What are MOTO payments? A guide for small business owners

Mail Order Telephone Order payments, known as MOTO payments, were all the rage before e-commerce took over. Even though their use has declined with the rise of online shopping, they remain a popular choice for many businesses, with about half a billion MOTO transactions happening in the UK each year.

Examples of businesses that might use MOTO payments include:

• Food and drink businesses like takeaways and catering companies.

• Service providers like nail salons and beauticians.

• Florists and mail order gift shops.

• Online retail businesses.

• Travel agencies and hotels.

If you’ve ever wondered “What is a MOTO payment?”, this guide is for you. We’ll talk through how this handy payment option works, and show you how easy it is to get started.

What are MOTO payments?

MOTO payments are customer transactions which are made over the phone or by mail. In other words, they’re a type of card not present transaction.

MOTO payments are as straightforward as using card machines to accept cashless payments in physical shops, and – as we noted above – they’re still in huge demand despite the rise of online payment tools. They’re especially important if you want to accept remote payments but don’t have an online store. 

How do MOTO payments work?

Here’s a step-by-step guide to how a MOTO transaction works:

1. Using your phone, tablet or computer, you access a virtual terminal, which is a web-based application for manually entering payment details.

2. You enter the customer’s card information into the virtual terminal as prompted.

3. You submit the transaction details for authorisation by the customer’s issuing bank and card network.

4. Once the transaction is approved, you’ll receive a confirmation and the customer will be emailed a receipt. 

5. Just like payments accepted through a card reader, you’ll receive the funds into your business account once they’re processed.

Pros and cons of MOTO payments

Accepting MOTO card payments can offer many advantages for all kinds of small business ideas, but it’s also important to be aware of the potential drawbacks. Understanding both sides can help you decide whether this method is right for your enterprise. 

Advantages of MOTO payments

Here are the perks you can look forward to:

Convenience for customers

As MOTO payments allow your customers to make payments easily over the phone or via mail, this method is convenient for those who are less tech-savvy or have limited internet access. MOTO payments are also an excellent option for customers who prefer speaking directly to a person rather than navigating an online checkout process, and can increase customer loyalty and satisfaction.

Increased reach

By enabling you to serve customers who can’t visit you in person, MOTO payments will broaden your customer base and feed into your business growth strategies by removing geographical constraints. Remember, offering a diverse range of small business payment options can give you the edge over rival businesses which have a narrower range of options.

Cost effectiveness

MOTO payments don’t require spending money on specialist hardware. All you need is an online virtual terminal and an internet-enabled device, making it a cost-effective option for small businesses. This can be really helpful if you’re working with a limited small business budget, allowing for quick and easy setup without a significant financial investment.

Flexibility

The simplicity of MOTO payments means this system is highly versatile, and can be put to use by businesses as disparate as nail salons, florists and those within the hospitality sector.

Streamlined operations

Having a swift, efficient system in place for handling card not present transactions will free up time for you and your staff, allowing you to focus on other essential business activities. And if you do have staff, easing the workload in this way can make a huge difference when it comes to employee retention. 

Customer preference

Some customers just feel more comfortable providing payment information over the phone rather than online. This might be due to concerns about online security, or they might simply enjoy the more personal touch that comes with such transactions. In any case, MOTO payments improve your customer service by accommodating this preference.

Ideal for startups

Whether you’re thinking about how to start a side hustle or you’re carving out a whole new career path by setting up a limited company, if you don’t plan to see customers face to face, MOTO payments can be an ideal solution. By minimising upfront costs, these payments can improve your initial cash flow ensuring you have more working capital available for other essential expenses.

Disadvantages of MOTO payments

There are also some potential downsides to consider:

Higher fraud risk

Card not present transactions are more susceptible to debit and credit card fraud compared to card-present transactions, since criminals can utilise stolen details without having to present a physical card. 

That’s why it’s important to confirm that your merchant services provider offers adequate payment security measures such as address verification, CVV checks, and real-time fraud monitoring to detect and prevent suspicious activity.

Increased fees

MOTO transactions can come with higher debit and credit card merchant fees due to the elevated risk of fraud. These fees can add up, impacting your overall profit margins. It’s important to factor these costs into your pricing strategies to ensure your business remains profitable.

For example, when deciding how to price a product or how to price a service, you might consider incorporating the fee in the price to maintain your desired profit margin. If you plan to do this, it’s worth knowing how to do a competitor analysis so that you keep your prices competitive.

Manual entry

Manual entry of customer information is more time-consuming and more prone to error compared to e-commerce transactions. The benefits of training employees come to the forefront here. 

By making sure your staff knows how to take MOTO payments, both in terms of what to say to customers and how to use virtual terminals, you can expect increased accuracy, improved efficiency in processing payments, and enhanced customer satisfaction – all vital considerations when it comes to how to run a business effectively.

Customer trust

While some customers prefer making payments over the phone, others might be hesitant due to security concerns. You can mitigate any potential customer concerns through clear communication about your MOTO payment processes, perhaps detailing the security protocols of your merchant services provider on your website.

Chargebacks

Cashless transactions such as MOTO payments leave you open to chargebacks, which is when customers dispute card transactions, leading banks to reverse the payments. Intended to provide financial security for consumers, chargebacks are often filed without good cause. This costs businesses time and money, and can damage their reputation.

Maintaining attentive customer service, promptly answering queries and having a clear refund policy in place will go a long way to cutting the likelihood of your customers taking the chargeback route. 

How to set up MOTO payments

Setting up MOTO payments is typically straightforward. Let’s run through the steps involved in choosing the right merchant services provider and setting up a virtual terminal for your business.

Choosing a merchant services provider

Before you can start accepting MOTO payments, you first need to research and select a reputable payment processor or merchant services provider like SumUpwhich offers MOTO payment capabilities.

Here are the main attributes to consider when finding the perfect fit for your business.

Evaluate security features 

Security is crucial for MOTO payments. Ensure the payment processor offers robust security features like CVV checks and data encryption.

Compare fees 

Each payment processor will have its own fee structure. Compare the costs associated with MOTO payments, including transaction fees, monthly fees, and any additional charges. Factor these costs into your prices to ensure your business remains profitable.

Assess customer support 

Reliable customer support will help you resolve issues quickly and keep your business running smoothly. Look for payment processors which offer robust support options, such as live chat and a comprehensive online support centre. 

Look for positive reviews and testimonials 

Do your homework by searching for feedback from other small business owners. This can provide insights into the reliability and performance of the payment processor. Pay attention to comments on ease of use, security, and customer service.

Check integration options 

If you already have a POS system or other payment infrastructure like self-service kiosks, make sure the payment processor can integrate with your existing setup. This will help keep things running smoothly and avoid any needless disruption to your business.

Setting up MOTO payments

When you’ve found a provider that suits your business, it’s time to get MOTO payments set up. Here are the steps involved:

1. Sign up for an account 

Visit the provider’s website and sign up for a merchant account. You’ll need to provide some basic information about your business, such as your business name, address, and banking details.

2. Enable MOTO payments 

Once your account is set up, head to the settings or payment options of your account dashboard. Look for the option to enable MOTO payments or virtual terminal services. You’ll usually need to complete additional verification steps to activate this feature.

3. Set up the virtual terminal 

Once approved, follow the payment processor’s instructions to set up your virtual terminal. This usually involves configuring your account settings, such as setting up email receipts and customising the payment form. Remember to test the virtual terminal to ensure it’s working as expected.

4. Train your staff 

Provide training for your employees on how to use the virtual terminal, making sure they understand how to enter customer information, process transactions, and handle any issues that might arise. As part of your small business risk management strategy, you should emphasise the importance of security and customer data protection.

How much do MOTO payments cost?

Understanding the costs associated with MOTO payments can help you manage your small business expenses and budget more effectively.

Transaction fees

These are the “main” fees you’ll come across, encompassing:

Processing fees 

MOTO transactions generally come with higher processing fees compared to card present transactions. As we touched on earlier, this is because the risk of fraud is higher for remote payments.

Percentage fees

Typically, you’ll be charged a percentage of each transaction. A range of about 2.5% to 3.5% is normal, though the fees involved in high-risk merchant accounts are likely to be higher.

Additional charges

As well as fees directly related to individual transactions, you may also have to factor in: 

• Flat fees – Some payment processors may charge a flat fee per transaction, which could be in addition to the percentage fees.

• Monthly fees – You might also encounter monthly fees for using a virtual terminal. These can vary widely, highlighting the need to compare processors.

• Setup fees – While many payment processors offer low or no setup fees, some might charge a one-time fee to set up your MOTO payment system.

• Chargeback fees – If a customer disputes a transaction, you may incur chargeback fees. Fees can vary, but £10 is typical. Don’t forget, this comes on top of the refund amount to the customer.

Alternative ways to accept remote payments

While MOTO payments are a fantastic option for many small businesses, it’s worth exploring other remote payment methods to provide your customers with even more flexibility.

Online payment gateways

An online payment gateway allows you to accept payments through your website. They’re convenient for customers who prefer to shop online and can easily integrate with an existing e-commerce platform. 

If you’re thinking about how to make money online, using this technology offers a secure and straightforward way for customers to complete transactions on your site.

Invoicing software

Invoicing software lets you send detailed invoices to your customers via email, often with several integrated payment options. 

For example, with SumUp Invoices you can accept online card payments, bank transfers, Google Pay, Apple Pay, and even cash. This approach increases the likelihood of timely payments and helps keep your billing process organised and efficient.

Payment links

Payment links can be sent via email or SMS and shared on social media, allowing customers to click and make payments wherever they are. It’s an easy and hassle-free option that doesn’t require your enterprise to have a website. Customers can pay instantly from their device, making it a quick and efficient payment method.

Digital gift cards

Digital gift cards offer a versatile and convenient payment option for small businesses. Customers can purchase these gift cards online and send them electronically to recipients, who can then use them for future purchases. 

With SumUp, you can even offer discounted gift cards, helping with your customer acquisition efforts and boosting sales during slower periods.

Bank transfers

Allowing customers to transfer money directly to your business account is a secure method, especially for high-value transactions. Although it may take a bit longer for funds to clear, this method is trusted and reliable for both parties.