DirectPayNet

Category: PAYMENT PROCESSING

  • Expansion Part 1: Expanding Your Business into New Markets with DCC, Multi-Currency Accounts, or Incorporation

    Expansion Part 1: Expanding Your Business into New Markets with DCC, Multi-Currency Accounts, or Incorporation

    Expanding your business into new markets is a great way increase revenue and meet the demand of customers abroad. With the ease of creating online stores, the process of opening up shop anywhere in the world is absolutely possible but not without jumping over a few hurdles.

    The first step towards expanding your business into new markets is to prepare it. Knowing the best processing solution your business needs that meet your target customer’s needs is the first step. With that, there are 3 major possibilities: DDC, currency accounts, and incorporation.

    Why a Business Would Want to Open in New Markets

    Global expansion isn’t right for every business. There are a few things to consider before expanding, which we’ll get into more in-depth in our part two. For now, we can boil it down to three unique reasons why a business would want to expand into new markets.

    1. Accept non-local traffic.
    2. Benefit from less competition outside the local market.
    3. Increase revenue by capitalizing on price.

    If your online store has web traffic outside of your local market, then that’s reason enough to test the waters in that new market. And that should be the first step in determining whether you should open up or not. There’s still reason to do it even if you don’t have traffic, but making the assumption that potential customers elsewhere want what you sell is a big risk.

    The 3 Ways a Business Can Accept International Payments

    There are three main ways you can prepare your small business for accepting international payments. These are you way of opening up in new target markets; it really can be that simple.

    Dynamic Currency Conversion

    Dynamic Currency Conversion, or DDC (most bankers call it this), is the simplest way to accept foreign currencies.

    What is DDC?

    DDC is a service your payment processor can add on to your payment gateway that allows cardholders to pay in their preferred currency, or rather the currency of the region they’re purchasing from, instead of the store’s currency.

    For example, a seller in the US will display their products and shopping cart in USD. But that isn’t very helpful for a buyer in the UK. So, instead of displaying the items in USD, DDC will convert it to GBP. This way, the cardholder will see how much they’re actually spending.

    How can you add DDC to your shopping cart?

    Adding DDC is as simple as phoning your merchant account provider or payment processor, like Stripe. Request to add DDC to your service and it should be a pretty painless experience.

    You can also ask your merchant services provider for something called the Planet Payment Add-on. This is what DirectPayNet calls it, but if you’re using a different provider then they’ll call it at least something similar. This add-on hooks up to your shopping cart and acts as a payment processor for all international markets. It’s sort of an in-between of DDC and multi-currency accounts (which we’re talking about next).

    Why doesn’t every merchant use DDC?

    It would be a good idea for all merchants to have DDC, at the very least. It’s an inexpensive way for business owners to allow international sale and conversions can increase considerably.

    What’s the catch with DDC?

    The catch is mostly for the customer but can ultimately lead to a chargeback. The amount shown to the customer is in their currency, not the merchant’s. But charges still need to be made in the merchant’s currency. That usually means the conversion rate for the customer is pretty bad and it’s likely to contain some amount in additional fees.

    DDC is common all over the world in many formats, not just for online stores. It appears on ATMs, too. For example, if an American is traveling to France and they decide to pay with their card at a restaurant, the POS could ask them if they want to be charged in euros or in dollars. If they choose euros, they’ll pay less than the USD amount displayed. That’s because of the fees and poor exchange rate used to come up with that USD amount. On the flip side, when they select “euros”, you’re the one being charged for conversion.

    You can look at this in two ways: the customer gets charged a bit more than if they researched the conversion rate, but they’re paying for convenience; or you charge them in your currency and risk the customer disputing the transaction.

    For an arguably better customer experience, having the transaction amount show in a user’s currency is beneficial. Chargebacks could happen in either situation, but that doesn’t mean they will. If you have just a few customers abroad (or none) even outside of your target demographic, then DDC is a good choice.

    Multi-Currency Merchant Accounts

    Sometimes shortened to just “currency account”, the multi-currency merchant account is one step up from DDC. DDC is good for when you have just a few foreign customers or you want to at least be prepared if it happens; multi-currency accounts are good for accepting and processing a foreign currency.

    What are multi-currency accounts?

    Currency accounts are merchant accounts that accept and process payments in the foreign currency of your choice. Some providers might require you to request which currencies you want; others might give you a multi-currency account that covers the most popular currencies. You have options.

    How can you get a currency account?

    You could ask your current merchant account provider about opening up a multi-currency account or you could go to a different provider and apply for one. If you work with Stripe or one of these 3rd-party services, then you’ll have to use DDC.

    What’s the catch with multi-currency merchant accounts?

    You have to have a bank account that accepts the foreign currency for you to get the most out of it. Technically, your local bank will accept the funds, but you’ll be charged a conversion fee and the rate will be bad.

    You can either open a bank account in that currency in your market, say opening an account for GBP in the US, or you can open the bank account abroad. Either way, having this account is the best way to maximize your revenue. You can let the funds sit in this account, accrue some interest, and only withdraw when the conversion rate is at its best.

    What other benefits are there?

    Besides lower fees and better rates for you and your target audience, currency accounts also let you price test in the new market. We’ll get more into price testing in part two, but essentially you can see what new customers are willing to pay in that new market.

    Incorporation

    Incorporating in the new market is the top-tier level of accepting foreign payments because you’re opening your business for operation in that market just like in your current market. This is a viable solution no matter the size of your business as long as you have a strong business model and sales to match. Whether you’re an entrepreneur, startup/new business, small business, medium-sized business, or a full-blown corporation, the only thing that matters is sales.

    What is incorporation?

    You likely already know what incorporation is at this point in your career as an online business owner. Incorporation is different in each country, as every region has different requirements. It can be simplified down to starting and officiating business operations.

    How can I incorporate in a new market?

    As stated, incorporation difference in each region including the different countries in Europe, even if a single region comprises of multiple countries. However, incorporating in a country within the EU has more perks than most other countries. Here, you can accept payments from anywhere within the EU as everyone uses euros and it’s within the European Economic Area.

    Your merchant services provider might help you with offshore business formation. DirectPayNet can assist you with this as well as helping to outline the other steps involved, like opening a bank account in the new market.

    Why choose incorporation to expand a business in a new market?

    Here’s the deciding factor for whether or not you should incorporate as a method to enter a new location: having at or above a $100K sales volume in that market. Incorporation doesn’t cost a fortune, but it’s definitely the most expensive out of the three options outlined in this post. However, it also comes with the most benefit. If you’re e-commerce business is making over $100K in the market as-is, then there’s obvious market demand for your product. Incorporating may cost you upfront, but the power you have afterward is outrageous. You’re bound to expand your customer base, increase sales, and see exponential business growth.

    Now’s the Time to Talk to Your Processor or Provider About Expanding Your Business into New Markets

    Don’t put it off. Speak to your payment processor or merchant services provider now about expansion opportunities.

    In part two, we’ll cover how you can use social media platforms, marketing strategies/market trends, and other growth strategies for maximizing revenue, improving brand awareness, diversifying your brand, and minimizing risk when expanding into new markets. Market research is always a good idea before taking official measures to enter a market, especially if you’re entering with new products, not just existing products. The right marketing campaigns and messaging can validate the need for your business in that new market. Stay tuned for part two.

    DirectPayNet can assist with all matters of preparing your shopping cart for foreign transactions. Contact us today if you’re interested in DDC, opening a multi-currency account, or incorporation.

  • 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.

  • What Is an MID and Why You Need One

    What Is an MID and Why You Need One

    The acronym “MID” stands for Merchant ID, Merchant Identification Number, or even Merchant Number. It sounds pretty straightforward and simple, but the MID plays a major role in the flow of funds. Not every merchant has an MID and merchants who do have one might not know it.

    Knowing your Merchant ID and understanding how it’s used can help you in the long run to keep your business compliant with your payment provider’s terms of service.

    Understanding MIDs and How They’re Used

    What is a MID?

    The Merchant ID number is uniquely assigned to a business upon opening a merchant account. That means MIDs are only given to business who use a merchant account to provide payment processing for customers, not merchants who use 3rd-party processors. If you use Square, PayPal, Stripe, or some other 3rd-party aggregator, then you won’t have an MID.

    Is a Merchant ID the same as an account number?

    No, the MID is not your account number or your merchant category code. Instead, it is a unique number associated with a business’ merchant account. There are other identification numbers, but none of them should be confused with the MID. You can have multiple merchant accounts that operate under the same MID. Alternatively, you can have multiple merchant accounts with individual MIDs. When there are multiple MIDs, it’s usually because the revenue streams need to remain separated. Unless you operate a multichannel retail store or something similar, you’ll only need one MID.

    What are the other ID numbers?

    The Merchant Account ID (not to be confused with Merchant ID) is used to identify various accounts that use the same payment gateway. If you operate different businesses under an umbrella corporation, then each business will receive its own unique Merchant Account ID while sharing the same MID. Because the umbrella corporation is what secured the merchant account, it’s what receives the MID. Everything under the umbrella operates with that MID but can be recognized separately by their individual Merchant Account IDs.

    The Terminal Identification Number (TID) is another form of identification. This one is based on the equipment used to process transactions. Let’s say your business has 3 Point-of-Sale (POS) terminals for processing payments. Each terminal has its own Terminal ID, so your business would have 3 TIDs under 1 MID.

    There’s also the Gateway Identification Number (GIN). This one is assigned to the specific network, or gateway, used to process payments.

    All these numbers combine to identify your business every time a debit or credit card transaction is processed to tell the provider who is paying how much money to whom through what network.

    Obtaining, Finding, and Using an MID

    Where is the MID located; how do I find my Merchant ID?

    The MID is assigned to you when you open a merchant account and it’s located on many documents related to your business. The easiest place to find it is on your monthly statement. It should be right along with your business name, address, and other info at the top.

    If you want to find it digitally, it’ll be in the online account portal if your merchant account provider gave you access to one. Each portal is different, but the first place you can check is under your account information page on the main menu. This applies to mobile apps as well.

    You might also find the MID on your merchant agreement in the attached forms (i.e., not on the contract, itself).

    If you can’t find it in any of these places, you can always call your merchant services provider and ask for it directly.

    How do I get an MID?

    Again, the number is assigned to you when opening a merchant account. You’ll have to go through the process of securing an account and verifying your business before being assigned an MID. Otherwise, it’s an automatic event. If you have a merchant account, then you have the number and should be able to find it using the methods above. If you don’t have a merchant account, then you don’t have a Merchant ID.

    What should I do with my Merchant ID?

    Keep it safe and never share it. We know it shows up seemingly everywhere, but it’s a very sensitive ID number that should be protected, just like your bank account numbers or social security number.

    Your Merchant ID should be on hand in case you need to refer to it. It can be used to dispute transactions, verify your identity, and more.

    If you’ve opened multiple merchant accounts, it’s important for accounting purposes to verify that the correct transactions are running through the correct MID. Merchant IDs are a great way to stay organized, financially.

    Can the Merchant Identification Number be lost or canceled?

    If your MID gets into the wrong hands, it could mean serious trouble for your online business. If your number gets flagged for fraud, it’s more trouble for you than for the fraudsters that caused it. The merchant service provider (MSP) or acquirer can freeze transactions, preventing you from processing payments. Your account can even be terminated, which in turn would cancel your MID number. Fraud is the main reason you should keep your MID protected, but it’s not the only reason your account could be canceled.

    Excessive chargebacks are the most common reason for canceled MIDs. Chargebacks are a normal part of financial operations for e-commerce businesses of all kinds. High-risk businesses tend to suffer from higher chargeback ratios. If that ratio is too high, a processor might withhold transactions funds as a way temporary chargeback reserve.

    Holds are generally temporary but if chargebacks continue, then your MID might become frozen. In this case, you won’t be able to accept any card payments until the freeze is lifted. A freeze is different than a hold in that the credit card processor only holds on to some funds but still allows your payment gateway to process credit card payments. A freeze stops your gateway from processing entirely.

    Termination is the final straw. If chargebacks continue and the acquiring bank or processor is continually covering for you financially, then they will see you has a risk and cancel your Merchant ID and account.

    Ways to Protect Your MID and Merchant Account

    Know the risk associated with your industry.

    You should understand the risk level associated with your industry, first. A good MSP will provide you with some level of fraud and chargeback protection, but not always. Standard merchant accounts don’t necessary include these security measures. Instead, a good high-risk MSP will.

    If your industry is associated with a higher-than-normal level of risk, it’s a good idea to apply for a high-risk merchant account. Online businesses that sell cannabis, THC, advice, tickets, and a slew of other products of risk are all categorized as high-risk businesses. Know the risk of your industry and act accordingly. Even if an industry is trending and on the rise, acquirers will still view it as a risk to their own financial standing.

    Use 3rd-party protective services and clear refund policies.

    There are plenty of 3rd-party plugins and services you can attach to your existing payment gateway that won’t disrupt the user’s checkout experience.

    CVV, AVS, and 3D Secure can be added pain-free to your site. These help verify customer identity to prevent fraud as well as chargebacks.

    Your refund policy is a great tool to prevent chargebacks. If you’ve been suffering from an increase in chargebacks, then review your refund policy. Make it friendlier to your customers and easily accessible from anywhere on your site. If you have an increase in chargebacks, then you’re paying much more than a typical refund because of the associated fees. It’s better to lighten up your refund terms so you can process it directly instead of allowing chargebacks to continue happening.

    Ensure Your Merchant ID Is Safe Against Chargebacks and Fraud with DirectPayNet

    Opening a merchant account through DirectPayNet grants you access to incomparable security. We provide chargeback monitoring services, fraud protection, and more to keep your MID safe and your business operating smoothly.

    Get in touch with us today to secure your MID.

  • How to Successfully Get a Lottery Payment Gateway

    How to Successfully Get a Lottery Payment Gateway

    Lotteries, raffles, and competition websites where players can gain a massive ROI with a miniscule ante have an obvious appeal. Who doesn’t like getting free money? Following consumer demand are business owners and entrepreneurs like you who see the earnings potential on the business-side of lotteries.

    Getting your site set up with a lottery payment gateway that works where it’s supposed to (more on that down below) is the most difficult part of creating a functional business in this industry. We’ll make it as easy as possible by outlining some points for you to consider before submitting lottery merchant account applications and guiding you towards successful approval.

    Lotteries are NOT the Same as Gambling

    Lotteries and sweepstakes are not the same thing as gambling or casino games. We like to group all of these together under the same umbrella, but they are treated differently by banks and laws.

    What is a sweepstakes?

    What sets sweepstakes apart from casino games or gambling is that it can be entered for free. If you want to offer sweepstakes to site visitors, you must provide the option of entering for free. Usually, the stipulation is that free entries must be physically mailed in, which usually deters people from doing it. This is the greatest differentiator between the two and can ultimately be the deciding factor in whether a payment processor shuts you down or not.

    For sweepstakes, participants will place their stake (essentially, a bet—unless they enter for free) and the winner will “sweep the stakes”, taking the entire amount of money staked. There are variations of sweepstakes where entries can be completely free, and no formal payment needs to be made to create the winning amount. Things like shopping sprees or winning a free phone can be the prize for a sweepstakes.

    You’re more likely interested in the lottery portion, not the sweepstakes criteria. Sweepstakes are used more as an incentive to make purchases, not really as an entire business model.

    What is a lottery pool business and how do lotteries differ from gambling?

    Lotteries are games in which tickets are sold in the hopes of gaining a prize, usually monetary. This differs from gambling in that the risk is a bit lower—but still there and still high. Gambling runs on high-risk stakes, betting any amount with the odds stacked against the player with the purpose of gaining exponentially more back. But that risk for gambling goes both ways: if the player does win, then the house has to pay up, respecting the game’s rules. For lotteries, the rules are much stricter. Usually tickets are a set price, players can buy multiple tickets if they want, and the amount they win depends on how many tickets other players buy. Once a player wins, they do get paid minus fees and taxes, so there’s always something left over for the business.

    Lotteries and sweepstakes are still high-risk businesses and will require a high-risk merchant account to function properly.

    How do lotteries differ between states?

    Not every state in the US offers a lottery, and some states even offer joint lotteries where players can buy tickets in another state and win. However, this is limited to retail stores. Online lotteries are an entirely different story, and only 8 states offer online lottery ticket sales: Michigan, Pennsylvania, Georgia, Illinois, Kentucky, New Hampshire, North Carolina, and Virginia.

    Some states don’t offer their own for religious reasons, others do it because they don’t want competition for successful casinos operating there. So how does this affect you? Each state has their own rules for lottery businesses. You’ll need to make sure you understand each state’s lottery laws and gambling laws to some extent. This helps you keep your business clean and operating only where it should.

    For example, Alabama prohibits the formation of a state lottery, gambling, and casino games except for on some Native American territory. In this case, it’s best not to operate a lottery site in this state due to how strict its rules are. You can use the link above to search for more state lottery laws and gambling laws. Familiarize yourself with the gist of them to get a clearer idea of where you should focus your business operations.

    More and more states are opening up their rules for online lottery sales along with e-commerce gaming and gambling operators. It’s also important to know that international lottery sites can potentially sell in all 50 states. Opening up shop in Malta is a great way to get your foot in the door and operate internationally, including running your site in the states and gaining a multi-currency payment gateway.

    The Challenges You Can Expect to Face When Getting a Lottery Merchant Account

    Not all merchant service providers will offer accounts for lottery businesses. Merchant accounts for lottery sales are wrapped up into igaming accounts because lotteries and sweepstakes are offered in addition to casino games, usually. That’s one challenge you might face if you are attempting to only offer lottery tickets to customers. The solution might be to keep your business model clear and strictly outline your operations for the acquiring bank, otherwise they might assume your business is a higher risk.

    Get your company licensed

    The first step no matter what is to get your company licensed. Merchant accounts are broken down into two categories: coded and non-coded. Only licensed gaming businesses can have coded merchant accounts, and that Merchant Category Code (MCC) is 7995. Feel free to do a little research of your own about that code to improve your account expectations and negotiations with your online payment gateway provider.

    Secure as many payment methods as possible

    The more ways for players to pay, the better your business will be. The most common type of payment is through credit cards (though regulations, at least in Europe, are changing that towards debit and bank transfers). Merchant account providers are also more willing to provide credit card processing that debit card processing.

    If you are assigned an MCC of 7995, then you won’t be able to process debit cards for the most part. Many banks deny transactions with that code because of the risk associated with it. That doesn’t mean that all banks deny it, but many do. Depending on your business, you could argue your way into falling under MCC 7800, which is for government-run online lotteries.

    Having said that, you should still offer Visa and Mastercard debit card payments as a method for your site. In fact, debit cards are more secure because it relies on actual funds. This pay be a point to assert when negotiating with acquiring banks.

    Ensure your lottery merchant account is OCT-enabled

    OCT stands for Original Credit Transaction and allows merchants to send funds directly to a player’s preferred credit or debit card payment option. It allows for PCI-compliant direct money transfers without the need for a user’s sensitive bank account info.

    Payments can be made via ACH or mailing a check, as well. ACH is more secure than sending a check, making wire transfers, or credit/debit payments. They can also be much faster. The difference comes down to what your account offers as a payout option and what the customer prefers if given the option. Note that ACH is only available in the US.

    You need a debit and credit merchant account

    Most providers only allow credit in the amount a customer spends, meaning you need to pay out via the debit account. Lotteries are high-risk to banks because of the potential for loss. They way in which these banks and processors combat that risk is forcing you to pay out with money that you actually have. You do have some credit, though. For example, if a customer spends $10 and wins $1000, the bank isn’t going to want to loan you the remaining $990 so you can pay the customer. They want you to take care of that on your own. That’s what the debit account is for.

    What to Look for in a High-Risk Merchant Account Provider

    In addition to the above, you should use a payment processing solutions provider that offers protection against chargebacks and fraud. Security is one of the most important aspects of operating a high-risk business, both for you as the online business owner and for the bank processing your transactions. Ensure you have protection against betting fraud, friendly fraud, and chargebacks as well as secure payouts and incoming payment processing. High volume caps are another point to negotiate. With a lot of incoming traffic, you want to make sure your account can handle it all without faltering.

    To get help setting up your lottery merchant account, get in touch with our agents who specialize in your industry. We’ll get you set up securely and fully operational quickly with customizable APIs for your lottery pool merchant account.