Understanding the Participants of the Processing
As a business owner, you will have heard that mobile payments are important to keep your business running. The problem is that so much terminology is used that it makes it hard to understand contracts and the different options available. Newcomers are confused by all the jargon.
There are different individuals involved in the processing of credit card payments. These individuals have different fees and will handle certain parts of the transactions. Here are some of the common terms that you need to understand.
Payment Gateways: The gateways transfer all the data to the processor or issuing bank from the merchant. Most processors, merchant types, banks and systems are supported by the payment gateways.
The Merchant Service Provider: This is the middleman between the merchant and the bank, processors and card companies. The account set ups and ability to handle all credit card payments are the responsibility of the service provider.
Issuing Bank: The consumers gain a line of credit from the issuing bank. Along with the acquiring bank, it holds liability if the merchant fails to pay.
Processors: All the information needed to settle and authorize transactions is handled by processors. The card and network authorization and connection to the card associations are handled by the front-end processors, while the receipt and forwarding of settlement batches onto issuing banks within a set time frame is handled by the back-end processor. There is usually a fee for this duty.
The Acquiring Bank: This is also referred to as the merchant bank and is the institution where you hold the merchant account. All acceptance and payments for transactions are handled by this bank.
The Card Association: This is the network of banks (acquiring and issuing) that process all the payments made through specific brands of credit cards.
More Important Terms You Need to Know
There are some important mobile credit card processing terms that all business owners need to know. These help to understand everything each vendor is telling you and compare them to make the best informed decision. These terms include:
Interchange Fees: Most credit card companies have fees for processing the transaction, known as the interchange fee. Different merchants charge a different amount and it is usually a percentage of the transaction plus a flat fee. Shop around to find the best interchange fee available.
Chargebacks: It is possible for cardholders to enter into a dispute within 60 days of the date of their statement. This can cost you up to $50 for the retrieval request but you will need to respond in a timely manner or other fees can be charged, along with losing the transaction and interchange fee.
Downgrades: You will need to meet requirements to qualify for transactions. When you don’t meet all, you will be downgraded, increasing the exposure to risk. As the risk increases, the merchant can increase the processing fees. Some common reasons for downgrades include not having address verification when using manual-key transaction methods, the swiped data being corrupted or some data is invalid or missing.
By being armed with this information, you will be able to make a well-informed decision when choosing merchant accounts. These terms help you understand your payments and who controls the different processes.