As expected, Visa and Mastercard have confirmed an April 2019 increase in interchange rates, the fee charged by banks that covers the cost of handling and credit risk inherent in a bank credit or debit card transaction. While they have not announced the amount of the increase, your merchants should expect to pay slightly more for their merchant processing in the coming months.

HOW INTERCHANGE FLUCTUATION AFFECTS YOUR MERCHANTS

The increase of interchange rates is not uncommon in the merchant processing industry, and the impact can be different from one merchant to the next depending on their ticket size and type of transactions they run. Some processors/partners, depending on the pricing structure they use for their merchants, can choose to eat the increased fees, while others pass the higher fees off to the merchants. Below are some examples of merchant pricing structures and how an increase in interchange can affect them:

1. Flat Rate Pricing– Flat rate pricing is one rate provided by the merchant processor/partner for all transaction types (manually keyed, swiped, moto, etc) and usually does not change when interchange fluctuates. Unless the merchant processor/partner decides to increase the merchant fees to offset the cost, a merchant on flat rate pricing will feel no effect of a rise in interchange rates.
2. 3 and 4 Tier Pricing– A merchant paying rates based on tiers will also not feel the effect of a rise in interchange. In this scenario, a merchant processor has given the merchant 3-4 rates based on the transaction type (i.e.- the merchant will experience a higher rate when a transaction is manually keyed as opposed to swiped/dipped). As interchange fluctuates, the tiers remain the same.
3. Interchange/Cost Plus Pricing- The most common rate structure offered by merchant processors, Cost Plus Pricing is based solely on the rate of interchange with an additional markup for the merchant processor. In this scenario, the merchant’s rate will fluctuate with interchange while the fees to the processor remain the same.

WHAT YOU AND YOUR MERCHANTS CAN DO

For merchants priced with Flat Rate and Tier Pricing, it is up to the merchant processor/partner to determine if they will eat the cost of the increase in interchange or pass the fees off to the merchant. Rather than a blanket rate increase, it is smart to adjust rates on a merchant by merchant basis.

For merchants on Interchange/Cost Plus Pricing, it is important to be upfront with the merchant about the change in rates and what it might mean for them. Make sure they understand that their fees (the merchant processor/partner fees) will remain the same, however the rate of Visa Mastercard will adjust.

PROACTIVE OPTIONS FOR THE MERCHANTS

If you sense aggravation about the inconsistency of rates, the good news is that there are available solutions for your merchants. For example, Cash Discounting has become a very popular solution. A Cash Discount Program is not a convenience fee or a surcharge. Merchant’s simply price their items at cash discount prices. When a customer chooses to pay with a credit or debit card, a non-cash price adjustment will be passed through to the customer and deposited in the merchant’s bank account the following day.

Here’s How it Works

For the sake of simplicity, let’s say the customer makes a $100 purchase and the merchant totals $50,000 in sales for the month. Below is an example of what to expect if the merchant were to charge a 4% Customer Service Fee.

Cash Discounting is not as simple as tacking on fees at the time of checkout. There are rules and regulations that must be followed, and it is important to use a processor that is familiar with the subject. To learn more about how to implement cash discount for your merchant, visit boldpayments.io/cash-discounting.

Chargebacks…the bane of many small to medium size businesses. Chargebacks have run rampant in the merchant processing industry. Many business owners feel helpless as the chargeback process has evolved into an unwinnable process to fight a form of fraudulent disputes. The best course of action? Prevention.

Definition

Before we get started, let’s look into what a dispute is. As defined by Visa:

A “dispute” provides an issuer (cardholder’s bank) with a way to return a disputed transaction. When a cardholder disputes a transaction, the issuer may request a detailed explanation of the problem from the cardholder. Once the issuer receives this information, the first step is to determine whether a dispute situation exists. There are many reasons for disputes—those reasons that may be of assistance in an investigation include the following:

Merchant failed to get an authorizationMerchant failed to obtain card imprint (electronic or manual)Merchant accepted an expired card

When a dispute right applies, the issuer sends the transaction back to the acquirer (Processor) and disputes the dollar amount of the disputed sale. The acquirer then researches the transaction. If the dispute is valid, the acquirer deducts the amount of the dispute from the merchant account and informs the merchant. Under certain circumstances, a merchant may respond to a dispute to its acquirer. If the merchant cannot remedy the dispute, it is the merchant’s loss.

PREVENTION

The best attack to the chargeback dilemma is prevention. There are steps business owners can take to make sure the issuer never advances the dispute beyond the cardholders request.

• The best form of prevention…EMV. EMV is a global standard for credit and debit payment cards based on chip card technology. This makes credit card virtually impossible to reproduce eliminating the claims of fraudulent transactions. This eliminates the vast majority of fraudulent disputes as it proves the card used was a legitimate card. A merchant’s POS company or merchant processor should have simple EMV solutions that can be installed rather quickly.

• Merchants can also prevent chargebacks by collecting the right information at the time of sale. It is important that the correct signature is captured matching the customer’s ID. In a fast paced environment, especially with small ticket items, it is unrealistic to check every transaction against the customer’s ID. However, for larger items, say a catering order, it is important to compare signatures on the customer’s ID to the credit card slip and even make a copy of the license.

• Another method to avoiding chargebacks is to train employees to identify the high risk indicators. Merchant should teach employees to verify signatures on large orders and manually keyed transactions, make sure invoices and delivery receipts are signed, and look for suspicious transactions (i.e.- leaving an abnormally large tip that can be disputed in the future).

• Lastly, merchants should always deal with customer complaints promptly. More times than not, a merchant can avoid a dispute by settling the manner before the cardholder calls the bank. It is important that all servicers are delivered to the customer’s expectations. If not, deal with the issue up front and try to resolve it before it gets to the issuer.

FIGHTING CHARGEBACKS

Before a merchant fights a chargeback, it is good to understand the “Dispute Life Cycle”. Below is Visa’s diagram outlining the steps a chargeback process:

Below are some common dispute categories that can be initiated by the cardholder:

Knowing this information can help merchants take the proper steps when fighting a chargeback. In addition, the following steps might also help during the dispute process:

• Act fast. The sooner a merchant can dispute a chargeback the more time they have to counter any rejection.

• If available, use a chargeback managing software. Many processors offer a tool that can provide the merchant with a faster notification and easier claim submissions.

• Provide as much documentation as possible when handling a dispute. Some merchants even go as far as providing a written outline of the services provided to backup their documentation.

• Merchants should ask their local merchant processor provider for help. Merchant process providers want to see their merchants happy and avoiding chargebacks is a sure fire way to do so. Merchants should take advantage of the merchant processor’s knowledge and contacts to push disputes through.

Unfortunately, chargebacks have become “a part of the business”, but merchants can limit the damage by following the steps needed to prevent and fight this headache.

For more information on handling chargebacks and additional ways to avoid them, please email info@boldpay.io.

**source: https://usa.visa.com/dam/VCOM/download/merchants/chargeback-management-guidelines-for-visa-merchants.pdf