Why a Virtual Terminal Merchant is Considered High Risk

Why a Virtual Terminal Merchant is Considered High Risk

In the oft occasions our merchant account managers are explaining to a merchant why he/she is categorized as high risk, it usually will be a virtual terminal merchant with whom we’re speaking. It’s not the kind of thing they want to hear, but we can explain it more clearly with the following scenarios:

How many times does a consumer, rather innocently or unknowingly, offer his or her credit card details – the 16-digit number, expiration date and CVV – over the phone?

  • Maybe it’s to order pizza on a Friday night.
  • Perhaps to pay the auto mechanic, when s/he is picking the car up after closing hours.
  • Or the travel agent, who needs an up-front deposit over the phone for the vacation you’ve scheduled a month from now.

All three of these merchants need a virtual terminal to accept credit card payments over the phone. Imagine the seemingly infinite number of things that could go wrong with all three scenarios, and how little the average consumer regards it as dangerous.

It is precisely why virtual terminal merchants are considered high risk merchants.

Plenty of security risks with a virtual terminal merchant

Anyone in the card-not-present environment – virtual terminal merchants and online merchants – are considered high risk, simply because the chances for fraud multiply with CNP transactions. Among the merchant types who use virtual terminals for mail-order/telephone order payments include:

  • Tech Support: Those who provide support via a telephone.
  • Nutraceuticals: Those who sell vitamins and supplements and accept payments by mail and phone.
  • Travel Agencies: Those who may require a deposit for the upcoming vacation.

What exactly could go wrong with providing your credit card details to a virtual terminal merchant?

“With a virtual terminal, the merchant is taking credit card numbers, expiration dates and CVV numbers over the phone or through the mail, then entering them into a virtual terminal,” said Wendy Jacques, Sales Manager at Instabill. “The merchant could easily enter the information wrong, plug in other numbers, resulting in the wrong credit card being charged, and ultimately a chargeback.”

That’s not to mention unscrupulous merchants, whose goal is to get consumers credit card data and embark on a shopping spree.

“There are so many security risks, so much going on when a merchant is taking those details over the phone,” Ms. Jacques added. “There is a big possibility that bad things can happen.”

Virtual terminal merchant account: What not to do

Occasionally, after a virtual terminal merchant gains a merchant account approval from Instabill, we tend to see the merchant begin to offer other non-related products on his/her website, knowingly or unknowingly.

This is not only a violation of the merchant account contract which s/he signed with Instabill, but the merchant risks losing their merchant account and placement on the Terminated Merchant File. Approvals from a merchant’s payment service provider and/or acquiring bank must be had before offering new products online.

Additionally, acquiring banks and PSPs (like Instabill) do occasional spot checks on virtual terminal merchants just to make certain the guidelines of a merchant account agreement are being followed.

What do we need from a virtual terminal merchant?

To get a domestic virtual terminal merchant account, our domestic banking partners require several things:

  • The business owner(s) must be located within the U.S. – not just registered in the U.S. – and be U.S. citizens.
  • If the virtual terminal merchant has a call center, it also must be located in the U.S. (we have seen virtual terminal merchants shut down for violation of such).
  • A working website specific to the product or service the merchant is selling.
  • And of course, a healthy history of payment processing is always important.

Getting an offshore virtual terminal merchant account is a different story. “Most offshore banks don’t offer virtual terminals for the very reasons I mentioned,” said Ms. Jacques. “Those who do have a lot of caveats. Banks always need to protect themselves.”

We’re always happy to discuss opportunities for our virtual terminal merchant prospective partners. Speak with a live merchant account manager today at 1-800-530-2444.