Happy Memorial Day

 

Happy Memorial Day! 

Bankcard Processors, LLC

(850) 228-5571

jphaire@bankcardprocessors.biz

Maximize Cash Flow

Cash flow is a company’s lifeline, especially in uncertain economic times. Businesses that accommodate a variety of payment options will win over more customers and increase the likelihood that they’ll be paid faster. Yet to fully maximize cash flow, companies must also reduce their DSO and minimize costly exception items.

Tip 1: Provide More Payment Options 

Customer expectations are rising, and a positive customer experience is crucial for retention. The more payment options you can offer your customers, the better. This goes beyond credit cards, wire transfers, debit cards, checks and ACH transfers. 

The use of digital wallets like Apple Pay and Google Pay is becoming increasingly common. More than two–thirds of Americans expect to have a digital wallet within two years, according to a survey last year by McKinsey & Co.

Remove any payment 'friction' from your merchant portal by using a system that lets your customers pay on their mobile device, via text message, digital wallets or online.

Tip 2: Reduce DSO

Think your company is doing the best it can to ensure customers are paying in a timely manner? Your DSO, or Days Sales Outstanding, might tell a different story. That’s the average number of days it takes for a company to receive payment from a sale or service rendered.

A business with a high DSO is typically experiencing lengthy delays getting paid by customers. So, anything that lowers DSO is good for business and a sign that the company’s cash flow is healthy.

Providing more payment options will help you reduce your DSO, as will invoicing immediately. An automated payment solution can also help cut down your company’s DSO by streamlining invoice management. This starts by speeding up payments and eliminating the lengthy processing time associated with paper checks. 

Offering your customers payment options that they’re comfortable with, including self–service capabilities, also provides convenience and minimizes hassle to encourage on–time payments. 

Tip 3: Minimize Exception Items

One red flag to watch out for: An inordinate amount of exception items, or payments that fail to be fully processed. 

This can happen due to relatively simple mistakes like a typo on a check or a missing signature, though errors with credit cards, ACH transfers, lockboxes and other types of transactions can also end up as exception items.

An automated payment processing provider can minimize the occurrence of exception items by reducing human error and quickly identifying and correcting any issues. For example, DocuPhase’s form–based online portal prevents avoidable errors that can hold up the payment process by alerting the user when fields need to be corrected before the submission will go through.

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Understanding Online Payments

 

A quick video to explain the process of online payments in terms of online card processing

How Payment Processing Works – Who’s Involved?

Understanding credit card processing basics allows you to make better-informed decisions about which payment solutions are best suited for your business. For example, you can avoid unnecessary add-ons and fees by designing a payment environment that only delivers the specific features you need to securely, quickly, and easily process incoming card-based sales.

In the next section, we’ll explore the details of how payment processing works. First, we need to meet the key parties that make each transaction possible:

• The cardholder is the customer who initiates an in-person or online purchase using a credit or debit card
• The card issuer is the bank that provides its customers with consumer plastic
• The merchant is the card-accepting business owner selling whatever goods or services the customer is trying to purchase
• The payment processor is responsible for securely routing the transactions captured by the merchant’s point-of-sale device to the customer’s card-issuing bank for approval
• The card association is the network maintained by the major brands (Visa, Mastercard, Discover, etc.). This card association is responsible for setting fees, resolving disputes, and establishing security guidelines for the network
• The acquiring bank is what the merchant uses to ultimately collect funds from the issuing bank. This may be the same entity as the merchant’s payment processor

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What is a Chargeback Fee?

A credit card chargeback fee occurs when a cardholder disputes a particular charge on his or her credit card statement to nullify the transaction. This means the customer is requesting the card-issuing bank to return the funds back to his or her bank account.

A chargeback fee is issued by a bank for each chargeback dispute. When a chargeback is set into motion, the customer’s card issuing bank reimburses the cardholder for the transaction amount. When the card issuer/credit card provider reimburses the cardholder, they’re basically pulling the funds from their own pocket. The card issuer will then pull the transaction amount from the merchant’s account to recover the funds they’ve lost.

3 types of chargebacks

Chargebacks can be a hassle for merchants. Thankfully, your business can mitigate and avoid these unnecessary fees and disputes altogether by learning more about the different scenarios that cause chargebacks.

Here are three types of chargebacks your business should be aware of:

1. True fraud

A true fraud chargeback occurs when a cardholder’s card or account has been compromised and used by an unauthorized party to purchase products or services without the permission of the cardholder. This results in the cardholder filing a chargeback for unauthorized use of the card or account.

2. Friendly fraud

Friendly fraud chargebacks typically occur when cardholders claim they’re unaware of purchases made using their cards or they never received a product they paid for.

Friendly fraud can also occur when cardholders claim they returned products and ask for a refund, even if they never actually returned the product. In these instances, cardholders will often file disputes directly with their credit card companies to avoid interacting with merchants.

Sometimes friendly fraud can be an honest mistake — customers sometimes input the wrong delivery address or make a purchase without fully understanding recurring billing terms. Regardless of the motive, this type of fraud can result in money loss and a damaged reputation if not addressed properly.

3. Merchant error

Unfortunately, there are also chargebacks that can result from a mistake or error on the merchant’s end.

Merchant error chargebacks can be due to a multitude of factors. Whether you accidentally charge a customer twice for an item or ship an item to the wrong address, merchants should be aware of these mistakes to avoid triggering a chargeback dispute and fee.

How do chargebacks work?

Now that we’ve explored the different scenarios that could trigger a chargeback, let’s break down how a chargeback actually works:

• The cardholder contacts his or her card issuer/credit card provider to request a chargeback on a particular transaction.
• The card-issuing bank pulls the transaction amount from the merchant’s account to credit the amount back to the cardholder’s bank account.
• The merchant’s payment processor sends an alert to notify the merchant of the chargeback.
• The merchant goes through their records to dispute or accept the chargeback.
• If the merchant is unable to procure a sufficient amount of evidence to dispute the chargeback, then the funds will not be returned to the merchant’s account.

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Happy Mothers Day!

 

Happy Mothers Day! Enjoy your special day!

Bankcard Processors, LLC

(850) 228-5571

jphaire@bankcardprocessors.biz

Who’s Involved in Credit Card Processing?

Every transaction made requires an entire chain of participants, ensuring the process is seamless. Here’s every participant involved:

• Cardholder: A customer who uses a credit or debit card at checkout.
• Credit card: A card with payment credentials used to make a purchase. Each credit card has a unique EMV chip embedded on the card, adding additional transaction security and reducing fraudulent transactions.
• Merchant: A business (like yours) that accepts credit cards as a form of payment.
• POS: The point-of-sale system used by the merchant (your business) to accept credit card payments.
• Issuing bank: Provides the customer with their credit card and an accompanying line of credit. Examples include U.S. Bank and BMO*.
• Acquiring bank: This is your credit card processor's banking relationship, which will collect the card transaction information from your POS system and route the transaction through the card network and the card issuing bank for authorization, settlement and funding to your business's depository bank.
• Card network: This is the card brand “middleman” (like Visa, Mastercard, and Discover) that manages the network to authorize, settle and eventually direct your customer's payment request to your business. It goes from your credit card processor and the acquiring bank to your customer’s card issuing bank. Then, it returns with either an approval or a decline.
• Merchant services provider: The company that may provide your business the tools and services to accept payments. They put everything in motion, so each step in the transaction process connects properly between banks, card networks, and your POS system. 
• Payment gateways: Facilitate the transfer of payment information between a payment portal, such as a business website and the credit card processor and the acquiring bank.

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