How to accept credit card payments over the phone

A Guide to Accepting Credit Card Payments Over the Phone

Did you know that in 2023, over 80% of global transactions were digital, driven by the rise of cashless payment trends? With millions of customers seeking convenience, businesses need to offer secure, efficient options. In the UK alone, 90% of adults have embraced new payment technologies, showing the shift toward virtual solutions. As businesses look for ways to stay ahead in this digital economy, accepting credit card payments over the phone offers unmatched flexibility. This post explores how phone payments work, their benefits, and essential security practices to keep transactions safe and efficient.

Understanding Phone Payments for Businesses

Credit card payments made over the phone, commonly known as Mail Order/Telephone Order (MOTO) transactions, involve customers providing their card details over the phone. This method is beneficial for businesses where face-to-face transactions are not feasible. Some of the industries that often rely on phone payments include:

• Service-based businesses: Professionals like consultants, therapists, and event planners must often accept payments remotely.
• Remote sales: Companies that sell products over the phone can close deals quickly and receive payments immediately.
• Restaurants and takeaways: Many food establishments allow customers to pay for their orders over the phone for faster delivery service.
• Medical practices: Clinics and private practices use phone payments to charge for appointments, especially for remote consultations.

Methods for Accepting Credit Card Payments Over the Phone

Businesses have several methods available to accept credit card payments over the phone. Each technique comes with its own set of advantages, and the choice largely depends on the size of the business and its specific needs.

Using a Virtual Terminal

A virtual terminal is a secure, web-based payment processing application allowing businesses to input a customer’s card details manually. It is accessible from any device with an internet connection, eliminating the need for extra hardware like card readers. Virtual terminals seamlessly integrate with business tools like accounting software to simplify record-keeping. Popular providers include Stripe, PayPal, and Square, each offering unique features to suit different business needs efficiently.

This is how it works:

1. Log in to the virtual terminal: Use a laptop, desktop, or tablet to access the payment platform provided by your merchant service.
2. Enter payment information: Manually input the customer’s card number, expiration date, and CVV code. Most virtual terminals also require you to enter the customer’s billing address.
3. Review and confirm: Double-check the information with the customer to ensure accuracy and avoid errors.
4. Process the payment: Click ‘Process Payment’ and wait for confirmation. Some platforms may immediately notify whether the transaction was successful or declined.

Using MOTO-enabled Card Machines

If you prefer physical hardware, a MOTO-enabled card machine is another option. These machines are designed to handle transactions where the cardholder is not present. MOTO-enabled machines are secure and reliable, with built-in security features enhancing transaction safety. They offer familiarity, making them easy to use for businesses already accustomed to card readers. However, this option may require additional setup costs and staff training to handle phone payments effectively.

Here’s how they work:

1. Input the transaction amount: Enter the total cost into the card machine, including any applicable taxes and fees.
2. Enter the customer’s card details: Manually key in the card number, expiry date, and CVV code.
3. Address verification: Some machines require address verification to reduce the risk of fraud. This step involves matching the billing address provided by the customer with the address on file with the card issuer.

Using a Mobile Credit Card Processing App

For small businesses or those on the go, mobile credit card processing apps are an affordable and convenient option. These apps transform your smartphone or tablet into a virtual card reader, allowing you to input card information manually.

To use a mobile app for phone payments:

• Open the app and select ‘Manual card entry.’
• Input the card details and the transaction amount.
• Confirm the information and press ‘Charge’ to complete the payment.

Mobile apps are excellent for businesses that need to take payments on the fly, like mobile service providers or pop-up shops.

Costs Associated with Credit Card Payments Over the Phone

Accepting credit card payments over the phone comes with various costs. These fees can add up, so it’s important to understand the financial implications.

Transaction Fees for Phone Payments

Phone transactions incur higher fees than in-person payments due to increased fraud risk. Virtual terminals from providers like Stripe and Square charge 2.5% to 3% per transaction, which translates to up to £3 on a £100 payment. MOTO-enabled machines charge between 2.75% and 3.5%, which translates to £17.50 on a £500 transaction.

Monthly and Additional Costs

Some providers charge a fixed monthly fee for virtual terminals, like Lloyds Bank Cardnet at £10 plus VAT, while others range from £5 to £30. Additional costs may include AVS and CVV checks for fraud prevention, investment in PCI DSS compliance, and fees for faster settlement options, such as next-day fund transfers.

Security Measures and PCI DSS Compliance

The security of customer data should be a top priority for any business accepting credit card payments over the phone. Failing to implement proper security measures can lead to data breaches, fines, and a loss of customer trust.

PCI DSS Compliance

The Payment Card Industry Data Security Standards (PCI DSS) are essential security protocols for businesses handling credit card data. Compliance applies to small and large businesses, requiring strict measures to protect cardholder information. Key requirements include using encryption for data transmission, maintaining secure systems, and continuously monitoring networks for unusual activity. Non-compliance carries severe consequences, including fines ranging from £5,000 to £100,000 per month and costly data breaches that could damage a company’s reputation and lead to millions in financial losses.

Data Protection Practices

Robust data protection practices are vital for maintaining security in phone payments. Businesses should never store sensitive data, such as CVV codes, and only retain necessary information for transaction processing. Encryption technology must be employed on virtual terminals and card machines to safeguard card details. Additionally, conducting regular security audits helps identify vulnerabilities and ensures compliance with PCI DSS standards. These proactive measures significantly reduce the risk of data breaches and ensure that businesses remain trustworthy and secure for their customers.

AVS and CVV Checks

Address Verification Service (AVS) and Card Verification Value (CVV) checks are crucial for reducing fraud. AVS confirms the billing address provided by the customer matches the one registered with the card issuer, while the CVV check verifies the three-digit security code on the back of the card. Together, these checks can decrease the likelihood of fraudulent transactions by up to 40%. Businesses implementing AVS and CVV checks add an extra layer of protection, making it more challenging for unauthorized users to exploit cardholder information.

Training Staff

Employee training is a key component of maintaining data security and preventing human error. Staff should be taught to handle sensitive information carefully, such as never writing down or sharing card details. They must also understand the proper protocol in the event of a data breach, with a clear plan outlining their roles and responsibilities. Regular training sessions keep everyone updated on best practices and emerging threats, ensuring the team stays informed and vigilant. Well-trained employees are essential in safeguarding cardholder information and maintaining overall security.

Step-by-Step Guide to Accepting Payments Over the Phone

Processing payments over the phone may seem daunting, but following these steps will ensure a smooth and secure transaction:

1. Prepare your virtual terminal or card machine: Ensure your equipment is set up and functioning correctly. Check the internet connection and make sure your device is secure.
2. Call the customer and request card details: Be polite and explain the payment process to the customer. Ask for the card number, expiry date, CVV code, and billing address. Reassure them that their information will be handled securely.
3. Enter transaction details: Input the payment amount, card number, and other necessary details into your virtual terminal or MOTO-enabled card machine. Double-check all information to ensure accuracy. It’s important to repeat the details back to the customer to confirm them. This step helps prevent errors and reassures the customer that you’re taking care to handle their payment properly.
4. Process the payment: Click ‘Process Payment’ on the virtual terminal or press the appropriate button on your card machine. Wait for confirmation that the payment has been accepted. In some cases, the system may take a few moments to approve or decline the transaction. If the payment is declined, politely inform the customer and suggest they try another card or payment method.
5. Provide a receipt and maintain records: Offer to send a receipt via email or text message, depending on the customer’s preference. Sending a digital receipt is not only convenient for the customer but also helps you maintain proper records without generating paper waste. Make sure to keep records of the transaction in a secure system for bookkeeping purposes and future reference. However, ensure that sensitive card data is not stored to maintain PCI DSS compliance.

Common Concerns and How to Address Them

Even with the best practices in place, businesses often have concerns about phone payments. Here’s how to handle common issues effectively:

Fraud and Security Risks

Fraud is a legitimate concern, especially since phone payments are categorized as “card-not-present” transactions, which carry a higher risk of fraudulent activity. Here’s how to mitigate these risks:

• Use AVS and CVV checks: These security measures help verify the legitimacy of the transaction. For example, an AVS check ensures that the billing address matches the one on record with the bank.
• PCI compliance: Maintaining compliance with PCI DSS standards is non-negotiable. This includes using secure systems, not storing sensitive card details, and conducting regular security audits.
• Monitor for red flags: Be vigilant for signs of fraud, such as a customer providing incomplete information or making unusually large orders.

Errors in Manual Entry

Manually entering card details increases the risk of errors, which can lead to declined transactions or disputes. To minimize mistakes:

• Double-check with the customer: Repeat the card number, expiry date, and CVV code back to the customer before processing the payment.
• Use quality equipment: Ensure that your virtual terminal or card machine is reliable and easy to use. Outdated or faulty equipment can increase the likelihood of errors.

Data Privacy Regulations

Complying with data privacy regulations, such as the UK’s Data Protection Act, is crucial. Businesses must ensure they handle customer information responsibly and securely. Failure to comply can result in significant penalties. Here are some steps to stay compliant:

• Limit access: Only authorized personnel should have access to the payment processing system.
• Secure storage: Use encrypted databases to store transaction records, and never store sensitive card information.

Benefits of Accepting Credit Card Payments Over the Phone

• Improved cash flow: Payments are processed instantly, which means you receive funds faster. For example, most payment processors deposit funds into your account within 1 to 3 business days.
• Convenience for customers: Many customers prefer the ease of paying over the phone, especially for recurring services or urgent purchases.
• Wider customer reach: Phone payments allow you to serve customers who can’t visit your physical location, including those in different cities or even abroad.
• Faster transactions: Phone payments are quicker than waiting for a cheque to clear or setting up a bank transfer, saving both you and your customer valuable time.

Drawbacks of Accepting Credit Card Payments Over the Phone

• Higher fees: As mentioned, transaction fees for phone payments are higher than for in-person transactions. For instance, a £1,000 payment could incur a fee of up to £35.
• Increased risk of fraud: Since the cardholder isn’t present, it’s easier for fraudsters to use stolen card information. Businesses need to implement robust security measures to protect against this risk.
• Data security concerns: Handling sensitive card information over the phone requires strict compliance with data protection laws. Even a minor data breach can have severe financial and reputational consequences.

Alternative Methods to Consider

While accepting credit card payments over the phone is convenient, there are alternative methods that may be more secure and efficient for your business.

Payment Request Links

Instead of taking card details over the phone, you can send a payment request link to the customer via email or SMS. Here’s how this works:

• The customer clicks the link and enters their payment information in a secure online portal. This method minimizes the risk of data breaches and manual entry errors.
• Many virtual terminal providers, like Square and PayPal, offer the option to generate payment request links.
• Payment request links are ideal for businesses that want to reduce the risk of handling sensitive data directly or for transactions that don’t require immediate payment.

Online Payment Portals

Setting up an online payment portal allows customers to make payments at their convenience. These portals are particularly useful for businesses that handle recurring payments or have a high volume of transactions.

• Online portals can automate billing and reminders, reducing administrative work.
• Many payment providers allow you to customize your portal with your brand’s colors and logo, enhancing the customer experience.
• If your business frequently deals with repeat customers or has a membership model, an online portal can streamline the payment process.

Future of Accepting Credit Card Payments Over the Phone

The landscape of credit card payments is rapidly evolving, with technological advancements and changing consumer preferences reshaping traditional methods, including phone-based transactions. While accepting credit card payments over the phone has been a staple for many businesses, its future is being influenced by several key trends:

Shift Towards Digital and Contactless Payments

Consumers are increasingly favoring digital and contactless payment methods over traditional phone payments. The rise of mobile wallets, such as Apple Pay and Google Pay, allows users to store card information securely on their devices, facilitating quick and convenient transactions. This trend is particularly pronounced among younger generations; for instance, a 2023 survey found that 70% of Gen Z prefer cashless transactions, with only 10% using cash as their primary payment method.

Enhanced Security Measures

Security concerns have always been paramount in phone-based credit card transactions. The future will likely see stricter compliance with Payment Card Industry Data Security Standards (PCI DSS) and the adoption of advanced authentication methods. Biometric verification, such as fingerprint or facial recognition, is expected to become more prevalent, adding an extra layer of security to transactions. For example, the introduction of palm-scanning payment technology in China showcases the potential of biometrics in enhancing payment security.

Integration of Artificial Intelligence (AI)

AI is set to play a significant role in the future of payments. Smart wallets powered by AI could handle most day-to-day financial activities, learning from users’ habits to suggest or make payments, budget, and offer financial advice. This integration aims to provide a seamless and personalized payment experience, potentially reducing the reliance on traditional phone payments.

Regulatory Changes and Compliance

Regulatory bodies are increasingly focusing on the payments industry to ensure consumer protection and data security. For instance, the UK government has published findings from the future of retail payments review, reflecting the growing importance of getting this right amid a complex environment. Businesses will need to stay abreast of these changes and adapt their payment processing methods accordingly.

Decline in Phone-Based Payments

With the proliferation of digital payment platforms and the emphasis on security, the reliance on phone-based credit card payments is expected to decline. Consumers and businesses are gravitating towards more secure and efficient methods, such as online payment portals and mobile apps, which offer enhanced features and user experiences.

While phone-based credit card payments have served as a convenient option for many businesses, the future points towards a gradual decline in their usage. The adoption of digital, contactless, and AI-driven payment solutions, coupled with stringent security measures and evolving consumer preferences, is steering the payments landscape towards more advanced and secure methods. Businesses should proactively adapt to these changes to meet customer expectations and maintain a competitive edge.

FAQs

Can I accept credit card payment on my phone?

Yes, most payment service providers (PSPs) and merchant service providers (MSPs) offer apps that make it easy to accept payments on your phone. Typically, you’ll need a credit card reader that connects to your phone, and the app will handle the transaction, allowing you to process payments securely.

How can I accept card payments over the phone?

To accept card payments over the phone, follow these steps:

• Set up your account with a payment service provider.
• Use a virtual terminal to process the payment.
• Take the customer’s card details over the phone.
• Enter the payment information into the terminal.
• Process the payment securely.
• Provide a receipt to the customer.
• Maintain proper records for your bookkeeping.
• Handle data securely to comply with regulations.

How to receive credit card payment without a machine?

You can use a virtual terminal for taking payments over the phone. This allows you to manually enter the customer’s card details and complete the transaction. Your client provides their card information, and you handle the payment directly through the terminal.

Is there an app to accept card payments?

Yes, many apps are available to help you accept card payments. Popular options include Square, PayPal Here, and SumUp. These apps are designed to integrate with credit card readers or allow manual card entry for convenience and security.

Can I give credit card details over the phone?

It’s important to be cautious when giving out credit card details over the phone. Only provide your information if you initiated the call and trust the recipient. Avoid sharing your credit card number if you were contacted by an unknown or unverified caller.