the order, you’ll also need a valid shipping address.
Step 5: Process customers’ payments and send receipts
Each phone-based credit card transaction follows the same sequence. First, enter the customer’s order details into your system, and calculate the final amount due. This amount should include sales tax and shipping costs (if applicable).
Next, obtain the customer’s credit card details. Ensure that you meet the card issuer and merchant services provider information requirements. Enter this data into your virtual terminal, and verify its accuracy with the customer.
When everything is correct, submit the payment. If you receive an approval, thank the customer and send an electronic or paper receipt. If the transaction is declined, explain that there’s a discrepancy, and ask the customer to repeat the transaction with another card.
Tips to Help You Safely Accept Credit Card Payments over the Phone
When a customer is paying over the phone with credit card, the process carries inherent fraud risks that are minimized during an in-person transaction. With careful preparation, however, you can considerably minimize your business’ risk of card fraud or a chargeback.
Telephone credit card processing risks
When you process an in-person sale, the customer must produce their credit card or debit card to complete the transaction. The customer should also be prepared to show you the physical card with the signature, plus identification.
If you process a customer’s payment over the phone, however, you’re engaging in a transaction with increased card fraud risks. First, you can’t visually inspect the card or see the purchaser’s photo identification. That means you can’t confirm their identity and verify that the card and ID match. This is what makes verbal phone payments less secure than card-present payments, and causes some businesses not to accept them.
With careful preparation, however, you can considerably minimize your business’ risk of card fraud or a chargeback.
5 Key Tactics for Preventing Card Fraud
Fortunately, you can increase the chances that phone-based card transactions are legitimate. These five security precautions apply to any size or type of business.
Record all relevant transaction information
When processing a card-not-present payment, note the buyer’s card number, expiration date, CVV code, and ZIP code. Ask the caller to state exactly how their name is shown on the credit card, since this may differ from the name they have given for the order. Write “phone transaction” on the receipt or electronic signature screen so your business can track transactions.
Check the shipping and billing address
If the customer’s billing and shipping address don’t match (especially if they’re in different regions or countries ), this may be a red flag and indicate that a counterfeit or stolen card is being used. An address validation system on your POS or virtual terminal when cross-reference the address on file for the credit card to alert to any unusual activity.
Get additional details for your records
Because of the higher fraud risk, it’s a good idea to ask for identification that can be checked in the case that something goes wrong with the order. Obtain the customer’s driver’s license number, birth date, and phone number (if your state permits). Securely store these details until the transaction is complete and the customer is satisfied with their purchase.
Require the purchaser’s signature upon delivery
If a customer is placing a phone order for home delivery, request that the buyer sign for the item when it’s delivered. This gives your business an extra layer of protection for phone orders, especially when it comes to chargebacks or shipments being lost in transit. It also helps to ensure that the proper person receives the package, as well as avoiding issues such as porch piracy.
Adhere to PCI DSS compliance requirements
If your business takes credit card numbers by any method, especially in paper form, you must comply with PCI (payment card industry) requirements for secure storage of customers’ personal data. Work with your merchant services provider to ensure compliance. In general, it isn’t recommended to physically store card details due to the risk they could be stolen or lost.
Also, consider that a customer is purchasing a product they haven’t personally seen. Perhaps they might think the product isn’t as advertised, or they feel they’ve received an incorrect bill. To minimize unpleasant disputes, carefully describe the product before the buyer commits to purchase it. Clearly post your business’ return policy in your retail store and on your company website.
Making the Right Choice: Choose Payment Depot
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Now, you’ve learned the distinction between a merchant account provider and a payment service provider. You’ve gotten an overview of the equipment and costs involved in processing phone-based purchase transactions.
Finding a provider that’s compatible with your business characteristics and goals is important. When you make the right choice, you’ve set the stage for secure, reliable phone-based credit card payments.
Determine what services your business needs from a merchant services provider. Carefully consider your business stage and financial condition. Then, choose the provider who’s best positioned to help you accept the phone-based card payments that will help your business grow.
And if you need help finding the best payments partner, get in touch with Payment Depot. Our membership-based pricing model saves merchants an average of $400 per month. Get in touch and we’ll help accept credit cards over the phone, behind counter, online, and anywhere else that your customers like to pay.
FAQs about Credit Card Payments
Q: What is required to accept credit card payments over the phone?
To process credit card payments over the phone, you’ll need a merchant account or a payment service provider that will provide access to a virtual terminal where you can manually input your customers’ card information.
Q: How can I start accepting credit card payments over the phone?
The steps are straightforward:
- Obtain the customer’s credit card information, including the card number, expiration date, CVV code, and ZIP code.
- Enter the customer’s credit card information into your virtual terminal.
- Submit the payment for processing.
- Upon approval, close the transaction with the customer and send them a digital receipt.
Q: Are there any risks involved in accepting credit card payments over the phone?
Yes, accepting phone-based credit card transactions carries inherent risks, such as potential fraud and chargebacks. Customers can dispute the transactions, claiming they didn’t authorize the purchase or didn’t receive the goods or services. Fraudsters may also use stolen card information to make unauthorized purchases.
Q: How can I mitigate the risks of accepting credit card payments over the phone?
Implementing strict security measures can help reduce these risks. These include properly verifying customer information, keeping detailed records of all transactions, and having a clear refund and dispute management policy. You must also comply with Payment Card Industry (PCI) requirements for securely storing customers’ personal data.
Q: How can I pick the right partner for accepting credit card payments over the phone?
You should first identify what services your business needs from a merchant services provider, then consider your business’s size and financial condition. Select a provider who can efficiently facilitate phone-based card payments to assist your business growth.
Q: Are phone-based credit card payments common?
Yes, multiple businesses, such as restaurants, retail stores, and mobile-based services, commonly accept credit card payments over the phone. It provides an additional layer of flexibility and convenience to their customers.
Q: What is a virtual terminal?
A virtual terminal is a software interface that allows businesses to manually process credit card payments without needing a traditional credit card terminal or POS system.
Q: Do I need special hardware for accepting credit card payments over the phone?
If your business regularly accepts credit card payments over the phone, you probably don’t need unique hardware to facilitate these transactions. However, you might need a mobile credit card reader and a smartphone to facilitate card-not-present transactions.
Q: What is the cost to accept credit card payments over the phone?
The cost varies but generally includes a per-transaction processing fee and a monthly service fee or virtual terminal access fee. Some merchant service providers also apply setup, PCI compliance, chargeback, amongst other fees. The processing fee usually ranges between 2-4% per transaction.
