Most modern businesses accept plastic. Credit and debit card payments account for sixty percent of all retail transactions. The numbers are even more lopsided online, where nine in ten transactions involve plastic. It is clear that we are headed for an increasingly cashless society. What does this mean for American businesses?
No matter their size, history or reputation, every business that accepts credit/debit card payments must apply for and obtain a merchant service account. Offered by banks and other authorized financial institutions, these providers perform a number of essential services for their merchant clients. For starters, they check to see if the card is valid. The merchant will see either an ?approved? or a ?declined? message on the screen of his card reader. If the transaction is approved, the provider will send the customer?s bank an electronic bill for the purchase. Once the funds have been received, the provider will deduct a number of agreed-upon service fees from the balance before it is transferred to the merchant?s bank account.
Types of Merchant Accounts
The single most important factor when it comes to merchant accounts is how payments will be processed. Most brick and mortar retailers physically swipe each card through a point of sale terminal or card reader. The accounts these merchants apply for are often referred to as ?card present? merchant accounts. Because they can ask for ID and check signatures, traditional retailers are far less likely to process stolen cards. But when a seller does not have access to the actual card, fraud and theft are commonplace.
Mail-order, internet and telephone merchants must apply for ?card not present? merchant accounts. Because they cannot check IDs or signatures, these merchants are far more likely to process stolen credit or debit cards. As a result, they are forced to pay higher rates and fees than traditional brick and mortar retailers. They must also install additional security features or they may be subject to heavy fines, penalties, and lawsuits.
Online Security
As e-commerce continues to grow in America, so too does the cost of fraud and theft. When an online merchant processes a stolen credit or debit card, he may be required to cover the cost of a chargeback. A chargeback occurs when a customer disputes a certain charge and his bank files a refund request with the merchant service provider. The provider must then investigate the claim to determine if it is valid. If the provider grants a chargeback, he will pass all costs on to the merchant. The provider also has the option of fining the merchant and increasing his service rates and fees. In extreme cases, the provider may terminate the account of a merchant that receives too many chargebacks. How can an online merchant protect himself from these crippling fees?
Business owners that follow merchant rules to the letter reduce the risk of a chargeback. These rules typically include additional security features for the merchant?s website. Let us take a moment to review the most popular security option for internet sellers.
Address Verification System (AVS)
When a person steals or finds a credit or debit card, it is highly unlikely that he will know the address of the true cardholder. AVS uses this simple fact to increase website security. If the customer cannot enter a valid billing address, he will not be able to buy anything on a site that is protected by AVS. This simple feature has drastically reduced the number of fraud complaints for many of the internet?s top sellers.
Card Verification Method (CVM)
Tech-savvy crooks have gotten quite good at stealing credit card numbers on the internet. But security codes are a different story. The security code is a three or four digit number inscribed on the back of most credit and debit cards. When an internet merchant has CVM on his website, the customer is asked to enter his security code before each purchase. Industry insiders estimate that Card Verification Methods have helped reduce internet fraud by as much as one-quarter.
Abide by PCI
The Payment Card Industry Security Standards Council (PCI SSC) has been issuing rules for online merchants since 2004. But it was not until recently that they were given the authority to access fines and penalties against merchants that fail to comply with their standards. If a site does not comply with the latest PCI Data Security Standard (PCI DSS), the merchant will be fined and possibly even sued, since unprotected websites can be held financially liable for stolen information. What that means is that if a hacker breaks into a site that is not PCI DSS complaint and steals customer credit card numbers and uses them, the merchant will be held responsible.
Online security may not be cheap, but protected sites are far more appealing to virtual shoppers, for obvious reasons. A merchant with a secure site will also receive more affordable rates and fees from his merchant service provider.
Take your small business to the next level now and find the merchant services package that best suits your vision.
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