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

Most merchant account seekers get ‘temporary blind’ and concentrate on the ‘lowest discount rate’ figure presented by most of the providers. This rate will almost always reflect a transaction in which a signature debit card is physically swiped. Will this apply to most of your transactions? Probably not… Therefore, you must get the provider’s mid qualified and non qualified rates. For the average online merchant, processing cost is somewhere between those two rates.

Your merchant account providers are here to make money. Discount rates are not the only fees charged… Are you familiar with the fee structure? Will you be charged for: customer support, monthly statements, annual renewal fee, gateway fees, batch fees, and if and when you’re not happy with the package – termination fees? Ask for a sample monthly statement and go over the different line items to understand the fee structure.

OK – you checked all fees and everything sounds reasonable. Do you know how much you will be charged for the credit card terminal? While many providers use free terminal packages to well hide other fees, some do it the other way around…

Who is it that you are doing business with? Get to know your provider. Search the provider’s business name on Google and read what other merchants have to say, ask the provider for referrals and call them. Call the acquiring bank the provider is using and ask for a reference on the provider or reseller offering you the account.

What will be the customer service and technical support you will receive? Can’t say? Check it out – call the provider’s customer support line and get a first impression: how long were you on hold, what did you have to go through to get to a real person and was the representative friendly, knowledgeable & helpful.

Are you going for a direct merchant account or a third party processing solution? Though that’s a big enough issue for a standalone post, regardless of the direction you take, you must verify that your business name appears on your customers’ statements. If you’re using a third party solution, make sure they have a ‘soft descriptor’ that will add your business name to any transaction processed on your behalf. If you fail to do that, you are one step from high chargeback rates, and that, my friend, is the end…

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

Regardless of what you were told, or the ‘as low as’ pricing you were counting on when applying for a merchant account, the actual cost of credit card processing will catch you by surprise each time you will try to figure it out.

Once you start accepting credit and debit cards, you realize that every transaction is unique. There are 123 pages to the MasterCard Worldwide U.S. and Interregional Interchange Rates guide and endless number of rate scenarios. Visa is not much better as can be seen at Visa U.S. Interchange Reimbursement Fees guide, taking into consideration that this guide applies to transactions within the US only.

The credit card associations explain that this pricing structure is a direct result of merchants and regulators demand for transparent pricing. These demands forced the associations to reveal the complexity behind credit card processing. No one doubts the end result – no merchant can see the forest through so many trees.

What could possibly be so complicated, that requires such a complex pricing structure? The complexity exists at ‘both sides of the equation’. Merchants and shoppers (or cards) both carry different sets of risks and rewards, to which the associations relate. Fraudulent transactions are more common online than at the local grocery store. Debit cards lack the credit risk embedded within each credit card transaction. Different card types have different sets of benefits. All these, and much more, are taken into consideration when pricing the cost of processing a single transaction.

Processing a regular Visa card will cost less than processing a Gold MasterCard, which will still cost less than processing an American Express card. Merchants that process in a single step (do the authorization and capture together) will process for less than merchants who are forced to split the authorization and capture, due to physical merchandise location and delivery regulations, making them capture in delay.

And the funniest part – all of the above is the least of your concerns. As long as your merchant account provider uses an “interchange plus” basis, you’re on safe ground. The plus is the element you should negotiate and feel comfortable with. No one is big enough to get a better deal from the associations

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

As credit card processing comes with a cost, this question should trigger a serious decision making process, featuring costing and marketing exercises, making sure accepting credit cards is indeed feasible.

Let’s say for a minute you already decided to accept credit cards. Your second question would probably be, ‘where do I find the cheapest merchant account around?’

Now, that is a tricky question. Obviously, as a merchant, you need to minimize your costs. But when it comes to merchant accounts there is no straight forward way to make sure that what you see is what you get.

In the world of online payment solutions there are many factors you need to take into account when you try to figure out how much you will pay and what would be the quality of the services you get.

A partial list of factors will contain discount rate, other fees, the need to use a gateway, contract terms and customer services.

Discount rate

Your very first task would be to try and figure how your discount rate might behave. The discount rate is the fee that will apply to each and every transaction you process. It is comprised of several fees and dues such as network fees, assessment fees and interchange fee (the largest portion).

Your basic –qualified- discount rate will be set by your merchant account provider and should cover  most of your transactions (i.e., for instance,  all transactions that will come from a basic, non rewards, credit cards and that will be swiped in your terminal – in other words a ‘Card present transaction’). You have to bear in mind the discount rate might eventually become higher and turn into a Mid-qualified rate (for instance, in cases where you would key in the credit card details, instead of swiping the card- otherwise known as ’Card not present transaction’) or even turn into a Non-qualified (incase a certain reward card is accepted).

You really need to try and make few assumptions on how your credit card transactions will split between the different types of discount rates. Your potential merchant account provider might help you with statistics he gathered, based on his experience with merchant from the same line of business.

 Other fees (look for them in the contract or even better, ask the provider!)

• Per transaction fee

Will apply to each and every transaction you process

• Batch fee

Charged for ‘batching ‘ transactions and sending into the network, to start the settling process (should happen at least once a day)

• Chargeback fee

Your merchant account provider will help you fight (represent) chargebacks and will expect to be rewarded for it. The fee can be charged even if the representation process failed and your customer got away with all his money.

• Set up fee

Charged upon the setting of the account.

• Statement fee/ monthly fee

Covering the activity statement you will receive each month.

• Quarterly/Annual fee

Paid for the maintenance of the account.

• Monthly minimum fee

Assuring the provider receives a minimum of processing fees each month. You will not have to pay it if you will process transactions above a certain amount (if you processed to some extant, yet did not reach the required level, you will usually be requested to pay the difference only).

• Customer Service fee

 Covering the support services you get from your provider.

• Early Termination fee

 Will apply should you elect to terminate your contract earlier than expected.

• Gateway fees

If you are an e-commerce merchant you will have to pay for gateway services that will enable your secure connectivity with the credit card processing network. These fees might be paid to a different provider (if services are not bundled by your merchant account provider into one package), and might include, among others, a set up fee, authorization fee (per transaction), monthly fee, virtual terminal fee and reporting system fees.

• Fraud detection fees

Should you decide to use fraud detection services (and unless you will be doing the fraud prevention internally, you should), either through your gateway or by other sources, you will have to pay fees. Some of the fees are per transaction, other fixed, depending on the depth and volume of services rendered.

The fees above (and other fees) come in different ‘shapes and sizes’ and in different combinations. You will find that some fees are completely waived by some merchant account providers, while between others, that do charge them, there are substantial differences. One thing you should bear in mind, there are no free lunches in the credit card processing industry. Merchant account providers need to earn their living, exactly as you do. They render services and charge fees based on risk management models and this industry has substantial embedded risks.
As an informed merchant you need to understand that there is a tradeoff between the different pricing models offered by the different providers. The best you can do is make sure the merchant account you signup with provides you with the combination of fees and level of services that suits you most. For instance, you might decide to work with a merchant that offers 24/7 customer support, and charge for it, rather than choosing one that waives the fee but maintains office hour’s support. You may decide to prefer working with a merchant that charge a bit more in the discount rate or in the per transaction fee, just because he waived the termination fee (and right now you don’t feel you can make a long term commitment).
An important thing you should remember is that there is always some place for negotiation. A merchant account deal should leave both you and your merchant account provider satisfied, otherwise, it will not last long.
Use http://www.creditcardprocessing-r-us.com to learn more about the industry, get acquainted with the providers, compare, and pick the provider that suits you most. 

Dan Pirogovsky, Co-Founder and SVP Business Development
www.CreditCardProcessing-r-us.com

Many on-line merchants make their best effort to enhance the shopping experience. By Geolocation they identify the shopper’s location and offer a local shopping experience, including local currency pricing. This is now supported by acquirers enabling multi-currency processing.

In such international transactions, no conversion occurs and the merchant receives the foreign currency paid by the shopper. The merchant can either manage the FX in-house, use third parties which specialize in this field and can guarantee the USD amount, such as E4X or FXmicropay or use direct cross currency processing offered by acquirers, such as ChasePaymentech.

One way or another, due to these many bypass solutions, Visa and MasterCard added the new cross border transaction fee. The fee applies when a shopper makes a single-currency purchase at a foreign country merchant, or in other words, when the issuing bank of the shopper is located at a different region than the merchant account of the seller.

Many travelers and on-line shoppers are already familiar with this fee, yet only few merchants are aware of the higher discount rates associated with such transactions, as well.

The workaround is relatively simple and should be applied when possible. Merchants may open local merchant accounts once establishing a local presence. Many of the merchants operating internationally already have international presence and those who do not can easily obtain one. Now that Europe is one big region, researches show that most US merchants can cover over 80% of their international sales by opening one Canadian entity and one EU entity only.

As shoppers origin is already identified (Geolocation – remember?), any international transaction is automatically routed to the relevant local merchant account. Issuer and Acquirer are now in the same region and no cross border transaction fee applies.

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