There are an ever-increasing number of ways businesses can accept payments. Options include traditional processors (FIS, Worldpay), payment facilitators (Stripe, Square), payment gateways (Payoneer, 2Checkout), and marketplaces (Etsy, eBay), all with fast approvals and smooth onboarding. Provide boarding.
Once a merchant account is approved and funds are flowing in, businesses typically focus on other priorities and only consider payment processing if something goes wrong. I recently spoke with industry experts who identified four common pitfalls and shared advice on how to avoid these interruptions.
Misclassified categories
Experts advised merchants to think of account opening not as a one-time event, but rather as a fluid contract with a processor that adapts to market fluctuations and model changes.
Mike Eckler, an independent consultant and 20-year payments industry veteran with leadership positions at PayPal, Moneris, and other companies, advises merchants to review their contracts, especially the seller’s category and sale. We have advised you to carefully read the provisions relating to restrictions or prohibitions on.
mike eckler
“Acquirers and other payment service providers will ask us to classify businesses by assigning them merchant category codes,” he said, adding that card brands Visa and Mastercard will classify companies based on their products and services. He explained that these codes are assigned by “If an acquirer or card brand discovers that they have misclassified your business, they may be subject to penalties and even termination.”
David True, a founding member of fintech and payments consultancy PayGility Advisors and chairman of industry association NYPAY, has a 30-year career that includes senior positions at American Express, Mastercard and other payment institutions. and advised merchants to consider card branding requirements. Application for processing services.
“From a merchant’s perspective, the first consideration is to avoid scrutiny by adhering to the card brand’s rules,” he said. “Processors and acquirers do not have the final say on a merchant’s level of risk or eligibility. These decisions are made based on the brand of the card.”
unbalanced risk appetite
True also pointed out that some agreements extend beyond card brands and processors to payment gateways, independent sales organizations (ISOs), and third-party vendors. “There are all kinds of relationships in business,” he said. “If you are an ISO, you must ensure that your acquiring bank supports your merchant category before registering for an account. If your bank has the risk tolerance and back-office controls to support that category. If you are a seller, you need to align with the expectations and risk appetite of your service provider.”
david true
True recalled that the ISO proposed a new merchant category to banks, arguing that the rewards outweighed the risks. He said the bank agreed because of its long-standing relationship and confidence in ISO’s due diligence, customer verification and underwriting processes.
Eckler agreed that relationships are important in payment processing, but noted that some categories are relatively risky and more likely to be shut down by the processor, card brand or acquirer. These categories include illegal or potentially illegal sites that deal in gambling, dating or adult content, health products or supplements, credit repair services, weapons or counterfeit goods.
Therefore, merchants must avoid activities that could damage the card brand’s reputation, and “card brands are carefully protecting their reputations and will penalize or ban merchants that harm their reputations.” added Eckler.
excessive chargeback
Experts advise actively monitoring customer inquiries, disputes, and refunds to keep chargeback rates below the industry standard of 1% (one chargeback for every 100 transactions). Seller suggested by Eckler Consider providers Screen and score transactions before acceptance.
“Many services are offered as a value-add, but there are also services that come with a fee,” he said, advising merchants to weigh the additional expense against the cost of processing a chargeback. “When you consider chargeback fees, potential lost items, and the time and effort spent investigating and remediating chargebacks, it may be worth paying the small fee to inspect fraudulent transactions.”
Eckler said larger merchants may consider other services such as expedited dispute resolution and Visa’s Order Insight, adding that contrary to popular belief, chargebacks aren’t necessarily a bad thing. “A low number of chargebacks for a high-volume seller typically means that the seller is taking a reasonable amount of risk to win business from new markets.”
True suggested looking at chargeback reason codes for clues about customer trends and behavior patterns. He said Visa recently introduced a program to assess customers’ purchasing patterns and identify behavior that deviates from those patterns. Sellers can take advantage of this feature.
“Think about what triggers the chargeback and whether it’s service-driven or product-driven,” he said. “If you’re new to this business, look into the chargeback issues others in your field are having. Most importantly, post a clear return policy on your website and have an independent, objective Please have a qualified source review these policies and terms of use to ensure they are clear and easy to understand.
Substandard security
Fraud is always present in e-commerce, but experts say PCI DSS compliance and Technology-driven tools Protect your business, customers, and infrastructure from known and emerging threats. Eckler considers fraud to be a cost of doing business, and is encouraging employees to recognize phishing (unauthorized communications) and social engineering (false representation to obtain information) that can lead to ransomware attacks. Advised managers to provide training.
True says merchants need an always-on, always-on fraud prevention solution because fraud never sleeps. “Research shows that first-party fraud (where a customer intentionally provides false information) and friendly fraud (where a customer dishonestly disputes a purchase) accounts for 60-70% of all chargebacks. ” he said. “Purchase a vendor with next-generation technology that continuously monitors, detects, and remediates fraud.”
True acknowledged that most e-commerce companies don’t want to burden their customers with additional security features at checkout, but they encourage sellers to consider those features to be a small loss in sales. We urged organizations to weigh the risks of security breaches against the costs of security breaches.
True said e-commerce websites must accurately reflect a company’s branding and product content, and companies should notify processors of any planned changes to their website, product categories or campaigns that could increase transaction volume. said it was necessary to do so.
“If you’re planning a change in your business, advise the acquirer so they can communicate and explain it upstream. Don’t rely on the acquiring company’s salespeople to convey this message. They You could say, ‘That’s great,’ without seeing the potential red flags.”
