Creating a website and a merchant account lets you start selling and generating income right away, but you should remember that nothing can be that easy. Merchant accounts are exposed to several common problems that can hinder your work and even cut a considerable amount of profits. Below is a list of common problems with merchant accounts and a detailed guide on how to face them with the lowest risks possible.
High-Risk Industry Problems
Here are several examples of high-risk businesses:
- Some eCommerce businesses
- Financial service providers
- Software development
- Travel industry
- Adult products/services
Most probably, you can already see your business here even though it’s only a small part of the full list. If your business is in a high-risk niche it can be exposed to:
- Frequent chargebacks;
- Frequent fraudulent activity;
- High user frustration rates;
- Unstable profit levels;
- Unexpected financial circumstances.
All banks and other payment service providers know about the risks and will most probably refuse to work with such ventures. The only way out is to work with special high-risk payment gateways for USA or EU providers. These platforms have specific terms and provide additional merchant protection and assistance.
Dealing With Fraud
All credit card owners are eligible to request a chargeback from their issuing bank if they notice suspicious payments in their transaction history. It’s a very good opportunity for people to get their money back if someone steals it, but it’s also a huge breach for fraudsters. Here are the most common chargeback fraud types and how to face them with lower risk:
- Friendly fraud – some customers may request a chargeback if they forget about a purchase and consider it money theft or an accident. If they hesitate about the purchase and fail to use your refund policy, want to return the money from an accidental purchase quickly, etc. To minimize such friendly fraud attempts, you should make your platform as straightforward as possible to prevent user confusion. Refund policies must be very clear and easy to reach as well. Users must see that they can get a refund easily without requesting a chargeback in their bank.
- Intentional fraud – some sly customers who know how chargeback works may try to deceive you to get your product for free. They purchase products and then open a dispute to request their money back without returning the goods. If you want to prevent them from succeeding, you must be well prepared. Keep all the records clean and implement a chargeback fighting protocol to act quickly and effectively.
If your marketplace is not protected, you and your users may also become victims of:
- Identity theft;
- Triangulation fraud:
To achieve the highest problem-solving efficiency and detect fraud attempts promptly, you should look for payment service providers (PSPs) or gateways that provide the following security options:
- High-risk payment processing – if your business is considered high-risk by the banks, it’s important to accept payments only via high-risk payment service providers.
- 3D Secure – this security protocol provides double verification of cardholders by requesting payment data and an alternative verification (usually via SMS). This gate is impassable for most fraudsters.
- Compliance assistance – it’s recommended to look for service providers that can assist you in gaining all the necessary compliances. It’s much easier to pay a regular fee than establishing compliance from the ground up.
- AVS (Address Verification System) – this automatic system is used to verify the billing addresses of your clients. In most cases, fraudsters don’t have access to the original billing addresses of stolen credit card owners, and you can prevent them from making fraudulent purchases.
Additionally, your website must be protected from user data theft. Do the following to enable due protection:
- Sign up for the most reliable PSP to obtain enough security features and assistance.
- Enable SSL/TLS encryption on your online marketplace.
- Ensure PCI DSS compliance.
Escaping Service Provider Ploys
It’s wise to be prepared for a wide range of potential fraud attacks, but, as a merchant, you also have to protect your business from dishonest service providers. Actually, being ripped off or abandoned by a PSP is usually more probable than fraudster attacks.
Some providers may try to lure you into signing a contract by offering very beneficial service fees. Unfortunately, most attractive adverts are usually the most deceptive. Read the contracts thoroughly and make sure to read the small print as it usually hides the mentioning of additional fees that weren’t advertised. Otherwise, you always risk receiving a significantly larger bill than you expected. The effect is very similar to fraud, but you rarely can dispute a contract that you signed.
Locked & Loaded
All the information above is very important to know, but even more important to use. Lack of attention and security breaches can lead to immense losses and ruin your marketplace’s reputation forever. That’s why you should invest a sufficient amount of capital into ensuring your platform’s invulnerability.