DirectPayNet

Category: E-COMMERCE

  • Are chargeback alert services right for me, and which one do I choose? Let’s weigh in.

    Are chargeback alert services right for me, and which one do I choose? Let’s weigh in.

    Every business owner wants to prevent chargebacks, especially high-risk merchants. There’s no 100% fool-proof way to prevent a chargeback from happening, that’s just the cold truth. But there are ways to minimize the occurrence of chargebacks, and one of the leading methods is by using a chargeback alert service.

    These services are attractive options for many businesses, but whether you use one depends on your financial situation and transaction volume. Luckily, if an alert service isn’t right for your company, there are other tools you can use to reduce your chargeback ratio.

    Chargeback Alerts: What They Are, Benefits, and Drawbacks

    By now, you’re probably familiar with chargebacks and fraudulent transactions. At least to the extent where you know you don’t want them, they can harm your payment processing abilities, and terminate your merchant account. Chargebacks are bad news, so preventing them as best as possible is the ticket for successful growth. Chargeback alert services can serve as a catalyst for that growth.

    What are chargeback alerts?

    Chargeback alerts are exactly what you think: a preventative alert that is received to warn against a possible chargeback. There are two types of chargeback alerts: fraud and non-fraud.

    • Fraud alerts – someone’s card was used without their authorization, so they contact their bank for a refund for the charges
    • Non-fraud alerts – the cardholder disputes a transaction they knowingly made because either the service was cancelled, refund was denied, goods were defective, or they didn’t receive the goods

    What are chargeback alert services?

    A chargeback alert service is one that provides the alert, monitoring your transactions and account to give you a leg up on chargeback management. There are two alert network issuers, Ethoca and Verifi, the latter of which offers two solutions: Order Insight and CDRN.

    Ethoca and CDRN both use a wide network of participating banks that, through verification methods, contact you when an issue with a customer arises. From there, you have 24 hours (for fraud) or 72 hours (for non-fraud) to resolve the issue before it becomes a chargeback.

    What’s the difference between Ethoca and Verifi CDRN?

    In terms of Ethoca and Verifi CDRN (Chargeback Dispute Resolution Network), the functionality is comparable but the pathway to provide you with chargeback notifications is different.

    Ethoca is a 2rd-party solution in cooperation with Mastercard. Verifi is a 2nd-party solution in cooperation with Visa.

    Billing descriptors help a chargeback prevention platform determine the business associated with the disputed transaction. Both providers will look for exact matches between your company and the transaction. Ethoca will also search by using a “starts with” term or phrase. In comparison, CDRN will try to confirm a match through the customer service number. This is why it’s so important to keep your details up to date.

    Each customer dispute is associated with a reason code to define the chargeback. Ethoca only recognizes fraud-related reason codes. CDRN recognizes the difference between fraud and non-fraud, thus the service does provide chargeback reason codes.

    Most large banks partner with both chargeback alert service providers, and every issuing bank has several different BINs (Bank Identification Numbers) to classify account types, card networks, user risk, and other factors. In order to participate in the chargeback alert programs, banks need to enroll their BINs. However, not all BINs are enrolled in each program. Ethoca is best for disputes related to Mastercard, thus BINs associated with Visa are not enrolled. And vice versa for CDRN. Ethoca is also more equipped to handle international disputes, whereas CDRN has a large portfolio of US-based BINs.

    What about Verifi Order Insight?

    Order Insight (formerly Visa Merchant Purchase Inquiry) is an automated prevention tool, whereas CDRN is a management program to handle current disputes. Both help you prevent chargebacks from happening, but Order Insight does all the work for you before a dispute occurs.

    Merchants don’t need to respond to requests or monitor inquiries. Everything happens in real time by allowing Order Insight to integrate with your CRM. This allows the service to retrieve all relevant information, like:

    • product descriptions
    • order quantity
    • tracking and delivery information
    • refund status
    • device and IP information of the customer when the order was placed
    • merchant contact info
    • customer contact info and order history
    • order payment status and credit card details
    • usage data of digital goods
    • merchant notes for transaction

    The service pulls this information, compares it to the customer request, and instantly protects you from a chargeback when possible. It works well with friendly fraud, true fraud, and merchant errors.

    Friendly fraud happens in situations like when a customer claims to not have received an order or they don’t recognize the charge. Order Insight can pull the relevant information to combat the customer request and prevent a dispute from happening altogether. Ethoca has their own version of this feature called Ethoca Eliminator, though it only works with friendly-fraud disputes.

    The service can prevent true fraud claims from becoming a chargeback by issuing a credit to the actual cardholder and flagging the transaction. You lose funds either way because the credit comes from your account, but the tradeoff is you don’t have to pay additional chargeback fees and your account has one less chargeback on the record.

    As for merchant error, these potential chargebacks can turn into simple refunds. A merchant error is something like entering the wrong delivery address or shipping the wrong quantity of a product. Besides avoiding a chargeback by refunding the customer directly, retailers can use this chargeback alert to fix the issue in-house and prevent it from happening again.

    What are the benefits of a chargeback alert service?

    The major benefit of these alert services is the reduction of chargebacks. You can easily reduce chargebacks by an average of 20%. The two management platforms give you great control over monitoring and managing chargebacks, which can give you insight towards more appropriate internal restructuring.

    What are the drawbacks for Ethoca and Verifi?

    The biggest drawback is the cost. It costs arounds $40 per alert. If you have a big company and process large sales volumes that can cover the expense, then using a chargeback alert service is a great solution.

    If you are a smaller business, it may not make financial sense to use these tools. Luckily, there are cheaper alternatives that may not provide the same level of protection, but will help you nonetheless.

    Alternatives to Chargeback Alert Services

    There are a few alternatives, some even free, that you can implement in conjunction with chargeback alert services or separately via APIs and plugins that won’t disrupt the customer experience.

    3D Secure

    3D Secure (3DS) is a security protocol for e-commerce debit card and credit card transaction at the payment gateway. Each credit card issuer has their own version of 3DS: Verified by Visa, Secure Code by Mastercard, and SafeKey by American Express. You can implement any or all three, free of charge.

    Device Fingerprints, Proxies, and Geolocation

    Knowing where and from what device a transaction is made from is incredibly helpful when disputing a chargeback. You may not be able to prevent the chargeback process from happening through these features, but you can certainly make a better case when fighting against one.

    AVS and CVV

    Address Verification Services (AVS) is an added step in the checkout process. That may seem cumbersome to some customers, but it helps avoid fraud. The billing address is compared to the address associated with the credit card used.

    Card Verification Value Code (CVV) is that short code on the back of each credit card. By requiring the customer to enter this number, you increase the validity that the actual cardholder is making the purchase.

    Fraud Scoring Tools

    Fraud scoring works by analyzing a transaction and comparing that data to a series of fraud indicators which results in a risk score. You can automate a fraud scoring tool to decline transactions that reach too high of a score to prevent fraud and chargebacks.

    Chargeback management and prevention services can save your business, but only if it’s a financial fit. Weigh your chargeback ratio against your company’s financial health before deciding.

    You can always get in touch with DirectPayNet’s team of expert merchant account support representatives. We’re knowledgeable about all things merchant-related, including chargeback fraud prevention. Get in touch with us to see if chargeback alert services are the right fit for your business.

    If you’re struggling to stop chargebacks, an alert service can help, but you may need more support. Contact us to for personalized assistance on chargeback protection to improve your relationship with your payment processor.

  • How to Secure Payment Processing for SaaS Applications

    How to Secure Payment Processing for SaaS Applications

    SaaS applications are one of the most convenient for users and the companies who offer them are fast-growing, acting as strong contenders for redefining what a service or business can be. That convenience comes with a price, however.

    Because SaaS applications are web-based software and often require subscription pricing models, they are flagged as high-risk to banks and payment processors. This makes it difficult for these hosted software business types to offer a shopping cart or manage payments for subscription billing systems.

    That’s a serious threat to the business as a whole; if an entirely web- or cloud-based service cannot be paid for and, thus, accessed, how can the company remain profitable?

    The Reasons Why SaaS Business Models Are Labeled High Risk

    Understanding the reasons why a SaaS company is labeled as high risk is helpful to combating the challenges that follow. You’ll be better prepared when applying for merchant accounts and will know which payment methods providers to avoid so you can secure a shopping cart faster.

    It’s akin to applying for a credit card: each application has a chance to be denied, potentially leaving a negative mark on your credit report. If you are denied too many times when applying for a payment gateway provider, you may be put on a blacklist.

    All-Digital Services

    When a companies sell cloud-based or all-digital services, they are always classified as high risk. The reason behind this varies between money laundering, illegal file sharing, adult content, and more. Most importantly, it’s difficult for processors to verify that what a user is experiencing is what’s being sold.

    You won’t be able to remove the high-risk merchant label, but you can alleviate the doubt providers may have by clarifying what your product does, what users can expect, and basically verifying that what we’re providing is exactly what they’re getting.

    Online-only businesses also fall under the high-risk category because of card-not-present transactions. Any online store is subject to this, as the customer is not directly handing you their credit card. Instead, they enter their own credit card information manually, which runs the risk of fraudulent transactions.

    There are security APIs and plug-ins you can use with your gateway to make credit card payments more secure that don’t disrupt the checkout flow and mitigate fraud.

    Poor Reputation

    SaaS applications ride on the backs of internet reviews. If too many users write complaints or low-star reviews, it doesn’t paint your business in the best light. How can you guarantee that these were one-off issues or people who just don’t want to pay for the service? When applying for a SaaS merchant account or to a payment provider, you can be sure that reviews will be researched.

    Good customer support service is a great way to combat a negative review. Commenting on the review and assisting that user with whatever their issue may be lifts some of the tension a payment process provider might have when seeing a slew of negative feedback about your service. Also, providing access to your SaaS application could help them compare actual functionality to what’s described on your website and in your subscription packages.

    Subscription Models

    Subscription billing models are great for business and appealing to customers, but unfortunately fall under the high-risk label. One reason is because service must be available for the entire timeframe stated in the user’s subscription package. If they purchase a month of service, you need to provide at least 30 days of full, uninterrupted service.

    Another big risk is with recurring payments, which assumes the user has funds to pull from their account. If funds don’t exist, that’s a big problem for you and the payment provider.

    If you offer subscription packages, it’s important that you detail exactly what users get in each package. There should be no question as to functionality, timeframe for which the service is accessible, and cost. Otherwise, credit card processing for your packages may come to a halt when you lease expect it.

    Chargeback Ratio

    This topic applies to all the previously mentioned reasons and is one of the biggest concerns for acquiring banks and processors. Chargebacks are a detriment to the SaaS industry. These occur when users who want a refund skip your customer service team and go straight to their bank to dispute the transaction. They might do this to get out of paying for the service, because they don’t recognize the service, or because they were unhappy with the service.

    Chargeback ratios are one of the most important things to monitor when running a high-risk business. The lower the ratio the better your standing is with the provider and the more likely your shopping cart will continue to work.

    Providing a clear, easily accessible refund policy is a great start to mitigating chargebacks. The policy should be emailed to the user and accessible from any page of your site or software.

    Next, you should clarify what a charge looks like on the user’s bank statement. Sometimes, the line item doesn’t match your company name. When sending the receipt for payment, a screenshot or graphic of what that charge actually looks like on a bank statement is incredibly helpful. Users will be able to recognize your company and avoid committing friendly fraud.

    To help combat actual fraud, obtaining PCI compliance and implementing checkout security services like 3D Secure is well worth the initial investment. It will help you verify customers and eliminate fraudsters, keeping chargebacks at a minimum.

    There’s no way to completely eliminate chargebacks, but you can monitor them closely and react appropriately by implementing new strategies that help address the concern. The right SaaS merchant account provider will offer chargeback and fraud monitoring services to help you stay on top of your chargeback ratio and remain in good standing with acquiring banks.

    Stripe as a Starting Point for Payment Processing

    Stripe is a great starting point for SaaS companies for several reasons. It’s one of the more recent additions to SaaS payment processing, but it’s quickly scaled the ladder in popularity.

    Quick-start Payment Solutions for SaaS

    You can get up-and-running fast with near-instant approval when applying for a SaaS merchant account through Stripe. The payments company is known for its ease-of-use and simplicity when it comes to applying and implementing. That follows through for SaaS accounts, as well, giving players in this booming industry a running start.

    Starting fast has its drawbacks, though. SaaS is still considered high risk, which means it’s subject to Stripe’s strict policies that often get businesses suspended or shut down. Stripe reacts negatively even when your business grows at an exponential rate, so there’s a lot to keep under control if using Stripe.

    Once you start selling more than $10,000, suspicion arises. The safest place to reside regarding sales volume is under $50,000. But keep in mind that Stripe is a good start to giving your online business a shopping cart, not a good long-term solution. While using Stripe, you should also be applying to alternative providers designed around high-risk merchants, like DirectPayNet.

    Familiar Service

    Stripe is familiar; it’s a household name like PayPal for business owners who maybe don’t know where to start when looking for a payment processor. Or even for established brands, Stripe is an easy solution that providers a user-friendly payment gateway that accepts Visa, MasterCard, credit cards, debit cards, and even ACH payments for direct debits.

    This familiarity is more relevant for business owners rather than users, though. PayPal is also a well-known service for online payments, but its brand and functionality work differently than Stripes, namely by allowing users to create their own PayPal account. Customers don’t need to create their own Stripe account to make a payment on your site, so the brand name doesn’t mean much to them.

    The best way to move forward with obtaining a payment processor for your SaaS business is to start with Stripe while researching, comparing, and contacting various high-risk SaaS merchant account providers. You can always keep Stripe as a backup option as there’s no rule against having multiple payment gateways for your business.

    Contact a High-risk SaaS Payment Processor

    Again, don’t rely on familiarity and convenience alone to secure a SaaS payment processor. The most important things to keep in mind are reliability, offering multiple payment options, and support for your business type.

    Reliable Payment Processing Solutions

    No business wants their shopping cart to be non-functional or their payment gateway to stop accepting payments. That’s a big risk for SaaS companies who use third-party processors like Stripe. Instead, focus on acquiring a processor that you can rely on for increasing or irregular monthly sales volumes and chargeback protection. You don’t want to run your business paranoid about being shut down.

    Accepting Preferred Payment Types

    Depending on what markets you operate in, there’s always a dominant method of payment that’s preferred by customers. Ensure your gateway offers these methods of payment by using a merchant account that doesn’t that doesn’t limit the user’s ability to make payments. ACH payment processing is incredibly popular for subscription services like those offered by SaaS companies.

    Specific Support for SaaS Merchants

    Your payment processor should understand your business type including the risks associated with it. This helps your merchant account support team mitigate payment and account issues and better negotiate terms and fees with acquiring banks. Don’t be afraid to shop around and contact multiple SaaS payment processors to compare their knowledge and support for your business so you not only get a shopping cart that works, but also a support team that understands you.

    Contact DirectPayNet for SaaS Payment Processing

    Our customer support team understands the SaaS business models and has helped many subscription-based businesses scale their company and provide reliable payment processing options. We are eager to help businesses of all sizes, including startups and small businesses set up their e-commerce payment gateway.

    Contact us today to discover your options as a high-risk SaaS merchant.

  • The Ins and Outs of Subscription Merchant Services

    The Ins and Outs of Subscription Merchant Services

    There’s been somewhat of a renaissance in recent times when it comes to subscription services.  Industries of all types have embraced this new subscription model as something that delivers consistent recurring revenue, while also providing the financial stability needed to continually improve the customer experience for the end-user.  When done well, this business model can be a magical, win-win scenario whether you are a startup disrupting an incumbent, a small business who is just trying to serve a loyal customer base, or a large corporation implementing a SaaS solution.

    However, the billing and maintenance of these recurring payments have their own challenges that must be effectively dealt with to make them work.  Ecommerce as an industry has discovered this time and time again.  Therefore, it’s of paramount importance that you set up your merchant services, payment processor, and credit card processing in a way that puts your best foot forward.  And this needs to happen across all your various payment methods including credit card payments and the usage of a debit card.

    Why are Subscription Services Considered High Risk?

    It all comes down to perception and expectation management at the end of the day.  When a customer buys a good or service on a once-off basis, you have no recurring obligations to them, and it makes it a much cleaner purchasing experience.  Subscription businesses, on the other hand, come with routine maintenance of that client relationship if you are to deliver exceptional service.

    For example, a client might forget to cancel a subscription that they no longer want and then hold you responsible when they are billed.  This can result in complaints that hurt your reputation and the financial impact of chargebacks on revenue that you thought you had earned.

    The reputational damage that can be done with regular chargebacks and complaints can be significant and that’s why subscription service businesses have to be continually combing through their revenue base to try and mitigate this risk.  It’s a necessary component of running a business like this, so you have to be very comfortable with all the different components of working with your merchant services provider regardless of the payment options available.

    What About Free Trials?

    Another contentious issue in this sphere is the use of free trials to bring customers through the door and let them test your product.  Many companies will use this as a growth tactic and then hope to convert that customer into a paying customer after they’ve had a chance to experience the product for themselves.

    This can be pushed too far though, and because of opportunistic companies who took advantage of this billing opportunity, we’ve seen new regulations come into play to combat this misuse.  Previously, a company would be able to use their credit card processor to start a billing process and collect monthly fees automatically after the free trial ended.  Visa, one of the major players in the space, has stated that expressed consent is required to bill a customer after a free trial has taken place.  Mastercard is soon to follow suit.

    This additional regulation makes it even more important that you have your ducks in a row when it comes to your merchant services – so that you are sure that everything is completely above board.  It requires the right processes and technological tools to do this at high volumes, and it’s something that too many organizations ignore.  The better you do this, the fewer chargebacks you’ll have.

    How to Reduce the Number of Chargebacks

    Now that we’ve unpacked the importance of managing your merchant services as a subscription service business, let’s look at some of the practical ways that you can manage this risk and reduce the number of chargebacks that are processed by your customers:

    Email Confirmations

    Communication is a key part of this user journey, and you need to be very clear in confirming when a customer is signing up for a subscription service.  They should be under no confusion as to what the deal is, what it entails, and the charge that they are going to be seeing on their credit card every month.  To prove that you’ve made this communication clear and to have a clean audit trail, you could use email and/or text confirmations with every successful recurring transaction right from the first payment.  The more comprehensive and detailed here, the better.

    Online Cancellation Options

    One of the cliché customer complaints that you hear often is that companies make it very difficult for a client to cancel a recurring bill.  It’s become a common trope because businesses have added friction to the process on purpose to try and improve retention.  This isn’t helping anyone.  It’s a much more sustainable business process to make it easy for customers to cancel through simple, intuitive online options.  You don’t want to keep customers that are unhappy.  You want to give them every opportunity to leave gracefully without damaging your company’s reputation.  Online cancellation methods are an absolute no-brainer here and they help to avoid unnecessary chargebacks time and time again.

    Consistent Pricing

    This is another key piece of managing customer expectations.  You want to keep your  prices as consistent as possible over time so that your customer knows what they’re getting themselves into when they see a recurring payment.  If a customer signs up for a subscription service at a specific price and then a few months later it jumps up in price, that’s going to cause some serious frustration which leads to chargebacks.  Do the necessary work to identify the price point at which you can run the business sustainably and stick to that wherever possible, especially for legacy clients.  That means that you stick to the social contract that your customers understand and it makes it much easier to keep them content.

    Customer Service Excellence

    Customers who sign up for subscription services tend to expect a high quality of customer service when they require it because, after all, they’re paying you monthly fees for the privilege.  As a result, it’s crucially important that your customer service is top-notch when dealing with billing in particular as often you can proactively diffuse nasty situations before they get to be a problem.  If there are short wait times to interact with customer service and they’re able to rectify issues effectively, you’ll find that your chargebacks will be significantly reduced as a result, and cancellations will be reduced.  This comes down to the right back-end CRM or saas software, the right training for your staff, the right refund policy, and sufficient resources dedicated to this part of the business.  This is not something to skimp on when you have a subscription business model.

    3DS v2 Authentication

    3D Secure has been the leading security protocol for online payments for a long time now and the v2 update brings with it a range of new improvements and changes to make the whole experience much more efficient for both parties at the payment gateway.  The new update allows for risk-based authentication to happen in the access control server layer which removes the need for additional friction in the process and makes for a much smoother purchasing experience.  It also brings with it native mobile integration so that your customers don’t suffer a diminished experience when they’re signing up on their phone.  Your merchant account provider and payment gateway typically provide this service, although there are several PCI certified external providers at low rates that can also provide 3DS authentication services.  All in all, it’s an absolute no-brainer when setting up your payment processing and it helps to manage the risk of chargebacks like no other. Click here for more details on 3DS v2.

    Constant Improvement

    Lastly, you want to be doing all you can to constantly improve your offering over time.  If you can continually innovate on what you’re doing and bring more and more value to the customer, you’ll put yourself in a great position to maintain that customer relationship for the long-term and mitigate any potential risk of churn.  Stay proactive and listen to your customers to keep the product evolving, and you’ll be off to the races.

    Those are just a few of the practical things that you can do to minimize the risk of chargebacks and ensure a reliable and efficient payment process for your subscription service.  If it’s something that you’ve never paid much attention to, then now is the time to rectify that.

    The DirectPayNet Solution

    You don’t have to do this all alone.  Here at DirectPayNet we are passionate about helping our clients implement robust, stable payment processing in a way that lowers the risks that threaten your business.  We’ve seen it all, the good, the bad, and the ugly and we are able to leverage that expertise to bring you the best of the best in the space.  In fact, we specialize in high-risk merchant accounts and we know what is required to manage a subscription merchant account sustainably, regardless of the service.  We are the one-stop payment solution.

    With us as your technology partner and liaison to the processing company, you’ll never have to worry about whether your merchant account is going to be denied, or if chargebacks are going to decimate your business.  Our sole purpose is to take care of any processing solutions risk so you can focus your attention on growing your business.

    If subscription billing is one of your business needs, then be sure to get in touch today.  We’d love to hear your story and see how we can help!