General Best Practices
Every professional knows that “Best Practices” are built on a foundation of basic principles. In credit card processing, this means: (1) getting the lowest interchange rate, (2) preventing chargebacks, and (3) winning representments. In our inaugural Best Practices bulletin, the new Litle & Co. gets you “back to basics” to show how you can save money, reduce risk, and improve operational efficiency.
Avoiding Chargebacks
Chargebacks, or challenges to the validity of a credit card charge, are much more than a nuisance. You will pay a processing fee for each one, and if you cannot substantiate the original charge (in a process known as a “representment”), you will be liable for reimbursing the amount charged back. Apart from the time and aggravation involved in handling representments, chargebacks greater than one percent of sales volume can also lead to fines by the card associations and ultimately to losing your merchant account and being banished from the processing networks. Even a small number of chargebacks, however, is a warning sign of unhappy customers. This Best Practice outlines how to reduce and avoid chargebacks.
Customer Data Security
To protect the security of cardholder data managed by direct merchants, the bank-issued Card Associations (VISA and MasterCard) have implemented new security programs that must be rigorously adopted by all companies that handle VISA or MasterCard data. MasterCard’s program is called “Site Data Protection Program” (SDP). VISA’s program is called “Cardholder Information Security Program” or CISP (pronounced “KISP”). CISP is similar to SDP but more elaborate, and thus will be the focus of this issue of Best Practices.
Optimizing Processing Fees
Do you know what you are paying for credit card transaction processing? Unfortunately, statements from payment processors don.t always tell the full story and often leave out hidden costs that are difficult to keep track of, especially in processing bank card transactions from VISA and MasterCard. (American Express, Discover, and specialized cards like Carte Blanche are handled directly by the card issuers, who have significantly less opportunity to introduce questionable fees.)
Address Verification Service
Address Verification Service (AVS) is an automated fraud-prevention system tool designed to reduce the risk of Card-Not-Present transactions. AVS helps minimize the risk of accepting fraudulent transactions by verifying the cardholder’s billing address with the card issuer. Verification results help the merchant determine whether to accept a particular transaction or take follow-up action. In this Best Practice we examine how address verification functions and more importantly how it can reduce fraud and chargebacks.
CVV2, CVC2 & CID Anti Fraud Tools
To help guard against fraud, the major credit card companies have implemented a system to ensure the credit card used in a transaction is actually possessed by the user. CVV2, CVC2 (Card Verification Value/Code) and CID (Card Identification Number) is an authentication system established to further efforts towards reducing fraud for “Card not Present” transactions. In this Best Practice we examine how CVV2, CVC2 and CID can help reduce fraud and chargebacks.
Recurring Transactions, Installment Billing and Utilizing Soft Billing Descriptors
Consumers annually spend over $1 Trillion on Recurring Transactions and Installment Billing. Furthermore, consumers are utilizing their credit cards more often for routine monthly payments in order to accumulate miles, points or some other form of reward. In order to remain competitive, merchants need to support these transaction types as part of their overall offering. In this Best Practice, we present some insight to illustrate the differences and benefits of Recurring Transactions and Installment Billing and how and why Soft Billing Descriptors can help you.
Payment Card Industry Data Security Standard
The Payment Card Industry (PCI) Data Security Standard is the first release of a unified standard among Visa, MasterCard, American Express, Discover and JCB card companies to address the growing issue of cardholder account security among US merchants and payment service providers.
Interchange
Interchange is a fee that the card associations (Visa & MasterCard) impose on the merchant and pay to the card issuing banks. This fee reimburses the card issuer for expenses associated with immediately crediting the merchants bank account for the amount of the initial sale. This payment occurs during the settlement of a deposit transaction and is normally structured as a percentage plus a flat fee.