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  • AMEX Payment Processing For High-Risk Business Is Possible. Why you need it.

    AMEX Payment Processing For High-Risk Business Is Possible. Why you need it.

    AMEX payment processing is poorly understood in Europe by e-commerce business owners. This is especially true for merchants in high-risk industry categories.

    Visa and MasterCard often get mentioned in all of the conversations. However, as a merchant in Europe, accepting AMEX is a little more complex.

    Getting this type of payment option can open up a whole new customer base and increase conversions. But it’s important to know how to implement this card type to your checkout, if you are permitted.

    As a merchant, American Express is one of the card networks to explore if you cater to US and Canadian buyers. However, most merchants are unsure of whether or not to accept AMEX cards. For some, it’s a matter of pricing. For others, it’s the hoops to jump through to get approval for high-risk credit card processing.

    However, the amazing payment processing solutions that come with accepting AMEX cards make it an endeavor worth pursuing. We will discuss merchant pricing for AMEX cards, how users in Canada and Europe can use this platform, and also prevent a chargeback on high-risk payments.

    All you need to know about AMEX merchant pricing

    American Express is something of a mystery when it comes to credit card payment processing. Unlike Mastercard and Visa, it’s not an open network. In other words, AMEX is the only entity that can issue its cards and allow for merchant payment options.

    Due to this limit on high-risk credit card processing, they have a lot more control over how much merchants pay to accept its cards. There are no definitive figures anywhere, but this is an assessment of the landscape of fees Amex charges for different categories:

    Lodging Payments (B&Bs, Hotels)

      • under $100: 2.25% + $0.10
      • $100-$1,000: 2.6% + $0.10
      • above $1,000: 3% + $0.10

    General Retail Payments

      • under $75: 1.6% + $0.10
      • $75-$1,000: 1.95% + $0.10
      • above $1,000: 2.4% + $0.10

    Other payments that merchants have to worry about include:

      • Network fee (0.15%)
      • CNP surcharge (0.30%)
      • Cross-border fee (0.40%
      • Voice authorization fee (0.65%)

     

    AMEX vs. Visa and Mastercard

    In terms of pricing, Visa and MasterCard seem like the more favorable option. However, it is also key to factor in the amount of US-based consumers that use AMEX. The American Express Card is the most popular credit card in 23 countries, including the US and UK.

    Therefore, for merchants in Canada and Europe, accepting AMEX cards for high-risk credit card processing can be a huge plus. In the same vein, the risk of chargeback and fraud is a genuine threat. In 2018, the US got the crown for being the country most prone to credit card frauds.

    Luckily, it’s possible to avoid scams and chargebacks on your merchant account. At DirectPayNet, we’re knowledgeable about an abundance of risk management tools, risk navigation techniques, and automated fraud detection resources. More importantly, this is efficient for avoiding chargebacks, refunds, and frauds.

    Contact DirectPayNet to get guidance on and set up with seamless AMEX transactions as a merchant.

     

    Common misconceptions about processing AMEX orders

    • Amex is not popular among consumers: This isn’t true. In fact, there are over 150 million AMEX users. More importantly, they spend 50% more compared to other cardholders.
    • AMEX doesn’t care for merchants: Tools like AmexOptBlue offer next-day deposits for all card transactions. This applies to merchants in Canada and Europe.
    • Cost of accepting AMEX is too high: Interchangeable rates depending on brands, as well as the absence of ancillary fees, can make it a bargain. Also, the OptBlue program now offered by most payment processors, gives merchants more reasonable fees. If you’re applying for Visa and MasterCard merchant account, the AMEX OptBlue program allows you to add it with no extra application making it simple and quick to accept AMEX.

     

    How to get approved

    As a merchant, there are two ways to get AMEX payment processing for business. The first is to go through a merchant service or payment provider with the OptBlue program while the second is to go directly through the AMEX card network.

    The first option through OptBlue is the better one in terms of merchant pricing. AMEX offers these payment providers wholesale rates so you could end up paying the same price to accept AMEX as you are for accepting Visa and MasterCard. Consequently, the aforementioned payment providers offer high-risk American Express card processing as a part of their services. Depending on the brand, it’s possible to find a great deal that works for business. Note that this works best for companies operating in the US.

    Going directly to American Express is an excellent option for larger businesses in Europe and Canada. Depending on the volume of transactions, it’s possible to get wholesale pricing that favors the cost of doing business. Additionally, even with a direct AMEX agreement, it’s possible to use the same payment gateway you use for accepting Visa and MasterCard.

     

    Why high-risk merchants in the EU and Canada avoid AMEX

    The answer to this question is a simple one — merchants want to save more money. American Express depends majorly on merchants for revenue. As a result, it’s not uncommon for foreign-based companies to pay more to allow for payments with AMEX cards. Before the OptBlue program, AMEX would sometimes cost merchants double the cost of accepting Visa or MasterCard.

    In the same vein, most high-risk merchants want to avoid having to go through the stress of fighting chargeback disputes. AMEX heavily favors the end user, so the chargeback burden always falls on the merchant who oftentimes loses the dispute even if it is not their fault. Also, for Canadian based merchants, they may have to pay more due to international cross-border fees. This is a factor that most US companies do not have to contend with.

    Finally, it may be impossible for some European-based merchants to process high-risk credit transactions without a US bank. This is a function of location and can be simply remedied by setting up a US office. Below are the requirements for getting one:

    • An incorporated business + valid business license
    • A business bank account for the incorporated company
    • A company owner/director that is also a US resident who can sign documentation and be the contact person for merchant account and bank account related inquiries
    • A physical address within the US (It can be a simple setup, nothing too complicated)
    • Pre-approval for a merchant account

    How to get approved for AMEX processing

    Many payment providers are weary to offer new businesses high-risk credit card processing services. The simplest way to get started in accepting AMEX is to ask your current payment processor to add this ability on your merchant account. If you’re applying for a new account, make sure your payment processor offers the OptBlue program. This way you can get started on accepting all cards without extra paperwork or delays.

    As to whether or not the business is a high-risk one, that is up to guidelines provided by AMEX. However, AMEX payment processing is not available for:

    • Adult entertainment businesses
    • Loan collection agencies
    • Gold, cash and silver collection agencies
    • Gambling businesses

    How to fight fraudulent AMEX transactions

    One of the primary reasons most merchants avoid getting AMEX payments is the risk of fraud. These simple signs can be an indicator of a credit card scam and help prevent them.

    • Ordering too many items, especially when it’s the same one
    • Orders made with anonymous email domains
    • Payments processed in substantially large dollar amounts
    • Delivery to countries with a history of fraudulent claims
    • First-time shoppers
    • High-volume purchases without regard for size, features, colors, and pricing
    • High-volume purchases made just before closing time
    • Attempts to rush an order

     

    How to dispute an AMEX chargeback

    With a chargeback, a merchant has about 20 days to respond to a “Request for Information” letter from AMEX. Typically, they would have to provide evidence (documentation) that the cardholder holds no legal claim to a chargeback.

    This is close to the way both VISA and Mastercard operate. However, for Mastercard, cardholders have more time to dispute a chargeback (120 days).

     

    Contact DirectPayNet for additional help

    AMEX payment processing is a great e-commerce tool for companies in Europe and North America. And it’s because of the opportunities it offers to carve a niche in a large market (The US).

    Worried about chargebacks, fraud and refunds? DirectPayNet offers a broad range of services to help merchants around the world navigate risk. For example, we can help you detect fraud and assist with offshore compliance. Additionally, we can assist in reducing the chargeback as well as refund rates.

    Email us to kickstart your payment gateway. Send us a message here.

  • Refund Rates Over 15% Can Ruin Your Payment Processing

    Refund Rates Over 15% Can Ruin Your Payment Processing

    When was the last time you paid attention to your refund rates?

    For many high-risk merchants, the focus when it comes to payment processing is chargebacks. You might believe that a low chargeback ratio alone protects your merchant account status. But when was the last time you checked your refund rate?

    High refunds and returns are as damaging to payment processing. And yet many merchants don’t pay attention to them.

    Low chargebacks will not excuse high refund-to-sale counts or refund-to-sale amount ratios with acquirers. With at least $369 billion lost to refunds every year, merchants cannot afford to bury their heads in the sand. Better refund and return ratios lead to better relationships with your payment provider. They’ll also help your bottom line too.

    This blog will dive into why refund rates are so important, and how to keep them within acceptable levels for payment providers.

     

    Why refund rates are a big deal

    Just as you do with chargeback ratios, you should be keeping your eyes on refund rates. A refund rate is calculated by the number of items refunded divided by the number of items purchased.

    A good range is somewhere between 7% and 15%. However, e-commerce and online merchants are much more at risk. Research from Invesp shows that “30% of all online products are returned compared to 8.89% in brick and mortar stores.”

    While refunds and returns both contribute to your refund rate, they differ in nature. A return refers to a lost sale. However, since the product is returned, it can be sold again.

    A refund refers to the loss of both the product and the sale. Which is particularly damaging for revenues, profits, and margins.

    With that in mind, many merchants pay attention to their refund rate with their own profitability in mind. But it’s crucial to understand that merchant account providers monitor this rate too. Why? Risk.

     

    Risk affects the bottom line

    A high refund rate indicates an elevated risk to acquirers. Good products and services shouldn’t incur a high number of returns or refunds. Thus, they may decide to suspend or terminate your merchant account or e-check/ACH processing based on elevated risk levels.

    Say you’re already operating in a high-risk vertical such as nutraceuticals. Compounding your risk profile with high returns is never a wise move.

    Acquiring banks and payment service providers will look at two key metrics when assessing risk with regard to returns. One is refund-to-sale count, and the other is the refund-to-sale amount. Refund-to-sale count refers to the ratio of refunds to the number of sales. For example, if you returned one in every 20 sales, your refunds-to-sale count ratio would be 5%.

    However, your refund-to-amount ratio refers to the monetary value of the sales. For instance, if you refunded one dollar for every ten dollars of sales made, your refund-to-sales amount ratio would be 10%.

    In many cases, payment providers will not return payment processing fees associated with a return or refund. Rather, most will add a fee for a return or refund as the process presents the same administration costs as processing a normal payment. If not more.

    Thus high refund rates hurt your bottom line. Not to mention put payment providers on edge. Which could result in probationary measures or a suspension of payment processing. Those suspensions are not always temporary either.

     

    The causes behind high refund rates

    When assessing your own refund rates, it’s important to remember the obvious rule, the lower the better. Refund rates vary with the industry and the time of year. For instance, electronics make up just under half of all frequently returned online product categories. Thus, acceptable refund rates are going to be higher in this industry.

    Again, the holiday season will always increase refunds and returns. Remember, five million packages are returned to retailers in the first week of January alone. In terms of a so-called “magic number,” below 7% is considered acceptable. But many leading e-commerce platforms believe below 5% is a good aim. The best performers have less than 1%.

    So why do refund rates creep up beyond the buyer’s remorse phenomenon seen every January?

    Deliberate overbuying

    A problem that plagues online retail is customers buying more items than they want. According to Barclaycard research, 30% of shoppers deliberately over-purchase and subsequently return unwanted items. While 19% admitted to ordering multiple versions of the same item so they could make their mind up once they’re delivered. This problem is often driven by overly-lenient returns policies.

    Products and services are not as described

    Almost a third of refunds occur because the products or services were not found to be as represented or described. This is a common theme for business coaches and influencers who operate lucrative affiliate programs for their high-ticket online courses or other offers. Affiliates over-sell the online course or program, leading to increasing refund requests.

    Buyer refund fraud

    Unfortunately, refund fraud is increasingly common. This occurs whereby a customer orders an item and requests a refund because it didn’t arrive, even though it did. Another version of this fraud is to return the item in its original packaging expecting to be refunded before the product arrives back into stock. This is a scam that recently cost Amazon €330,000. Customers bought iPhones, took the items out, filled the box with soil to the exact same weight, and returned them for a full refund. Taking advantage of the fact that Amazon didn’t check their returns.

    Defective Products

    The most common reason for returns and refunds is defective products. In some cases, this is as a result of damage caused in transit. But in most instances, this is a result of poorly-made or low-quality products not meeting customer expectations.

     

    Has the global coronavirus pandemic increased your refund rate? That’s not the only trend you need to watch out for as a result of COVID-19. Read our guide to learn how coronavirus is affecting merchant accounts for high-risk merchants.

     

    Steps merchants can take to lower refund rates

    If you’re a merchant struggling with high refund rates, there are several steps you can take to reduce them.

    Review partnerships and product descriptions

    Overpromising and under-delivering is a one-way ticket to a return or a refund. Therefore, revisit your product and service descriptions on your website.

    Do they accurately reflect what customers can expect from their purchases? It’s significant to note that 88% of shoppers characterize detailed product content as being extremely important to their purchase decision. Thus review all marketing language, product descriptions, and affiliate partnerships. Make sure those selling your product are not setting expectations too high.

    Review order fulfillment partners and suppliers

    Are items taking too long to arrive with customers, resulting in refund requests? Are returns disappearing, losing you inventory value?

    Your order fulfillment partner is crucial to your success. Especially in the online retail market. Make sure you work with a third-party logistics supplier that can provide trackable and signed-for deliveries. This move will reduce instances of attempted refund fraud.

    Expand and improve customer support

    This is a critical move if you want to keep your refunds from transforming into chargebacks. But it’s also wise so that a customer can receive prompt answers to queries on shipping, your service, or your products.

    In many instances, potential refunds and returns can be avoided by explaining something the customer missed. For example, if you operate a SaaS platform, integrating live chat support can help a consumer to find the feature they’re looking for. Rather than becoming frustrated and issuing a refund request.

    Diversifying your payment processing

    If you run all your payments through one channel, every refund will hurt you. Diversify your payment processing and operate additional e-check and merchant accounts (maybe even in another jurisdiction). This lessens the impact of risk.

    By spreading payments across multiple merchant accounts, ACH processing, and MOTO, for example, you lower your exposure to refunds. This is achieved by spreading your refunds out amongst several different payment channels. This way one channel won’t become too affected.

    Shelve high-refund product or services

    It’s also worth investigating how your refunds relate to your product or service offering. If there is a particular product or service that attracts refunds, why not shelve it?

    By taking it off your website, you can then carry out research as to why it was so problematic. You can use that knowledge to make the necessary tweaks or take the decision to discard them altogether.

    Ban serial refund claimants

    Sometimes so much time is focused on bringing in sales that you don’t analyze refunds or returns. It’s your choice who you do business with, and serial refund claimants do nothing but hurt your bottom line.

    Thus, make sure to assess refund data and block or ban serial offenders. If there seems to a quite a few, it could be a sign that you need to revisit your returns or refund policy.

     

    Don’t ignore high refund rates – take action

    Many merchants wrongly assume that good chargeback ratios will keep them in the clear with payment providers. But acquiring partners assess businesses on risk, not just chargebacks. And high refund rates indicate high risk.

    Thus, it’s wise to take action as soon as you notice refund rates creep up. By following the above advice, you can better uncover the reasons behind your refunds and take corrective action.

    As the world continues to navigate through uncertain times, refund rates are on the rise. With the expert help of DirectPayNet, you can keep refund and return rates below those of your industry competitors. Expanding your payment processing capabilities as a result.

    Talk to us to learn more about how we can help your business today.

  • Transaction Approval Rate: Make More Money In 30 Days

    Transaction Approval Rate: Make More Money In 30 Days

    Would you like to know how to increase your transaction approval rate to earn more revenue in 30 days or less?

    Think about it.

    If you’re generating $20,000 in sales each month right now but have hundreds of declined transactions, you could be missing out on thousands of dollars from people who want to buy your product or service.

    You could finally say goodbye to rejected transactions. No hassles. No customers would think you’re a scam. Losing sales you’ve paid dearly in traffic to get would diminish every day.

    The truth is, many high-risk merchants get charged a fee for each declined transaction.

    You could raise your revenue by 10% or more by reducing declined transactions.

    If you can relate to any of this…

    We’re here to tell you it’s possible to increase your profit margins within 30 days or less.

    So, if this piques your interest, keep reading to find out how you can improve your transaction approval rate and make this your most profitable year yet.

     

    What is a transaction approval rate?

    You might hear other people refer to the transaction approval rate as transaction success rate (TSR).

    Either way, you can get both by calculating:

     

    TOTAL # OF APPROVED TRANSACTIONS

    TOTAL # OF ATTEMPTED TRANSACTIONS

     

    Here’s an example…

    If you process 1000 transactions and only 750 of them turn into sales, your transaction success rate is 75%.

    Now, imagine if those 1000 transactions are worth up to a total of $75,000 in sales. That means you are losing $18,750.

    In fact, you’ll be earning less than that.

    Your payment providers deduct fees from your payment gateway and merchant account. This includes a cost for each declined transaction which could range anywhere from $0.20 to $2.50 per charge attempt.

    How would that make you feel?

    That’s why it’s important to see how much money you are losing. If you use the transaction approval rate to measure your success, it’ll be easier for you to test and optimize your payment processing.

    Why the transaction success rate matters
    It’s frustrating when potential customers change their minds about buying after their card gets declined. (Photo by Yan from Pexels)

     

    Why the transaction success rate matters

    This metric is crucial because it highlights how much money you’re losing after spending a lot to acquire a customer.

    It’s frustrating when potential customers change their minds about buying after their card gets declined. And we know you might be thinking that there isn’t much you can do afterward…

    But you can always find the root of the problem and prevent it from happening again.

    There are multiple reasons a transaction gets declined. Sometimes the cardholder doesn’t have enough funds in their bank. And, that’s not your fault. Or, it’s possible that the transaction was rejected by the customers’ bank with little reason provided. Or, your buyer is in a different country using a card type not recognized by your payment provider.

    If that’s the case, perform a sales audit. Look at the history of each lost sale and find out why they were declined.

    Tracking this crucial data, will improve your chances of increasing your sales from your existing traffic. Also, you’ll save yourself from getting charged more merchant account fees for declined sales.

     

    The surprising risks of payment processing

    As you’re aware, mom and pop stores offline prefer customers pay with cash instead of a debit or credit card. This is because they want to avoid transaction fees. E-Commerce merchants don’t have this luxury.

    Being an online seller means you cannot escape fees when a transaction happens regardless of whether it’s approved or declined, or even if it’s not your fault. By paying for a declined transaction, it’s a straight up loss.

    What’s worse is that in the e-commerce world, chargebacks happen. The burden of paying for them falls on the merchant. Not only do you pay for declines, but you also lose if the customers issues a chargeback or refund.

    According to Mastercard, “The [card-not-present] CNP channels are disproportionately impacted by false declines, with the average decline rate for a CNP transaction hovering around 15% to 20%, versus 2% to 3% for card-present transactions.”

    These rates will vary, but there could be other penalty fees that add up too.

     

    Too many chargebacks negatively affect merchant accounts

    Excessive chargebacks, for example, have an impact on costs to operate an online business. When a customer has a complaint about the merchant or their product, they could call their bank to dispute a transaction. Then, the bank will initiate a chargeback to refund the customer’s money along with a fee whether or not a refund has already been issued by the vendor.

    A high enough rate of chargebacks could result in getting MATCH-listed or TMF’d by the payment processor. It’s never fun when something like this happens.

    As you can see, there are some risks involved by having your own merchant account.

    To get your account to a low risk level, you’ll need to partner with experts in high-risk merchant accounts.

     

    DirectPayNet is not your average merchant service provider. Secure a robust payment gateway and get help managing your payments channel. Connect with us today.

     

    Why orders get declined

    Even if you have a high-risk merchant account, you can still drive a higher transaction approval rate than anyone else in your industry.

    We’ve seen high-risk categories, such as the supplements, financial and dating industry, achieve this.

    These are some of the most common factors for a high decline rate:

    • Card Type Rejected
    • Cardholder’s Address does not match
    • “Do Not Honor” Declines
    • Expired cards
    • Fraud/Risk Mitigation Tools
    • Large Ticket Orders
    • Incorrect Account Information
    • Insufficient funds
    • International Charges or Currency Does Not Match
    • Technical Issues

     

    Pay attention to the merchant category code

    The merchant category code (MCC) is for credit card networks to identify the type of services the business offers.

    This 4-digit number is used to track purchases and maximize credit card rewards. For example, your transaction description may show up as “grocery stores” after buying food at your local market.

    The MCC could even prevent certain purchases like an unusual, large volume of orders. Because of this, it becomes a barrier to get more orders approved.

    Finally, MCCs are associated with your business model. Merchants with online businesses in the gambling, gaming, supplements and adult entertainment market can’t escape this label.

    Unfortunately, when some banks see your MCC, they automatically reject your orders. This is because some categories are rampant with fraud. Having a lower ticket for your product will result in more sales as banks see a low price as less risk for potential losses. Split test pricing to see where you get highest conversion while balancing chargebacks and refunds.

     

    High-level solutions for high-risk merchants

    Now that you know what affects a transaction approval rate, it’s time we go over some solutions that every merchant should apply.

    There are tons of concrete solutions. But today, we’re only going over these three:

    1. Payment Method Selection

    Something as simple as displaying specific credit card logos can increase your total of approved transactions. Display the most updated Visa, Mastercard, American Express and Discover symbols in your footer and on your checkout page. This will show potential shoppers what card types you accept.

    Don’t forget to include brands like Maestro. You should publish a disclaimer notifying your visitors that debit purchases from outside of your country are not accepted.

    Unfortunately, EU banks will only approve EU debit transactions. The same goes for US banks only recognizing US debit purchases done locally. But, make this clear at your checkout. That way, customers will know whether you allow debit transactions and you will not be charged a fee because their attempt got declined.

    If you want to improve your cross-border transaction approval rates, explore adding various currencies to your checkout page. Your sales conversions will increase if you charge the customer’s card in the same currency it is issued in.

     

    2. Manage Update Notifications

    Your customers’ credit card information might need to be updated from time to time. Their subscription renewal is coming soon, but are their card details still accurate?

    For a successful rebill, you could notify them before the next charge. Even a simple email might be all that you need to avoid declined transactions.

    Sign up for Visa Account Updater (VAU) and MasterCard Account Updater (MAU). This service updates card details automatically for expired cards or cards that have been replaced. It’s inexpensive and will increase customer lifetime value (CLV).

    Enhance your checkout with an API response. Checkout sessions can be sophisticated if you develop them to respond to different buying scenarios. Telling your customers why their card was declined will help them be successful at their next attempt to buy from you.

     

    3. Implementing 3D-Secure

    By now you’re probably already familiar with how 3D-secure (3DS) works. If you’ve been asked to complete additional verification when shopping online this is it. As you’re aware, this is what’s known as a secure pop-up registering more data. Some newer 3DS providers are able to authenticate the transaction without any friction to the customer.

    A strong customer authentication (SCA) often relies on 3DS. This is so that the buyer can voluntarily authenticate their order and minimize any challenges during checkout.

    It’s a great way for merchants to offer a better and safer user experience for their customers. Best of all, merchants have an easier time being protected from chargebacks when 3DS is used.

    Soon enough, we’ll start to see 3DS become mandatory for merchant accounts over the course of 2020 and 2021 for European merchants and will likely follow in the US. So implement this now, because it will inevitably be the standard for all online offers sold.

     

    Increase your transaction approval rate today

    There’s an untold truth about high-risk merchants with big traffic…

    You could be increasing their earning potential by 10% or more in 30 days or less.

    The online businesses of many entrepreneurs is suffering from low transaction approval ratios. Thorough analysis is needed to correct and reduce declined orders.

    On top of that, merchants keep getting charged for every declined transaction. And most are unaware of how they can improve their payment processing.

    With better communication, a few effective tweaks to the checkout page, and more diversified banking to cater to different card types, merchants can see profits and sales soar. They will no longer have to worry as much about handling the hassles of getting transactions declined.

    So in reality, all you need is a payment gateway provider you can trust. And, if you’re looking to grow your sales fast, then you can count on these solutions.

    Fixing transaction approval rates is only one of many solutions available for increasing your online revenue. Want to know other tactics plus tips for risk management? Get started by contacting DirectPayNet today!