Have you ever wondered why most providers
of real merchant accounts go through verifications and
checks on not only your business but also on your individual
processing history as an owner (unless you are a 501c3
Non-Profit)? And why approvals can take from 1-5 days
for merchant accounts?
You probably ask "Why are they treating
this as if I'm applying for a loan? This should be
as easy as visiting my favorite 3rd party processing
service's website and entering my checking account
information".
Well merchants need to understand
that there are very legitimate reasons for merchant
providers being just a little more cautious than third
party payment processing providers.
- A.
Merchant account providers have to abide by very different
rules than other payment service providers. Visa/MC
sets forth rules that are to be honored by not only
merchant account providers but their sponsoring bank.
And in the case of Visa/MC's rules for merchant account
providers, many of them have been put in place by Visa/MC
after many years of being in the branded credit card
business so they've drafted many of their current
contracts in effort to prevent past operational mistakes
from reoccurring - just as any business person drafts a
contract, to prevent the worst and protect their interests
- B. Many merchants do
not understand that the government does have some sort of
say so in what's going on in the merchant industry.
It's called Homeland Security, and though they're not yet
working as closely as they want to with merchant providers
their Homeland Security rules to have parameters set in
place where banks can be held responsible for clients that
use their services to break Homeland Security laws. (Note:
there have been reports that they are fighting hard to
have all of merchant's processing data turned over to them
- and processors are fighting back, so it's not 100%
complete yet).
- C. At least 95% of
merchant account providers ask for voided check copies or
bank letters for verification when a merchant applies for
an account. Merchants sometimes wonder why the
processor cannot simply "call my bank to verify the
information and go on and approve the account". Well
in that method there's no paper trail or proof in writing
that the provider actually verified the checking account
information. And in both the legal world and in
Visa/MC's rules this carries no weight in the case of a
merchant signing on and causing a fraudulent catastrophe.
- D. Merchants
should also understand that with a real merchant account
they are their processing their own sales either by
allowing their customer to enter card data or by the
merchant manually entering card data. They are
entrusted with very sensitive credit card data. Have
you ever noticed that with many 3rd party payment
processing providers that are not real accounts often
charge much more for allowing merchants access to their
Virtual Terminal, which allows the merchant to enter their
own sales as needed? Well this is because when the
merchant can just take a card number and enter it
themselves the risk of fraud does increase, as if the
merchant isn't the most honest business person they have
the opportunity to steal card numbers and enter the
numbers into the Virtual Terminal themselves at will.
This is why
many third party providers often offer their "cheap"
options as the option that only allows customers to enter
their own data and charge much more for the Virtual
Terminal, but as many merchants know this isn't always the
most feasible or professional way to do business, as
sometimes your customers won't want to have to "visit your
website" just to pay for a product or service, they may
want to pay for it via mail, phone, or even in person.
This is where being entrusted to use the Virtual Terminal
ethically comes in handy, and if the merchant is not
ethical it's ultimately the processor that's responsible
for resolving the fraudulent activity (explained more
below).
E: Contrary to popular
belief the merchant account provider and bank is taking on
much more risk than many merchants believe. Here's
an example scenario where the merchant should be held
responsible for fraud but a processing bank may be:
-
A merchant applies for an account,
without the best intentions, they are approved by the
bank's underwriting.
-
The merchant gets access to
stolen card information and manually enters that info
themselves via either their Virtual Terminal or Web
Interface. Let's say $500.
-
The real customer, having
no knowledge of where this charge originated sees that
their card was used fraudulently.
-
The customer
disputes that transaction with their credit card company
considering it fraud because they did not authorize it.
-
The merchant provider/processor attempts to contact the
merchant to inform them that they have a chargeback and
will have to refund this customer because the customer
charged this transaction back with their credit card
company and the merchant has no proof of customer
authorization (so the customer wins the Chargeback
dispute).
-
The problem is that the merchant had bad
intentions to begin with and they're long gone.
-
In
this case who has to refund the customer that money
because the merchant is no where to be found? The merchant
processor and processing bank does! Though the
merchant is responsible for the fraud they cannot be
tracked down in this instance but the customer must still
be refunded. So the role of the provider in this
case is to take care of reimbursing the customer - of
course this would make any provider a little cautious
about who they sign on.
Operating a business that
accept credit cards is, at the end of the day, a
responsibility that should not be taken lightly.
Think about it, if it were your credit card being used by
a business wouldn't you want the bank that's trusting and
processing for that merchant has done due diligence to
verify that the merchant has good intentions?
Sometimes merchants are frustrated that providers turn
them away as if only they should be the ones choosing in
the process, but when there's so much at stake providers
have to ask just as many questions before boarding a
merchant as a merchant has to ask before choosing a
provider.
----------------------------------------------------------------------------------
Joe Thompson of Thompson Merchant Services (www.thompsonmerchant.com)
is a lead contributor to content on MerchantSeek. For additional merchant account
questions or comments feels free to visit
http://www.merchantseek.com/msforum/forum/
