It’s not easy for High Risk merchants to get payment processing in the first place, so when you get it make sure you don’t lose it. Below we identified 6 mistakes to avoid and prevent major headaches for high risk merchant account owners.
The following industries are High Risk because of their proximity to illegal activities
- Policy Page
Merchants need to have a clear and easy to follow Return Policy. Customers should know what to expect, which will prevent a lot of dissatisfaction. This is also merchant’s best defense against chargebacks (Chargeback happens when customer disputes the transaction to the Credit Card issuer). In High Risk merchant category, it’s very important to minimize chargebacks. Arguing a chargeback once it was filed is much easier when you have a solid Return Policy.
- Contact Information
Make it easy for customers to reach you. Ensure that the contact page, phone number, email and your address are prominently displayed on your website. Merchants need a good customer service department, answer the phone and respond to inquiries within 24 hours. Keep this in mind: if it’s easier for your customer to contact their credit card and file a chargeback, they will do that, which creates a big problem for you.
- Delivery Tracking
Customers sometimes claim that they never received the merchandise. Whether it’s a fraudulent or genuine claim, a merchant should be able to prove one way or another. For higher margin products consider requiring signature on delivery.
- Use Fraud Tools
Merchants have access to automatic fraud prevention tools. Services like Address Verification (AVS), Credit Card security codes, 3D Secure (triple verification), will catch fraudulent transactions before they are shipped. Payment account providers and gateways provide a lot of free tools to help merchants in this category.
- Product Description
Merchants can avoid a lot of headaches when the product information and description is clear and honest. When customers receive the product and it’s not what they expected, they feel duped. This is when they are likely to call their credit card instead of contacting the merchant.If there is a product disclaimer, ensure customers don’t miss it. Things like: color, material, fabric, quality, accessories and all other details about your product should be understood by the customer before they placed an order.
- Fight Chargebacks
High risk merchant account owners should always respond to a chargeback. The premise here is that a merchant has done all the right things for the customer: didn’t overpromise, delivered on time and the correct product, responded to problems. While ensuring that the systems are secure, can catch identity theft and wrong orders. If this is the case, merchant should always have a reason to fight the chargeback and should do it either through the Payment service provider, gateway, 3rd party services like Midigator, Ethoca, etc, or fight it on your own. If you don’t fight, you will lose a 100%.
AllRates is happy to work with any merchant in eliminating costly mistakes. We will help finding the right Payment Provider, Gateway service or Chargeback company. Check your current merchant credit card rates or Contact Us.
When merchants are searching for the term MATCH or TMF as it relates to credit card processing, it’s already a bad sign. Let’s look at what is it and how to deal with it.
What is MATCH/TMF
Member Alert to Control High Risk Merchant (MATCH) is a blacklist created by MasterCard to keep track of merchants and owners that committed an offence and have been terminated. Terminated Merchant File (TMF) is essentially an older version of the same list. Card Brands (Visa, MC, AmEx, Discover), Acquiring banks and Payment Providers are using this list to automatically decline merchants. You can find full MasterCard merchant account rules HERE.
Why have I been placed on MATCH?
There are 14 reasons why a merchant can be blacklisted, they are shown below. A Payment Provider, Acquiring Bank, or Card Brands (AmEx, MasterCard, etc) can add a merchant to MATCH. Merchant usually receives a letter with an explanation of why they were added to MATCH. We see a lot of merchants complaining that they didn’t receive any communication, usually it’s because thy missed an email or the letter.
|MATCH List Reason Code||Title||Explanation|
|01||Account Data Compromise||Account data is stolen from the card-present merchant and used with other merchants|
|02||Common Point of Purchase||Account data is stolen from the card-present merchant and used with other merchants|
|03||Laundering||Merchant processed transactions that did not involve a bona fide cardholder|
|04||Excessive Chargebacks||Merchant breached predetermined chargeback thresholds|
|05||Excessive Fraud||Merchant breached predetermined fraud-to-sales dollar volume thresholds|
|07||Fraud Conviction||One of the business's owners was convicted of criminal fraud|
|08||Mastercard Questionable Merchant Audit Program||Merchant is labeled a “Questionable Merchant,” as determined by MastercCard guidelines|
|09||Bankruptcy, Liquidation, Insolvency||Merchant is unable to discharge all financial obligations|
|10||Violation of Standards||Merchant was in violation of one or more of the card network’s regulations|
|11||Merchant Collusion||Merchant participated in fraudulent collusive activities|
|12||PCI-DSS Noncompliance||Merchant wasn’t compliant with PCI-DSS requirements|
|13||Illegal Transactions||Merchant processed illegal transactions|
|14||Identity Theft||Musiness owner’s identity is in question|
How long is a merchant on MATCH/TMF list?
MATCH period lasts for 5 years, after which the merchant is automatically removed.
What merchants can do once they are on MATCH/TMF?
Merchant can contest the decision to be placed on MATCH by writing a letter and stating valid reasons. Providers will usually review their decision again, this is especially useful when one of the Card Brands placed you on MATCH. For example MasterCard has been known to place merchants on MATCH for ‘violating MC standards’. If a Payment Provider finds that it doesn’t pose liability to them, they can accept the merchant for payment processing even though they are on MATCH.
Feel free to contact us and let us help you look through your MATCH case. Contact HERE
With merchant expansion comes credit card fraud expansion, this is a sad truth. Many e-commerce merchants sell to international clients, this alone increases the fraud probability ten-fold. However, there are things you can do to protect yourself.
1. Beware of high risk countries. Some are famous for originating fraudulent credit card transactions. Below are the top 5
Scrutinize every purchase transaction from the above countries, decline these purchases for any smallest thing that looks wrong.
2. Check the IP address. This one is simple: if the IP address doesn’t match the Credit Card billing address, manually review this order. If these don’t match, and IP address is from the High Risk country – Automatic Denial. The risk is so great with these countries, that some merchants block IP address associated with them.3. Think about your product. Simple economics, if your product has negligible hard costs (digital goods) you will only loose a portion of your profit due to fraud. However if you have a tangible product with fixed costs (manufacturing, storing, shipping) when fraud occurs – you lost your costs which quickly adds up. There are numerous examples of companies going out of business due to large credit card fraud. Make sure to implement stricter fraud rules depending on your product.
4. Fraud versus Chargebacks. Believe it or not Chargebacks can cause more damage to your merchant account in the long run than fraud alone. If you shipped 10 items to a fraudulent address and you never got paid, that’s a big loss. But if you keep getting hit with Chargebacks and they are growing to more than 1% of your sales, your merchant account will be terminated, plus you could end up on MATCH list. This means that you will not be able to get a merchant card services account for 5 years. Always be paranoid about your Chargebacks!
5. Red Flags of Fraud. Here’s a list of things you should always watch out for:
- A customer placing multiple orders in a short time span and shipping to different addresses.
- The order was placed late at night, especially between 2:00 and 4:00 am
- Name and address contains spelling errors
- The email address is a nondescript jumble of letters and numbers
- The customer orders multiples of the same item
Success of your Business depends on ability to sell – which means making it easy for your customers to buy. Cash isn’t easy and electronic wallets aren’t in yet, so accepting Credit Cards is your main venue. When you outgrow PayPal, Square and Stripe, here are the 8 most important items you will need to know about opening an account with a Merchant Service Provider.
1. Be prepared to gather a lot of documentation. Your merchant processor will ask for:
- Complete and signed application
- URL – have your website up and running
- Copy of D/L, passport
- Utility bills
- Credit history
- Incorporation documents and/or other corporate docs
- License and/or Legal Opinion (if applicable)
- Business Plan
- Recent bank statements, 3-6 months
- Latest credit card processing statements 3-6 month
- Warehouse fulfillment contract (if applicable)
- Photos of your office/warehouse/location
2. You will have to post a Reserve. Reserve will be between 5-20% or 6 month rolling reserve. This protects processor’s losses, the more comfortable your merchant provider is with you – based on the docs provided in #1 – the lower the reserve.
3. Sign a 2-3 year contract. High-Risk merchant providers will want your commitment, a 2-3 year contract with a cancellation penalty is not out of the ordinary. Penalty is normally called ETF – Early Termination Fee, read the agreement closely to understand what you are getting into.
4. Sign a personal guarantee. High Risk means you pose more liability for the Merchant Service Provider, both Bank & Provider will want you to be on the hook as well. Because the owners guarantee personally, posting a Reserve from the company will protect Guarantors by creating a financial cushion – Reserve isn’t always a bad thing.
5. Offshore versus Domestic. Make sure you understand where the Acquiring Bank is located. Offshore banks have their own pluses and minuses
- Processing Credit Cards is a BIG PLUS. If all domestic processors decline you, go offshore
- declines can go up
- foreign Corp set up – will cost $
- deal with international laws
- beware of third world country banks
6. Fees and Rates. High-Risk merchants will pay more than Low Risk guys. The fees will reflect the liability created for Payment Providers but compare the fees through AllRates.org to make sure you stay competitive among High Risk rates.
7. Chargebacks. If you don’t already, you will need a plan on how to manage Chargebacks. Most likely you are a High Risk merchant because your industry is experiencing high percentage of chargebacks (above 1% is High). There are tools to manage Chargebacks, a good description of how to go about it is HERE
8. IT Integration. There are several ways to integrate with a Merchant Service Provider:
- Hosted payment page. Easiest: simply redirect customers to a secure payment page
- Inject a hosted payment page through iFrame. This allows you to keep customers on your website
- Integrate through Processor’s API, will need an SDK file
- Connect through shopping cart plug-in
This Merchant Account Aggregator Guide has everything you need to know about Payment Processing Aggregation. Whether you are a High Risk Merchant or not, but need to understand Aggregators, you’re at the right place.
Merchant Aggregator versus Direct MIDs
A MID (Merchant ID) is given by the Acquiring Bank. When merchants receive their own MID they work directly with a Payment Provider/Bank. This is important because in this scenario it is the Bank that decides to accept or decline the merchant. It shouldn’t be a reprise but Banks stay on a conservative side.
In the case of Merchant Aggregation, it’s the Aggregator that gets a MID from an Acquiring Bank and then collects several merchants under this MID umbrella. This means that the merchant is largely invisible to the Bank and the Aggregator is the one doing due diligence, ultimately deciding to accept or decline.
Types of merchant processing Aggregators:
Behemoth Aggregators: PayPal, Square, Stripe, Amazon Payments, etc. These board very large number of merchants every day, they are easy to work with: you can open an account and start credit card processing the same day. Behemoth aggregators were created for startups, and small to medium size businesses that don’t have large volumes.
High Risk Aggregators: this type of aggregator is created specifically to hide very High Risk merchants behind their umbrella MID.
Guidance for High Risk Merchants:
If you are a small, under $200k annual volume merchant, you can fly under the radar of Stripe and the like. I’ve known high risk guys happily processing with PayPal or Stripe for years, it’s fairly easy to slip through the cracks and stay processing.
However if you:
- the business, or the owners will not pass the initial due diligence review
- have been placed on a TMF/MATCH list
- or you are so blatantly High Risk that you are ‘Radioactive’
then you still have a chance to get credit card processing through a High Risk Aggregator.
Keep in mind that Aggregators charge higher rates. Behemoths offer flat fee or at least very well documented tiered pricing. Yes, they will charge more, but they won’t rip you off. High Risk Aggregators – merchant beware, they know they are your last resort and they will take advantage of it by charging the highest credit card processing rates. Because they CAN….
Things to keep in mind before signing with a High Risk Aggregator:
- How long they’ve been in business and does it look like they will stick around
- Reputation (check the reviews)
- Try to find out who and where their Banks are
- Test their customer service
- Which credit cards they take. How about alternative payments?
- Ask about IT integration
- Negotiate your rate
AllRates works with a few Aggregators in the industry. Go ahead and submit the form, we will let you know if we can help.