ResponseWire

Time to use Verified by Visa and MasterCard SecureCode?

Tue, 09 May 2006 08:54:10 +0000

The Verified by Visa and MasterCard SecureCode programs have not really caught on with cardholders or merchants since their introductions in 2001. The programs were designed to increase both cardholder and merchant confidence in Internet purchasing and reduce disputes and fraudulent activity related to card use.

Since the liability shift from acquirers to issuers for fraudulent card use became effective, however, the programs have provided real value for merchants. For merchants to use Verified by Visa and SecureCode on their e-commerce sites, they must purchase a simple plug-in software module that determines cardholder participation in the service and establishes an Internet connection.

This enables issuers to authenticate cardholders. The implementation process for merchants was at first somewhat complex, but today the various vendor solutions have made it much easier.

The card Associations have marketed Verified by Visa and SecureCode to increase cardholders' confidence in making more online purchases, but the programs really do nothing for cardholders.

In fact, they may take away some of the cardholders' chargeback rights because the issuers cannot pass on the loss to the acquirers and are less likely to credit cardholders when the funds come from the issuers.

The card Associations' zero liability policies have already virtually eliminated consumer liability in cases of card fraud for all transactions.

More for merchants

The programs do a lot for online merchants, though, especially now with lower rates for Verified by Visa and SecureCode transactions. When properly used, the programs eliminate chargebacks for fraudulent transactions. The risk of loss remains with issuers. This is a huge benefit to acquirers and online merchants who have been plagued with "I didn't do it" chargebacks, such as:

Visa Reason Code 83: Fraudulent Transaction-Card Absent Environment
Visa Reason Code 75: Cardholder Does Not Recognize Transaction
MasterCard Reason Code 37: No Cardholder Authorization.

Free network vulnerability scans

To make it easier for merchants to understand, adopt and comply with the Payment Card Industry (PCI) Data Security Standard, MasterCard recently announced the global availability of free network scans for merchants.

Scanning is one of the steps required for many merchants to achieve compliance with PCI. This offering by select companies will allow merchants to learn more about network vulnerabilities and how they can improve network security and achieve PCI compliance. (Go to www.mastercardsecurity.com to find links to the participating security companies.)

Merchants have been slow to adopt Verified by Visa and SecureCode primarily because of the added cost and because of the fear of lost sales due to consumer abandonment before finalizing the transaction.

The true measure should be the merchants' net income rather than the gross sales. Many abandoned sales are fraudulent transactions anyway. The savings from reduced chargebacks and fees and lost product and the new interchange discounts may offset the merchants' upfront expense and extra cost for the services. Both card Associations have a lot of information available on their Web sites that ISOs and MLSs can review to learn more about the programs and to find information helpful to their merchants. Visit:

usa.visa.com/business/accepting_visa/ops_risk_management/vbv.html

www.mastercard.com/us/merchant/security/what_can_do/SecureCode/index.html

Electronic Representment of NSF Transactions

Mon, 10 Apr 2006 16:24:12 +0000

Electronic representment of NSF (Non Sufficient Funds) is a method whereby checks from bank accounts with insufficient funds are repeatedly deposited through the Federal Reserve Automated Clearing House until funds are available.

This is good for retailers because it protects retailers by allowing them to collect upon bad checks from customers that have already received merchandise.

While the process of paper check representment is complicated, simply put, the bad check is held and the customer's account is tracked until the necessary funds to cover the check are deposited. Once deposited, the amount that the check was drawn for is removed.
Some payment processors do not represent NSF checks or electronic checks for their merchants at all and merchants must go through the files to separate cleared transactions from NSF transaction and then create a batch file to resubmit them through the Fed. Others payment processors only perform this representment of NSFs once.

The best option is to have these transactions represented two times after the transaction initially bounces with all of the work done electronically through the payment processors automatic check representment system.

A Serious Look at Electronic Checks as a Payment Option

Wed, 29 Mar 2006 16:37:06 +0000

In 1998 it became legal to accept ACH transactions over the phone without an actual check or signature from the customer. This opened the door for the convenience of electronic checks (e-checks) via phone or internet sales. An estimated 40% of all consumers do not have access to a credit card. Therefore, offering e-checks as an additional payment option is an attractive alternative and facilitates faster phone and internet sales.

Advantages of e-checks:

customer convenience is improved because customers who do not have access to credit cards need another method of payment, e-checks are that method.
e-checks also make life easier for a customer, instead of having to mail in a check to pay for a product or service, it can easily be paid for over the phone or internet.
processing speed is increased because electronic checks can be cleared in a matter of days instead of the standard two to three weeks it takes to make sure a paper check has not bounced.
e-checks have priority over paper checks in the ACH system
e-checks can be electronically re-deposited for recollection of NSF's up to two more times, instead of only once for a paper check.
back office time is reduced because tallying deposit slips, copying checks, and going to the bank are all eliminated.
refunds can also be done electronically. This saves the vendor time and money as no more paper checks need to be drafted and mailed to clients.
reporting is easy because it is all electronic and available daily on-line.
transactions are processed in batch mode if desired, for speed and convenience.

e-checks are typically associated with a lower when compared to credit card costs.

Disadvantages of e-checks:

some customers may still be unfamiliar with the e-check process (giving their routing number and account number) so you may need to ensure that your call center agents or website is familiar with the process so it works smoothly.

e-checks can not be authorized or preauthorized as credit cards are. Because of this, merchants must be willing to wait until the e-check clears prior to shipping merchandise unless they want to ship before clearance, which may take between 3 to 10 days.

Selecting a Payment Processor

Mon, 13 Mar 2006 12:02:29 +0000

Choosing a payment processor can be a difficult choice as there are numerous factors to consider, such as, pricing, customer service, knowledge of your industry, and integration.

Research: Research your choices before deciding on a processor. Rates, services, and features of processors can greatly vary.
References: Always check references or get a referral of any company you contract to process your payments, as you will be required to give the company access to your checking account. Therefore, it�s important to be sure you find a company you can trust!
Reports: Review the reports that will be provided to you. Usually this is something that is not thought about at the start of a merchant relationship because the focus is on rates and terms. The reality is you have to live with these reports every day. Although your fulfillment house can manage much of this on your behalf, you will still need to be able to balance your bank accounts and understand the status of any transactions or chargebacks. Reports also help you to understand why you are losing sales, such as, why are you getting so many declines. Surveying your report codes and analyzing them are a great source of data.
Customer Service: Find out about the customer service department. No one ever plans on having problems with their account. The fact is, however, that every account will encounter some issue that requires assistance at one point or another. Whether it�s resolving a chargeback or dispute, increasing your limits, or helping you reduce chargebacks. A good payment processor will be able to assist you in all of these areas without billing you for every minute they are working on one of these issues.
Know Your Limits: Research the processing cap limits of your account. If you are in Direct Response, be sure to find a company that is familiar with this industry. Many processors who are unfamiliar with DR will freeze your funds once you start processing beyond the limits of the account because it moves into a possible higher risk category. This can potentially put a company at risk if a freeze like this is unanticipated.
Are Big Banks Better: Don't assume a big bank name is any better, more ethical, has lower costs, or is more efficient. Most big banks outsource all of these services and leave the merchant paying high fees. In addition, getting changes or data can be tough if they are not customer service orientated.
Cancellation Penalties: Be careful of signing a contract too hastily or for a full year. Read the application carefully because many contracts carry a cancellation clause or penalty. There is nothing worse than being stuck with a company that�s not responsive to your needs because they know you won�t take a financial hit to cancel their contract.

The Chargeback Process

Tue, 28 Feb 2006 14:42:35 +0000

The chargeback process is a largely unknown to merchants and can often be a cause for frustration. Therefore, in order to shed some light on this subject let's take a look at the chargeback process used by Visa and MasterCard:

The customer disputes a transaction by contacting their card-issuing bank
The card-issuing bank researches to determine whether the reasoning for the chargeback is valid.
A provisional credit is provided to the customer. The card-issuing bank initiates a chargeback process and obtains credit from the merchant's processing bank.
The merchant's processing bank researches the validity of that chargeback. If they determine the chargeback is invalid they will decline the chargeback and return it to the card-issuing bank.
The chargeback amount is removed from the merchant's account and the merchant's processing bank provides written notification to the merchant.
Did a processing error occur? If so, the sale is re-presented to the card-issuing bank for corrections.
The merchant provides documentation to remedy the chargeback. If the provided documentation is found to be satisfactory, the chargeback is declined and the customer is once again charged for the sale. If the documentation is found to be unsatisfactory, the chargeback is successful and the process ends.

As you can see, there are multiple steps involving multiple parties, and each step requires the responsible party to dedicate a certain amount of time to its management. The resolution of a typical chargeback can take anywhere from six weeks to six months. If each party takes the maximum amount of time to complete a responsibility, it's not hard to see how a chargeback can seem to drag on forever.

Credit Card Processing - Industry Lingo

Wed, 15 Feb 2006 11:32:49 +0000

Acquiring Bank/ Merchant Bank
The financial institution that conducts business with merchants who accept credit cards. The bank buys the merchant's sales slips and credits the monetary value to the merchant accounts.

Card Not Present/ Manual Entry
Credit card information that is manually keyed-in through a computer or terminal keypad as opposed to being swiped though a terminal.

Cardholder
An individual who has opened a credit card account to make purchases and obtain cash advances.

Chargeback
A reversal against a sale that was credited to the merchant's account. Chargebacks are usually the result of an error made by the card holder's bank, a misunderstanding by the customer, or fraud. The merchant must provide proof that the goods and services in question were provided to the customer.

Discount Rate
A fee charged by the bank for processing credit card transactions. The fee is based on a small percentage of the merchant's total sales volume.

ISO
An independent sales organization that is registered through Visa and MasterCard to set up credit card merchant accounts. ISOs represent banks or third party processors.

MOTO
Stands for mail order/telephone order. Typically, businesses that conduct credit card transactions over the phone or by mail are considered to be riskier than retail businesses that swipe credit cards.

Reserve
in the event of charge backs from customers, processors may hold a percentage of your sales for a specified period of time. For example a processor may hold 15% of sales for 6 months. If there are no disputed sales in that time period, you will be paid the withheld money.

Retrieval Request
A request from a cardholder's bank for information about a charge which is being disputed. Retrieval requests usually precede a chargeback.

Third-Party Processor
A company that processes credit card transactions and distributes funds. Many banks choose to outsource credit card processing to third party processors instead of handling it in-house.

Preventing Credit Card Fraud

Mon, 21 Nov 2005 22:17:52 +0000

Preventing fraud with credit cards takes place long before a DRTV marketer realizes that someone has just stolen their merchandise. Many times, the key to success comes years earlier when the marketer selects their merchant provider and sets up their credit card processing guidelines.

A sophisticated merchant provider, or payment processor, has the ability to give tools and wisdom to their customer to help them prevent fraud.

One example of how to prevent fraud is the ability to accept or deny customer orders when the shipping address does not agree with the credit card customers billing address. If the person on the phone is the real customer, why would they not know their own billing address? Yet the inability to pass this test is one of the top practices that results in fraud.

Another powerful example of how to prevent fraud is the ability to collect and process payments only if the customer supplies the CVV code. The CVV code is the 3- or 4-digit number found on the back of a credit card and is an additional security method used for transactions taken over the phone or internet, which are also called �card-not-present� transactions. These card-not-present transactions are especially prone to fraud because the customer is not standing in front of you with their credit card and ID in hand. This simple step helps offer protection against customers who attempt to process a transaction paid for by a stolen credit card.

Multiple Forms of Payment Processing

Mon, 21 Nov 2005 22:14:40 +0000

Payment processing has evolved from a one payment only form of service industry into an industry that is scrambling to find and implement new ways to accept payments from customers.

Years ago the only form of payment many retailers took was a paper check. Slowly the wide use of credit cards started to create an environment where the cost of accepting credit cards far outweighed the lost sales if you did not accept them.

Fast forward to today. Now you will find an environment where many Americans have limited access to credit cards because of credit over extension or bad credit while other customers demand to be able to use their credit cards because they want to earn the affinity points.

So how does a DRTV marketer collect payment from a �credit challenged� customer? They migrate to debit products which have turned up in 2 forms, Visa debit cards and electronic check products. All these products are available over the phone or internet with no paper documentation because they all clear thru a gateway using a secure SSL internet socket.

And still DRTV marketers continue to look for new ways to capture payments from every possible customer in every possible form imaginable.