Did You Know?

In the regular retail market, approximately 75% of all transactions are now plastic based – credit, debit, and gift cards.  Online, that number is nearly 100%.  While it is true that a decent number of businesses also make use of third party payment systems, most simply take plastic.

How Does it Work?

When you sign up with a merchant account provider, make sure they have extensive experience with online accounts.  You don’t want to be the guinea pig for a company just taking their services online.

Security is the buzzword.  By its very nature, Internet sales are potentially less secure than traditional retail sales.  This is because all of your customer’s information must travel through the Internet for payment to be completed, and that means it is possible for a hacker to interrupt the stream of data.

The way merchant account firms prevent this from happening is through encryption.  All the data your customer sends when they pay for a product is encrypted both on its way to the payment gateway and back.  A great deal actually happens when someone clicks “pay now,” but the details aren’t important as long as good security protocols are in place.

No One Knows Your Size

In some ways, setting up your Internet merchant accounts provides you with a certain degree of anonymity.  Your company can be a one-person show, but online you appear identical to all of the other companies.  This allows you to compete with larger businesses on equal footing – after all, you are offering the same services.  Additionally, because your company is small, you won’t have as much overhead, potentially allowing you to offer the same products for less.

What to Look For

Aside from choosing a credit card processing provider with a great deal of familiarity with Internet based businesses, you want to make sure that the fees are comparable to those charged by other providers.  You also need to make sure that customer service is available at all hours of the day and night.  Since the Internet is open for business 24 hours a day, your site has to be open then too.  If your customers can’t pay for their products, they will just move on.  Finally, ask about other benefits the company offers.

Do they help you to build a website?  Connect you with reliable drop shippers?  Offer small business loans to help you expand and upgrade?  All of these may help you at some time or another.

For a home based business, setting up Internet merchant accounts makes good sense and helps the company grow.

Who has Credit Cards?

Nearly 200 million Americans currently hold over 600 million credit cards.  That is a lot of buying power.  While there has been a 10% decline in the number of people who actually have a credit card, those that do carry them use them routinely, although slightly less than before the current recession.  In fact, there are nearly 1 billion – that’s right, billion – VISA cards issued world wide.  Can you afford to ignore that market share?

What about Debit Cards?

Surveys show that more consumers have debit cards than credit cards and are more likely to use them.  In fact, the use of debit cards has nearly doubled in the last few years, and approximately 75% of the population, across the board, uses them regularly.  With over 500 million cards in use in the US alone, that is a huge number of potential customers.

What Does it Cost?

Fees for merchant credit card processing are simply too disparate to give accurate figures.  The amount you will be asked to pay monthly, per transaction, as the discount rate are all negotiated based upon what kind of business you do, your risk factors and so forth.  You should, of course, compare offers to ensure that you get the deal that is best suited to your business and practices.

Cash and Carry no More

There will always be a portion of the population that will want to pay in cash, and in a retail environment that can be easily accommodated.  If you intend to have an online business, it is no longer a viable method of payment.  Merchant accounts that are specifically designed for online business allow you to take credit, debit, and gift cards, and some will take a payment directly from a bank account.  It all adds up to increased sales and improved convenience for all.

One way to reduce the chance of future disputes or chargebacks is to make sure your descriptor is very clear and up to date. This way if one of your customers does not recognize a charge on one of their cards they can contact you directly vs. dispute the transaction with their issuer. Even if you win a dispute you may still incur additional fees so having a clear and up to date descriptor is critical.

For merchants with internet merchant accounts I recommend using your website address and phone number.

Example: TheTransactionGroup.Net 888-383-8056

For non eCommerce merchants your business name and phone should work just fine.

Example: The Transaction Group 888-383-8056

Some processors will limit the amount of characters you have for you descriptor so you might have to get creative.

What is the PCI Security Standards Council and What Do they Do?

The PCI Security Standards Council was formed in 2006 by five major payment brands including American Express, Discover Financial, JCB, Mastercard International and Visa Inc. They create a standard body and security framework for how to protect cardholder data based on its transmission — whether its processed, stored or just transmitted over a network. In addition, they create security programs to protect cardholder data.

The council felt it would be easier for merchants with a set of rules and industry-accepted best practices, and offer additional data and financial protections. Each individual payment type still has a specific compliance program, but the PCI Council offers the merchant an opportunity to voice their opinions and ideas about those requirements how they comply directly with merchant or payment banks.

What do Merchants Need to Know?

Each business model has different security and compliance requirements. For example, if a merchant outsources all processing to a third party, the third party must demonstrate compliance with the merchant bank, and merchants then have a limited scope of operation.

However, if a merchant develops their own applications for online credit card processing and manages their own network to transfer sensitive data, they are obligated to work within stricter PCI Data Security Standards.

The PCI council offers a list of approved commercial products to reduce compliance efforts, and merchants should check the list to be sure their programs meet Payment Application Data Security Standards. This saves merchants time and the headache of spending money to retro-fit applications for compliance.

Most importantly, merchants must always think about data security. It makes sense to outsource to a service provider with a security skill set and fundamental understanding of the payment process. This saves time and money, and the need to create a dedicated IT department.

Standard Benefits of Accepting Credit Cards

Credit Cards Increase Sales: An increasing number of people use credit cards for convenience, simplicity and impulse purchases. If your business has a merchant account, you automatically extend your customer base, perhaps even worldwide with e-commerce. It’s also much easier to up sell someone paying by credit card vs. cash or check.

Credit Card Terminals and E-Commerce Solutions are Reasonably Priced: Basic merchant accounts include affordable terminals that are easy to set up and require only a phone line and receipt roll. There are also plenty of basic e-commerce solutions available for nominal monthly fees.

Fees for Accepting Credit Cards: Credit card processing companies take a percentage of every merchant sale processed through their merchant account, but it varies based on the type of card and how it is processed. It’s best to verify all rates before committing to a contract. You’ll also want to ask if they require you to sign a long term contract and/or change an early termination fee.

Added Protection from Frauds and Scams: Card companies have protection programs and security measures to help reduce fraud via card theft or loss. Payments can be stopped by a consumer, merchant or a payment processor, and the card canceled or changed. This is a great advantage over cash that is difficult to retrieve.

Cardholders understand that if a change shows up on their credit card statement they did not authorize, they can dispute it and in most cases will get their money back. Most also understand they can dispute a transaction if the product or service does not live up to their expectations and the merchant is unwilling to resolve the problem. This last point is really important when it comes to online credit card processing transactions since the consumer is not face to face with the business or their product/service.

In today’s competitive business environment, it’s critical you provide your customers with convenience, security, and trust. Having the ability to process their credit card at checkout is a big step in that direction.

What is Required to Store Customer Data

To store credit card numbers, a business must adhere to stricter PCI Security Council Data Security Standards. There is an increased risk of losing customer data to a security breach or a hardware malfunction.

Storing customer sensitive data is also more complicated from a technical perspective, requiring several hardware and software tools to do it effectively. Security measures need to be consistently maintained and updated by a trusted person.

Despite the risks, sometimes credit card number storage is a necessity. In this case, it’s best to look at an external data storage company.

Why it Pays to Store Data Off-site

Customers are the lifeblood of your business, and they trust you with sensitive information. Outsourcing storage of customer credit card information ensures its protected by the highest security measures available, and by someone focused solely on safe data storage. Running a business is work enough, and offloading this responsibility to a respected vendor can save lots of time and headaches.

In addition, some outsourcing services have a more effective process in place to bill recurring customers, rather than retaining credit card processing information. Choose an online payment gateway that offers this type of data storage. It will be held in the gateway’s secure database for easy access. When you need to charge a customer again, just refer to the customer number and charge amount.

Authorize Net can be configured both ways. While most merchants use Authorize Net’s secure servers it also works with sites that want to maintian sensitive customer data on their own servers.

Do Credit Card Rewards Help Consumers Justify Purchases?

Airline points are a common benefit for credit card users, and are usually the reason people are willing to make purchases on a card. This is especially true when each swipe brings them closer to free round trip airfare for the tropical vacation of their dreams — airfare they would not otherwise splurge on.

The incentive of free airline miles or discounts at favorite stores are just some reasons people are more willing to pull out the plastic, according to a recent study by Andrew Ching, assistant professor of Marketing at The University of Toronto and Fumiko Hayashi, senior economist at the Federal Reserve Bank of Kansas City. Overall, their study revealed that removing rewards from credit cards would reduce the amount of purchases consumers make using credit in the quest for rewards points for goods/services.

In addition, a 2008 survey by the Aite Group, a financial and technological research firm, found rewards are the second most important reason consumers choose one card over another, and many consumers own multiple rewards cards. Marketing research firm ComScore also did a study in 2008 that indicated two-thirds of consumers would consider changing cards, if the card was available and the rewards they value were better.

How Credit Card Rewards Impact Merchants

Rewards and miles programs come with an additional cost to the merchant though. The discount rate a merchant pays on these types of cards can be 2% higher than the qualified rate they normally pay on personal credit or debit card. Taking into consideration this means the total discount rate could be 4%-5% it’s critical a merchant factors this in when they price their products or services. Rewards and miles cards can drive additional sales for your business but there is a cost to it.

Currently processing? Do you know what your rate is on rewards and miles cards? Take advantage of our complementary merchant account review (rate analysis). Fax in one of your most recent statements to 312-896-5628, provide us with a good day & time to call. One of our pricing specialists will contact you and break out your current rates. There is a good chance we’ll be able to save you up to 25% on your current fees by customizing a rate plan specifically tailored for your business.

Now is the time to improve your bottom line! Contact us today at 888-383-8056.

Match up the Bank County with Billing Address Company:
It may be easy to miss, so be careful. If the card is issued from one country, but the merchandise is being billed to another, that is a pretty clear indication something may be up. This is really important due to the fact smaller banks may not have as strict identification procedures, and will not catch the error.

Verify if the Mailing Address is a Mailbox or Ship Forward Service:
Anyone trying to scam a business wants to stay anonymous, but they still want to pick up the merchandise. Most often they will use a public P.O. Box, private mailbox, or a drop shipment forwarding address , which serves as a temporary receiving point. Always request a physical address, or don’t send the order. Never send to a P.O. Box (unless it’s a legitimate company), a public rented mail box or forwarding address – as there is no way to verify if the buyer is legit.

Develop an Internal Fraud Avoidance File:
Create a file that includes all the details of each fraudulent order, year after year, to avoid being scammed by the same person again. Include all critical information related to the transaction, including the name, address and phone number(s), as well as credit card number.

Now if an order comes in that looks suspicious, you can review the file to see if there are similarities in the look or presentation of information, or if the same person has resurfaced to try again. This is a great way to keep clear track of potential dangers, and protect your internet merchant accounts against fraudulent credit card transactions.

4 Tips to Get Started

Use Extra Care with International Orders:
Anything being shipped to an international address should be double checked, especially if it’s from a high fraud country. According to a ClearCommerce survey, there are 12 countries that are considered high-risk, a few being Egypt, Turkey and Malaysia. Their research showed that although sales outside of the United States only represented 17% of the sample study, they accounted for over 42% of all fraudulent orders. Some merchants I know that take international orders will have the cardholder fax or email them a copy of their ID and credit card so they know they are dealing with the cardholder and they have the physical card on their person.

Double Check Country IP Address Against Billing Address:
This can be managed using an address verification system (AVS), mentioned in the previous blog post.

Check for Anonymous Proxy Servers:
A consumer using a stolen credit card may be able to hide their actual IP address by using a proxy server. Proxy servers allow people to browse the Web anonymously, and due to the fact these addresses change frequently, they can be hard to detect consistently.

If you feel your internet merchant accounts may be at high risk from this type of shopper, it’s important to employ strong IP and server detection technology. This technology will help you avoid the guessing game when reviewing orders, and ensure the anonymous proxy server list is automatically updated.

Always Send a Confirm Email:
Use an auto-generated email to confirm a sale and test the validity of an email address, as well as to verify the details of the card holder’s order. Be sure to keep track of order decline rates, especially if they are declined by the card issuer or because its considered to be a fraudulent international order. If the merchandise was back-ordered and has to ship more than seven days after initial authorization, be sure to obtain a secondary authorization.