Though opening a high risk merchant account today, sure looks like a mission impossible, in no way did this suddenly happen.

Hardening the banking industry in general and the credit card processing industry in specific is an on-going process which started with the MSB witch hunt, causing hundreds of Money Services Businesses to seek none US banking solutions, continued with illegalizing online gaming to its current pick, caused by the Subprime Crisis from which America is yet to recover.

As online gaming (happily processed out of the US) had to find none US alternatives, it opened the door for new offshore merchant account initiatives and offerings. Once hit by the Subprime Crisis, reducing bank capital and eliminating large part of America’s credit availability, banks had to carefully pick, or occasionally stop extending, lines of credit.

As providing acquiring services is another mean of credit line, acquirers were forced to adjust to new industry standards and started implementing same hardening restrictions, getting US high risk processing to where it is today.

Offshore merchant account providers were only waiting for this opportunity, to gain control over an additional portion of US businesses processed out of the US.

As merchants are left with no other choice, they apply for offshore credit card processing, and get their processing needs elsewhere. It is perfectly legal and practically, for some high risk merchants, the only way to sustain their online business.

The US ends up losing higher processing fees paid by local merchants to offshore merchant account providers.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

Authorization transaction

Merchant – submits an Authorization request transaction for approval.

Payment processor – passes the request through the associations to the issuing bank and awaits response to be presented to merchant.

Issuing Bank:
• approves or declines the authorization request.
• puts a hold on cardholder funds – the “Authorization hold”.

Merchant – receives the approved or declined authorization transaction via the associations and payment processor and decides on next steps (usually according to further fraud checks and stock availability).

Capture transaction

Merchant – submits a Capture transaction. Capture transactions are usually batched after being stored on merchant’s computer or POS machine and sent for processing once a day in order to minimize costs.

Payment Processor – process batch and send capture transactions to issuing banks via the credit card associations.

Issuing Bank
• sends money to Acquiring Bank via the credit card associations.
• bills card holder for shopping online.

Acquiring Bank – funds the Merchant Account with net proceeds of the transaction.

Payment Processor – provides detailed reporting on each capture transaction, including all fees deducted by all parties involved.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

The associations develop, maintain, monitor and regulate the networks that enable: authorization, capture, refund and chargeback data and money transactions. Issuing banks and acquiring banks are members of the associations, to which they pay fees for the smooth operation of the network.

Issuing banks issue individuals credit cards and take full responsibility on a person’s ability to fulfill a financial obligation. When a transaction is “Authorized” by an issuing bank, same bank will have to fund the transaction regardless if it is able to collect authorized funds from cardholder or not. This fundamental obligation is the basis on which the credit card processing flow is based. It is the reason merchants are willing to accept credit cards and also explains why majority of fees end up being paid to the issuing banks.

Acquiring banks take the commercial risk of merchants going out of business which means they have to fund all chargeback transactions they can’t collect from a merchant. This is why acquiring banks are picky accepting a merchant, split the market and relate to merchants according to pre-set risk categories and set mechanisms, such as “rolling reserve”, to ensure at least a partial recovery of a potential loss.

Payment processors grew into the ‘operating arm’ of the acquiring banks, providing merchants with both technological and financial infrastructure needed to operate the merchant’s site.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

Derek further implies that such swipe transactions will be considered as Card Present (“running cards at a Swipe’s rate”) and will also enable merchants to enjoy “both online and in-person transactions” using the same one solution/merchant account.

Getting a Card Present approval from Visa and MasterCard isn’t easy. Verifone decided to disable the CNP scenario on their PAYware Mobile solution when they applied for a CP acknowledgment… Assuming such is achieved, it is still far from the vision of one solution for both scenarios: Card Present and CNP.

As both Innerfence and AppNinjas are using Authorize.net as a Payment Gateway, they cannot offer an ‘all in one’ account unless same is offered by Authorize.net. Other major Gateways and Processors are in the very same place and currently do not support such one account, so “hold your horses” on that vision for the time being…

Compare different iPhone Credit Card Processing solutions and go with the one that suits you best!

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

Sophisticated international merchants should add BIN check within their processing workflow. The BIN check result should be used both for acquirer routing as well as for anti fraud score set.

And how will that increase the credit card processing volume at a lower risk? One question at a time… Credit card processing volume will increase as different cards, issued by different issuers will be routed, through different merchant accounts to different acquirers for processing. As different acquirers have different capabilities, risk mechanisms and preferences, some will decline 100% of a certain issuer, while others will have his cards passed with flying colors…

Regarding lower risk – use the BIN check to match issuing bank country with customer’s country address. Whenever those two don’t match, show a higher score and perform additional anti fraud checks prior to charging the card.

As funny as it may sound you don’t need to invest in sales and marketing or penetrate new markets to show an immediate improvement in your bottom line. Optimizing your credit card processing flow will immediately have the same effect – an effect you can work with on years to come!

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

If you read the previous post you are well aware of the motivation and monthly numbers of web searches for stolen/faked/or otherwise hacked credit card numbers.

Accepting credit cards with an iPhone using an iPhone credit card app, is identical to accepting credit cards via any other computer web connected virtual terminal. As most virtual terminal users run a MOTO business, in which they never actually see the card, in most cases, when you accept a credit card with an iPhone, you’re probably on a safer ground, as unlike those MOTO businesses, you, at least occasionally, do see the actual credit card.

All iPhone credit card applications (included on our site…) are PCI compliance, as restricted credit card info is never saved on your smart phone. The second you process a credit card transaction, the info is securely sent to your payment gateway, and transaction details no longer include credit card information you are not supposed to maintain.

As a merchant accepting credit cards you need to make sure you use anti fraud measures, just like any other merchant. Many iPhone merchants, like other small merchants, use their payment gateway and merchant account provider to fully run the fraud management on their behalf. The real risk in this kind of an arrangement is a business loss, as your provider, might decide to decline a transaction you could have decided to take…

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

As a merchant accepting credit cards online, you must read the comments Claus got on his superb Credit Card Number Generator post. Ninety Nine percent of the comments were received from potential buyers or sellers of stolen credit card numbers.

Buyers asked for HELP as they truly wanted to buy something on the internet and NEEDED a credit card number (that works…) and sellers were just trying to make a living… A potential buyer (playing it safe) wrote: “I need genuine credit cards with all the details. If you give valid credit cards, I will pay you once I try it and it worked”…

Sellers, trying to “make a living”, testified regarding the quality of data provided: “fresh”, “valid”, “today”, “that works”, etc., had Tariffs for different card brands, types and geographical issuing locations, and offered packages (prices for minimum of 5 cards…).

I strongly recommend reading the comments Claus received. It’s a wakeup call! Once you do, you feel the danger and must ask yourself what are the measures you have taken to fight the fraud attempts coming your way…

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

When you receive the notice: “card not supported” on your credit card machine, it means just that – the specific card brand (or type) you are attempting to charge is not supported by your processor (or you are yet to register for processing that card brand).

99.99% of credit card processing providers will enable Visa and MasterCard processing, yet for processing American Express and Discover you almost always need to apply separately. If you failed to do so, or was not approved for processing these brands, trying to charge Amex or Discover will generate the notice you received.

There are plenty of other card brands: Diners Club, JCB, China UnionPay, BC, Maestro (Switch, Solo), Visa Debit, Carte Bleue, Girocard and many others… Check what card brands and types are supported by your processor, so you’ll know in advance which cards you can charge.

If your processor can only accept Visa and MasterCard, it might be the right time to look for alternatives… I personally switched to iPhone credit card processing, yet this has to be reported on a separate post.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

They enable you to accept credit cards using their micropayment account for 5% plus 5 Cents per transaction, which is 5 Cents per transaction less, than any other credit card processing solution currently available!

So how do you set it up?

1. Open a PayPal Business (or premier) account
Yes, go through the REGULAR process of opening a Business or Premier account (not a Micropayment account) – Strange, yet it’s the only way… Once you have a Business or Premier account opened, continue as follows:

2. Search at PayPal search box for “micropayments”;

3. Press on “PayPal Micropayments Website”;

4. In the new page opened, press on “Signup”;

5. Now request to change the Business (or Premier) account you just opened to a micropayment account.

6. Congratulations – you just opened the best micropayment credit card solution currently available!

Yes – it is awkward, and yes – their menus suck (until they read one or two “How to” and change…), yet once you open the account and start charging your micro payments, you no longer care…

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

MasterCard SecureCode, was, surprisingly enough, initially developed by Visa, and offered as a service to Visa customers under the commercial name: “Verified by Visa” (also known as VBV). Nowadays “3-D Secure” or in short “3-D” is a generic term which relates to: VBV, MasterCard SecureCode and J/Secure (JCB International 3-D commercial name).

3-D Secure adds, through an XML based protocol, another authentication step for online processing solutions. Shoppers generate a code (the “SecureCode”…) known only to them and their issuing bank, which must be entered to finalize an online transaction on sites which implemented this additional security step.

Merchants implementing 3-D Secure, benefit from chargebacks reduction (chargebacks previously initiated due to: “unauthorized transaction”), yet might see a volume decrease due to transaction failures, or simply lower conversion, directly related to the additional step required…

At the end of the day, at least until 3-D Secure will be imposed by the associations, every merchant needs to make the decision, whether to implement 3-D Secure or not. It has a lot to do with the nature of your online business and the chargeback rate you are facing today.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com