What the Difference is Between an ISO and Bank Related Merchant Account?
August 16, 2010 by Admin · Comments Off
When considering where to obtain merchant services, there is no shortage of providers to choose from now a days that’s for sure! There is no doubt that processing has become a lucrative business. Over time, the service has been de-regulated, so merchant’s have much more choice as to who they want their provider to be. There are two major conglomerates to choose from. One can choose to have their Bank (member Bank – which means they are certified to process Visa and MC) process their transactions, or an ISO (Independent Sales Organization). Iso’s were developed after the de-regulation of merchant services.
There are some major differences between having an ISO process your transactions in comparison to the bank.
Direct Processing is a little bit faster from a bank hosted account, only because they have a direct link to the merchant’s banking info, where as with an ISO, the timing for deposits maybe anywhere from 24-48 hours after settlement. This difference exists because the branch would have a direct link to the deposit account, where the Iso’s deposit has to be cleared by Iso, then the member bank.
The Member Banks will also be more accepting of high risk merchant processing because of this link to the merchant’s account. Often times a merchant will have a business account with their bank, as well as other savings and credit accounts. Because of this “direct access” the branch has immediate security in the form of the entire merchant’s investments act to draw upon should there be any faulty transactions.
This high risk processing has advantages with Iso’s that the member banks cannot compete with at the same time….often times Iso’s are eager to obtain business, and, with the appropriated security in place, maybe more accepting of high risk accounts.
Service levels are another major difference. Banks are not as fast to provide comfortable “one stop” customer service in the same way that an Iso may be. Again Iso’s are more customer driven and as a result often provide better, faster more specific and personal customer service. As one may deduce, part of this improved service has allot to do with Hours of Service, Iso’s often have their own customer service and help desks working around the clock, where as a bank has very pre determined hours of operation, which are regulated and often not convenient for when a merchant may require additional services.
Pricing is a standard issue for any merchant seeking out services. This is where we see another major difference, in that, the Iso’s will compete and drive their prices down in order to obtain one’s business, the member banks are less competitive and often do not respond to competitive pricing quotes.
The best aspect of all of the differences mentioned here is that with the existence of both Bank’s and Iso’s being able to process merchant services, it offers a competitive edge to merchants. Just like any monopoly the more players on the board, the more fierce the competition which, in relation to merchant services, leads to the potential for better more competitive pricing and increase in the quality of service for merchants.
The Difference between a Retail Merchant Account versus an E-commerce Merchant Account
July 23, 2009 by Admin · Comments Off
There are a few major differences when dealing with a Retail Merchant Account, and an Ecommerce Merchant Account. Both are similar in that, a merchant or seller is able to accept Visa, Master Card, American Express and Interact, as a method of payment for goods and services rendered, but the way they are accepting these transactions is where the differences lie.
Merchant Services applications are always looked at in terms of safety and security. Visa and mc need to take into consideration, when and where the point of sale is taking place, as there are some risk factors they need to take into consideration when adjudicating weather or not the business is fit to accommodate transactions…..these risk factors contribute to the major differences between getting an approval for a Retail account VS. a Ecommerce Account. Let’s take a closer look at these risk factors and the 5 major differences between processing a transaction in a retail environment compared to an online situation.
- Card Acceptance. This is the main driving factor or difference between the two types of transaction processing. Visa and mc consider this a risk factor because in a retail situation, the merchant ALWAYS obtains a signature from the customer directly on the receipt. It is difficult for a customer to reject a fee from a purchase when the merchant is able to supply a signed receipt as confirmation of the transaction. With online processing, the availability of that signature is slim to nil, so Visa and Mc will rely on the solidity of the business profile to reduce or cancel out the possibility of a merchant disputing a fee. So the will scrutinize the business profile more thoroughly, as they do not have the comfort of relying on something like a signed receipt.
- Fulfillment. This is an industry term. Basically this refers to the amount of time between finalizing a transaction for goods and services and when the customer receives those goods and services. for example, If I go for a haircut and pay visa, I have received my service and paid right away….if I purchase a swimsuit online, I make the payment right away (ecommerce billing) but, I do not receive that product for 2-3 or how ever many weeks, whatever the FULLFILLMENT time is….this creates another risk that will be looked at before approval. it is a major difference to pay for something and wait for it, then to instantly have what you’ve purchased.
- Product Availability and Presentation. Unlike walking into a store and picking out your “size and color” when shopping online you are only subject to one form of presentation, usually a picture or image of some kind to represent your purchase. Whereas, in a store you can touch it, feel it, try it on, etc. Digital images are helpful to represent your product type, but there is still a down home difference between being able to see and touch as opposed to a 2-d image.
- Product Type. The internet provides a platform never before available to business. So more “intangible” goods and services now have a home online whereas things like financials services, learning or educational seminars, software sales were vague and expensive to advertise in order to obtain a customer base that kind of thinking is in the past. E commerce is ideal for these types of businesses that differ greatly from retail in that they are providing a service that does not physically exist.
These are just a few prime examples as there are many businesses that thrive online, where as the platform may not be as successful to others. The bottom line is, that the internet is a wildly new exciting tool for businesses to reach out to an audience never before imaginable. Malls will never close, but the internet is competing with how and where our shopping dollars are spent!
15 Ways to Prevent Chargebacks
April 9, 2009 by Admin · Leave a Comment
Merchant Account providers DO NOT like chargebacks, getting a lot of chargebacks can cause you to have your merchant account terminated or even worse end up on the TMF List. Some chargeback situations can’t be helped, but many can if you understand how to protect your self. Here are 15 ways to help prevent chargebacks.
- Here is the most obvious way to prevent a chargeback – Do not complete a transaction if the authorization request was declined. Do not repeat the authorization request after receiving a decline. Be sure if you want to get a second verification then phone it in.
- If you receive a “Call” message in response to an authorization request, call your authorization center. Be prepared to answer questions. The operator may ask to speak with the cardholder. If approved, write the authorization code on the sales receipt. If declined, ask the cardholder for another Visa card.
- Make an imprint for all card-present transactions. If you have a point-of-sale terminal with a magnetic-stripe reader, swipe the card through the reader for every face-to-face transaction. If the terminal isn’t working or a card’s magnetic stripe cannot be read, key-enter the account information and make an imprint of the embossed information onto the sales receipt using a manual imprinter. Even if the transaction is authorized and the cardholder signs the receipt, if the receipt does not have an imprint of the embossed account number and expiration date, the transaction may be charged back to you for “no imprint” if the cardholder later denies participating the transaction. This is why having a manual imprinter is essential and make sure staff is trained on how to handle situations like this too. The number one reason merchants end up with chargebacks is due to untrained staff.
- Obtain cardholder signature. The cardholder’s signature on card-present transactions is required. Failure to obtain the cardholder’s signature could result in a chargeback for “no signature” if the cardholder denies authorizing or participating in the transaction. You should also look at the signature to make sure it somewhat matches what you see on the back of the credit card. If doesn’t ask for I.D.
- Stay organized. Make only one imprint of the card for each transaction. Making more than one imprint can lead to duplicate deposits and increase the chance of a chargeback. If you need to redo a sales receipt because of an error, write “VOID” across the incorrect sales receipt, inform the cardholder, and tear up the incorrect sales receipt in view of the customer.
- Ensure that transactions are entered into point-of-sale terminals only once—and deposited only once. Entering the same transaction into a terminal more than once, or depositing both the merchant copy and the bank copy of the sales receipt with your acquirer, or depositing the same transaction with more than one merchant bank can all result in “duplicate transaction” chargebacks. And chargebacks can be anywhere from $10-$50. You end up with 5-7 of these every month and you’ll feel it.
- Ensure that incorrect sale receipts are voided and that transactions are processed only once.
- Be clear about your policies at check-out. If your establishment has policies regarding merchandise returns, refunds, or service cancellation, disclose these policies to the cardholder at the time of the transaction. Your policy should be pre-printed on your sales receipts; if not, write or stamp your refund/return policy information on the sales receipt near the customer signature line before the customer signs (be sure the policy shows clearly on all copies of the sales receipt). Failure to disclose such policies at the time of the transaction will be to your disadvantage should the customer return the merchandise. This is a tough one, but it’s always the Merchant’s burden of proof to show that policies are clear.
- Do your batch closes or sometimes known as settlements daily. Deposit sales receipts with your merchant bank as quickly as possible, preferably within one to five days of the transaction date—do not hold on to them. Failure to deposit in a timely manner can result in chargebacks for “late presentment.” It can also result in higher discount rates or cause your transactions to fall under the higher Non-Qualified MDR rates with some providers.
- Deposit credit receipts with your acquirer as quickly as possible, preferably the same day as the credit transaction is generated. Failure to process credits in a timely manner can result in chargebacks for “credit not issued.”
- If a customer requests cancellation of a recurring transaction which is billed periodically (monthly, quarterly, annually), always respond to the request and cancel the transaction immediately or as specified by the customer. As a customer service, advise the customer in writing that the service, subscription, or membership has been cancelled and state the effective date of the cancellation. Failure to respond to customer cancellation requests almost always leads to chargebacks.
- Keep customers informed on the status of their transactions.
- If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
- This one is common sense for most Merchants, but there are always a few creative individuals out that who decide to conduct business in an interesting manner. If the merchandise ordered by the cardholder is out of stock and delivery will be delayed or this item is no longer available, advise the cardholder in writing and offer the cardholder the option of purchasing a similar item or canceling the transaction. Do not substitute another item unless the customer agrees to accept it. By giving the customer notice and the option to cancel, you may help avoid a customer dispute regarding the merchandise and a possible chargeback.
- Know your shipping time lines. Ship merchandise before depositing transaction. Don’t deposit transactions with your merchant bank until you have shipped the related merchandise. If customers see a transaction on their monthly Visa statement before they receive the merchandise, it could lead to a preventable chargeback.
Why do Different Payment Processors Have Different Rate Structures?
January 9, 2009 by Admin · Comments Off
Many different processors are out there who offer merchant services. Weather the services are provided through a Member Bank or ISO, every application is subject to a very similar adjudication from Visa and Mastercard. Different processors do however, have different rate structures. There are a few reasons as to why these differences exist.
Let’s look at two of North America’s top two providers of merchant services, Elavon and First Data Merchant Services.
Elavon broke through the industry by offering rates that are closer to interchange than any other provider. How were they able to do this?? Well, they came into the market through Costco, a very big business buyers club who deal exclusively with Business to Business retail. As Costco was already dealing with a customer base made up solely of business owner’s, they saw the potential for their entire customer base to utilize their own Merchant Services program. Costco was able to ensure Elavon a certain volume of processing annually, so in turn, Elavon was able to offer rates lower than competitors at the time. This is one of the factors that will cause a major difference in a rate structure: the very volume of customer’s the processor has, will allow them to be more competitive. When providers host these buying clubs, they can charge a different rate structure as again, the volume is guaranteed to make them money.
On the opposite side of the spectrum, some providers like, First Data Merchant Services, have higher rates. This is a result of a few different factors, the most prominent being the RISK involved in hosting an account. When the risk of loosing money on processing for a merchant is evident, the provider will charge a higher rate right at the point of transaction, to ensure that they cover any assumed losses. The riskier the business, the higher the rate; To protect the provider from loosing money right from the point of purchase. Allot of merchant services will not provide credit card processing at all for potentially high risk accounts and restricted business types, so merchant’s will pay the higher rate just to be able to offer the services.
The way in which the processors present their rate can sometimes be different as well. Right now in the industry, processors have Interchange, the basic “cost” handed down from Visa and Mc. Sometime, processors will have “tiered” transaction pricing, meaning that for qualified cards you pay one rate, and for specialty, club, corporate or points cards, there is additional rate structure. Other processor lump everything together, for one base rate. So depending on how the processor’s presentation of the rates, you will see a difference.
At the end of the day, the differences between what the processors provide are minimal. Every processor is victim of interchange and the rates will only differ depending on the processor’s customer base, the risk involved in boarding the account and the way in which they present the different levels of card processing costs. It is best to do research when looking for a provider and remember that the differences in the rate are subject to negotiation as well.
Credit Card Terminals in Canada
May 2, 2008 by Admin · Leave a Comment
A credit card POS Terminal is often a stand-alone piece of digital machine which enables a merchant to swipe or key-enter a credit card’s information at the same time as supplemental details necessary to process a charge card sale A Visa or Mastercard POS Equipment is a dedicated piece of apparatus that only processes credit cards although it really is typical for similar transactions such as gift cards and examine confirmation to also be performed.
A credit card Point of Sale Terminal usually should be plugged straight into a electrical power supply and connected to a telephone line or internet connection Nevertheless, some terminals might be driven by batteries, communicate more than the internet or via the cellular phone companies. Each time a bank card is processed (either swiped via the magnetic stripe reader or keyed inside the keypad), it contacts the network to verify if the credit card can be authorised. The purchase is then filed on the POS Terminal until the polling window is opened. The machine will either upload the electronic funds straight to the vendor financial institution, or even a polling service provider will dial directly into collect, process then submit the data towards the vendor bank.
Probably the most well-liked charge card terminals consist of a modem, keypad, printer, magnetic stripe reader, power supply and memory card. They have had the same basic design since the 1980s. As with computers, there’s a wide variety of memory capacities and other features like built-in printers and debit card pinpads that affect the manufacturing cost of a charge card terminal.
