| The economy is on everyone’s mind these days, | | | | who take on the risk involved with payment |
| and we’re all searching for ways to save money | | | | processing when the banks are unwilling to do so. As |
| wherever we can. Banks benefit from government | | | | a business, you benefit because MSPs generally offer |
| bailouts, credit cardholders are offered promotional | | | | merchants lower rates than banks that would |
| rates and reward programs, but who is looking out for | | | | otherwise charge very high fees, or flat out not take |
| the merchant? Incentives are given to consumers for | | | | you on as a client. |
| them to spend more. Upgrades are made to the bank | | | | The issuer is the financial institution that lends money to |
| networks. These costs have to come out of | | | | the cardholder. The rate for each transaction, known |
| someone's pockets, and unfortunately it is the | | | | as interchange, is determined by the issuer of the card |
| merchant who takes the brunt of these added costs. | | | | (Visa, MasterCard) and depends on the card code. |
| But there is light at the end of the tunnel. | | | | The merchant services provider (MSP) is an |
| Fees for card-not-present transactions are among the | | | | organization that offers merchant accounts and |
| highest in payment processing, since fraud and | | | | provides payment processing services. An MSP can |
| chargebacks are more prevalent and harder to control. | | | | be a merchant bank or an independent sales |
| Keeping costs low is possible, however, by following | | | | organization (ISO) sponsored by the member acquiring |
| three simple steps: | | | | bank. |
| 1. Identify and Reduce Risks. | | | | Interchange rate is a fee that the acquiring bank pays |
| 2. Educate Yourself on the Basics of Payment | | | | to the issuing bank during a transaction (that uses the |
| Processing. | | | | MasterCard or Visa network). Your merchant services |
| 3. Uncover the Truth Behind Your Fees | | | | provider must pay for this fee charged by credit card |
| | | | | companies. If you're a small to medium sized business, |
| Identify and Reduce Risks | | | | you may not always be told about the Interchange |
| Most online merchants take it for granted that fees | | | | rate, but instead have it combined into a single discount |
| are higher in their business, but the reasons may not | | | | rate. Merchant service providers only have so much |
| always be obvious. There are some risk factors | | | | leeway in pricing because they have no control over |
| behind accepting payments online which you may not | | | | Interchange. |
| even be aware of, and they may be responsible for | | | | Dues & Assessments are uniform fees |
| higher fees imposed by your merchant services | | | | merchants pay on all transactions, collected by the |
| provider (MSP). | | | | acquiring bank on behalf of Visa and MasterCard in |
| Product type and description can have a direct impact | | | | order to finance their operations and payment network |
| on whether or not consumers are satisfied with what | | | | upgrades. |
| they receive. You don’t want them calling you, or | | | | A Payment gateway is an e-commerce interface |
| worse, their credit card company. Be as clear and | | | | which allows you to connect your online store to your |
| concise as possible regarding product details, to avoid | | | | internet merchant account, so you can accept credit |
| surprising your customers. | | | | cards. The payment gateway is the online version of a |
| Claims you make regarding your product can have an | | | | brick and mortar retailer’s point-of-sale terminal. |
| equally important negative response from your | | | | The Processor is divided between front-end and |
| customers. Avoid complaints and chargebacks by | | | | back-end. The front-end processor simply authorizes |
| being as accurate and truthful in your claims. The | | | | data, while the back-end receives the authorization, |
| bottom line: set realistic expectations and then follow | | | | processes it and passes it on to the acquiring bank for |
| through. | | | | settlement to be paid out accordingly. |
| Shipping times and methods should be clearly identified | | | | Visa and MasterCard are associations offering |
| as to give your customers an expectation of when | | | | memberships to qualified banks as an issuer and/or |
| they will receive their product. Sending shipments | | | | acquirer. They set interchange rules and provide the |
| insured with tracking information and proof of delivery | | | | infrastructure for the exchange of funds and data. |
| saves you both time in answering customer inquiries | | | | 3. Uncover the Truth Behind Your Fees |
| and money incurred by chargebacks or fraud. | | | | Very few merchants realize exactly where their fees |
| 2. Educate Yourself on the Basics of Payment | | | | are going. Did you know that interchange is a fixed |
| Processing | | | | fee that is set solely by Visa and MasterCard? And |
| Staying on top of changes in the payment processing | | | | while interchange accounts for the bulk of your rates, |
| industry can help you to better understand who is | | | | there are multiple processor and gateway fees, not to |
| charging you what, how much, and for what specific | | | | mention downgrade costs that ultimately affect your |
| reason. This may help you avoid unnecessary fees. | | | | bottom line. |
| Work with a knowledgeable and proactive merchant | | | | Risk-sharing is the banks’ method of operation, |
| services provider that can help you stay up-to-date | | | | which is the reason they partner with merchant |
| with industry changes. First, let’s identify who and | | | | service providers who are willing to take on part or all |
| what are involved. | | | | of the risk involved in processing payments. This is |
| The acquirer is the financial institution that accepts | | | | why it’s important to speak with your provider and |
| payments for the products or services on behalf of a | | | | find out what factors in your business affect your risk, |
| merchant. A bank and a Visa & MasterCard | | | | and consequently your rates. The lessons learned are |
| member, the acquirer bills the merchant and can | | | | that understanding fees, reducing risks and having the |
| terminate the relationship if it is deemed too risky. Most | | | | right merchant services provider can help lower your |
| acquirers don’t do business directly with merchants, | | | | rates. The smart move for any business is to get a |
| choosing instead to work with intermediaries. These | | | | free rate analysis from a provider familiar with your |
| intermediaries are the merchant services providers | | | | industry. |