What Are MOTO Transactions in Payment Processing?

Mail Order/Telephone Order (MOTO) payments first came out in the early to mid-20th century. At the time, mail order catalogs needed a way to accept payments that didn’t involve waiting around for a check to arrive in the mail. The invention of MOTO payments greatly facilitated the growth of mail order catalogs and phone orders. In recent decades, MOTO payments have become essential for remote and online shopping. 

What are MOTO payments, and how can you use them in your business? To learn more about this type of payment processing, read on.

TL;DR

• MOTO stands for Mail Order/Telephone Order. The method originated in the early to mid-20th century.
• To process a MOTO payment, your business will either need a point-of-sale system or a virtual payment terminal.
• MOTO transactions are still used today for subscriptions, charity donations, phone orders, bill payments, remote companies, and other purposes.
• The process starts when the customer provides their payment information over the phone. After you manually enter the information into your payment terminal, it is processed like any other transaction type.
• This payment method can expand your geographic reach. You don’t have to wait for a check to arrive in the mail, so you can process payments faster.
• Because of the higher risk of fraud, payment processors have verification methods in place. Additionally, MOTO payment processing often costs more.
• For the best experience, it’s essential to have methods in place for fraud prevention and data security. You should also prepare a detailed recordkeeping system so that you can quickly resolve any potential disputes.

What Does MOTO Mean in Payment Processing? 

So, what are MOTO payments? And what is a MOTO transaction used for in payment processing? 

At its heart, MOTO transactions are purchases that are made remotely. They can be made over the phone or by mail. While MOTO in payments has been around for decades, e-commerce has reinvigorated this payment model in recent years.

MOTO payments were an early version of today’s card-not-present transactions. While MOTO payments are less commonly used for digital transactions today, they are still an effective method for businesses that need to process transactions when the payment card isn’t present. Anytime you’ve placed a pizza order or given a charity donation via phone, you may have used MOTO payment processing. 

It is important to note that MOTO payments aren’t simply any payment processed remotely. Today, this payment method is generally reserved for making payments by phone or mail. You’ll often find MOTO transactions in appointment-based businesses, service-based companies, and any organization that doesn’t rely on an online checkout process to process remote transactions.

How Do MOTO Transactions Work? 

The actual process behind MOTO payments is fairly straightforward. 

1. First, the customer calls to place their order.
2. You enter the payment details, such as the CVC code, card number, and expiration date, into the payment terminal or virtual terminal.
3. The payment processor communicates with the issuing bank and payment network. During this stage, anti-fraud measures, balance checks, and validity verifications are performed. 
4. Once the transaction is authorized, they are ready for settlement. This normally happens at the end of the business day. 
5. During settlement, the funds are sent from the issuing bank to the merchant account. Any payment processing fees are withdrawn along the way.

To protect your company from potential disputes and speed up dispute resolution, it’s essential to keep detailed records. For example, the record of the transaction, customer identifier, and amount should be carefully recorded. However, you should also be proactive about data security so that your company doesn’t fall victim to a data breach.

How To Accept MOTO Transactions

In order to accept MOTO payments, you’ll need to have a merchant account set up. Additionally, you will require one of two different tools before you can accept this transaction type.

Point-of-Sale (POS) Terminal

Today, many smart terminals allow you to manually enter credit card information. You just have to use the manual entry option in the payment mode section of your terminal. Often, the POS terminal will use an address verification system (AVS) or something similar to ensure that the card is valid. 

If you already have a terminal and would prefer to have a single, centralized solution, a manual POS terminal is likely the best option. This type of terminal is also a good option if you have a physical storefront. However, it’s important to remember that some terminals restrict manual card entry, so you should make sure your POS terminal allows you to use this option.

Virtual Terminal

Meanwhile, virtual terminals are ideal if you have a team working remotely. These terminals are browser-based systems, so you can open them up on any computer or mobile device. As long as the device has a web browser, you can most likely use it with your virtual terminal.

This option is ideal if you’re a remote company or an online storefront. Often, companies will use virtual terminals if admins take payments over the phone frequently. Like physical POS systems, virtual terminals also use AVS and similar methods to verify the validity of the card and purchase.

The Benefits and Drawbacks of Using MOTO Transactions

What is MOTO payment processing good for? More importantly, when should you avoid these transactions? 

To make the best decisions for your company, read on to learn more about some of the potential advantages and disadvantages of using MOTO transactions.

In essence, MOTO transactions are ideal if you want to have a global reach, convenient access to payment processing, or the ability to sell subscription-based products. However, there are still potential data security risks involved, especially if customer payment data isn’t stored safely. At the very least, manual entry means there is always a risk of human error. 

When Do MOTO Transactions Make Sense?

While MOTO transactions might feel like an artifact from yesteryear, it is still used in modern transactions. It is a low-friction, convenient way for customers to pay without having to visit your company in person or online.

These transactions are especially useful when: 

• You are taking payments over the phone for unpaid bills.
• Your customers aren’t interested in paying online.
• You run a charity and take donations by phone.
• You have a remote business.
• You don’t currently have a physical or digital storefront.
• You operate a service-based business, such as home healthcare or consulting.

It’s a good idea to talk to one of our payment processing professionals before switching to MOTO in payments. While there are important benefits, the costs can outweigh the advantages. Because these transactions are more likely to be fraudulent, the payment processing cost is often a bit higher than for other transaction types.

Final Thoughts

When using MOTO transactions, you are still required to fulfill your PCI compliance obligations. By getting a secure payment process, you can meet your regulatory requirements and protect your customers from data breaches. At PayCompass, we can discuss the best security measures for your company and how you can protect your essential data. 

If you’re looking for Next-Gen payment solutions, we can help. PayCompass has helped more than 6,250 different accounts get the payment services they need. From chargeback prevention to MOTO transactions, we can streamline your merchant payment process.
Find out more about how we can help with your virtual payment processing by reaching out to our team of experts today.