What is a Merchant Terminal?

Today, many retail merchants do much of their business through credit card transactions. In order to be able to accept credit cards, a merchant must take several steps, including the establishment of a merchant account. A credit card terminal, also known as a merchant terminal, is one of the key elements in this cashless commerce system, allowing the merchant to accept credit cards for purchases.

The typical merchant terminal in 2010 was an electronic device requiring two connections, one to a power supply and one to a telephone line. Besides this, it had several other important components: a modem; a memory card; a magnetic stripe reader to swipe cards, typically placed on the right-hand side or toward the top of the device; a keypad, through which a credit card’s number can be manually entered; and an LCD screen, on which information such as authorization is communicated. Depending on its age and functionality, a printer may have been included.

The basic functionality of the merchant terminal is the same, no matter what its specific features are. The customer or merchant swipes the card or keys in the credit card number. The terminal contacts the network for authorization. All of the transfer of funds — from the customer’s account to the merchant’s bank — takes place behind the scenes, so that neither the customer nor the merchant has to attend to them. Records of the transaction are kept by multiple parties, so that if there is a question about the transaction for any reason, such as a merchandise return, the details are available.

Merchant terminals can complete transactions with debit cards as well as credit cards. Some are also capable of processing gift cards and verifying checks. The technology is undergoing constant development, so other possibilities may arise as well.

One of the ongoing developments in merchant terminals is technology to make them mobile. This is an important development for merchants who do not work out of a storefront, and even some who do. Airlines that offer in-flight purchase options and home repair specialists who do their work in their customer’s basement or under the sink benefit from devices that allow them to process credit card transactions away from their base of operations. As of 2009, Apple store employees were processing transactions on iPod touch units that are specially designed to accept credit cards.

The mobile technology is taking several different forms. Some developers have created software that bases the merchant terminal around the merchant’s laptop, while others rely on the merchant’s cell phone or a wireless terminal. As with the plug-in terminal, developments in the field are ongoing.