The merchant account is a type of bank account that allows businesses to receive payments in various ways, usually debit or credit cards. The merchant account is established based on an agreement between the acceptor and the merchant who acquired the bank for the settlement of the payment card transaction. In some cases, payment processors, independent sales organizations (ISO), or member service providers (MSP) are also parties to the merchant agreement. Whether a trader enters into a merchant agreement directly with the acquiring bank or through the aggregator, the contractual agreement binds the merchant to comply with the operating rules set by the card association.
Video Merchant account
Metode pemrosesan kartu kredit
Today the majority of credit card transactions are sent electronically to merchant processing banks for authorization, retrieval and deposit. Various methods exist to present credit card sales to the "system." In all circumstances all the magnetic strips are read by swipe through the terminal/credit card reader, the computer chip is read ("EMV"), or the credit card information is entered manually into the credit card terminal, computer or website. The earliest method, sending credit card slips to merchant processing banks by mail, or by accessing the Auto Response Unit (ARU) by phone, is still in use today but has long been overshadowed by electronic devices. This initial method uses a two-part form and a manual device to mechanically insert the emboss card number information into the form.
Credit card terminal
Credit card terminal is a stand-alone electronic equipment that allows traders to swipe or enter key credit card information as well as any additional information required to process credit card transactions. They may be connected to a Point of Sale system and typically have a keypad and a network connection and may have a built-in printer.
Automatic response unit (ARU)
An ARU (also known as voice authorization, retrieval and deposit) allows for manual key entry and subsequent credit card authorization via a mobile phone or landline. With this method, a merchant usually instills their customer card with a stamper to create customer receipts and trader copies, then process transactions instantly over the phone.
Payment Gateway
Payment gateway is an e-commerce service that authorizes payments for e-business and online retailers. This is equivalent to a physical POS (point-of-sale) terminal located in most retail outlets. The merchant account provider is usually a company separate from the payment gateway. Some merchant account providers have their own payment gateways but most companies use third-party payment gateways. The gateway usually has two components: a) a virtual terminal that can allow merchants to enter securely and enter credit card numbers or b) have a website shopping cart connected to the gateway through the API to allow real-time processing of merchant websites.
Maps Merchant account
Level 2 or level 3 processing - card purchase
Visa and MasterCard have created a special type of payment card used primarily by government agencies and businesses. More companies and government agencies rely on this form of payment to compensate their service providers and suppliers. Businesses benefit by receiving their funds quickly and by winning competitive offers and government contracts where the purchase card is the required form of payment. The downside, however, is the increased cost associated with accepting this payment. These fees will usually be much higher than receiving a standard consumer credit card.
The solution is that some businesses may qualify for how to process these transactions that allow them to pay lower fees if they can provide additional information, called "level 2 or level 3 data". For example, if government transactions are more than $ 5,000, businesses can significantly reduce their transaction costs by including "level 2 or level 3 data" about purchases together with each transaction. An example of level 2 or level 3 data is the purchase order number associated with the transaction to be paid by credit card. This data is forwarded to the buyer so it may be easier to reconcile the transaction. If all the necessary data is not collected and forwarded during the transaction, the merchant may have additional charges added to the base fee, or be forced into an unqualified transaction category.
Marketing merchant account
Merchant accounts are marketed to the merchant by two basic methods: either directly by the processor or the sponsoring bank, or by an authorized agent for the bank and also directly registered with Visa and MasterCard as ISO/MSP (independent service provider/sales service provider).
The marketing details are by card issuers like Visa and MasterCard, and are enforced by various rules and penalties. Some of the largest processors also partner with warehouse clubs to promote merchant accounts to their business members.
Marketing by bank
Banks that have merchant processing relationships with Visa and MasterCard, also known as member banks , may issue merchant accounts directly to merchants.
To reduce risk, some banks limit approvals to merchants in their geographic areas, those with physical retail stores, or those who have been in business for two years or more.
Marketing by an independent sales organization (ISO)/MSPs
To market merchant accounts, ISO/MSP must be sponsored by member banks. These sponsors require the bank to verify the financial stability and conformity of the company that will be marketing on its behalf. ISO/MSP must also pay fees to be registered on Visa and MasterCard and must comply with regulations on how they can market merchant accounts and use of Visa and MasterCard trademarks. One way to verify whether an ISO/MSP is appropriate is to check websites or other marketing materials for the disclosure "the company is a registered ISO/MSP of the bank, city, state.FDIC insured".
This disclosure is required by Visa and MasterCard and will result in a penalty of up to $ 25,000 if not apparent. In almost all cases, if there is no disclosure, the company may be a fourth party who does not know or worse. In many cases, unregistered operators are responsible for some of the worst horror stories of traders.
Rates and fees
Merchant accounts have various costs, some are periodic, others are charged per item or percentage. Some fees are set by the merchant account provider, but most per-item and percentage fees are passed through the merchant account provider to the credit card issuing bank according to the tariff schedule called exchange fee, set by Visa, Discover, and MasterCard. The exchange fee varies depending on the card type and the state of the transaction. For example, if a transaction is done by swiping a card through a credit card terminal, it will be in a different category than if typed manually.
Discount rate
The discount rate consists of a number of fees, fees, assessments, network fees and mark-up merchants who are required to pay to receive credit and debit cards, the largest so far being interchange fees. Each bank or ISO/MSP has a real cost in addition to wholesale exchange fees, and generates a profit by adding mark-ups to all the costs mentioned above. There are a number of bank pricing models and ISO/MSP used to collect merchants for services provided. Here are the more popular pricing models:
Three-pricing
Three-tier pricing is the most popular pricing method and the simplest system for most traders to understand, if not the most transparent. Newer six-tier pricing, including additional levels that include debit cards, business, or internationally are increasingly popular. In a three-pricing pricing, merchant account providers group transactions into three groups (tiers) and assign rates to each level based on the criteria set for each level. A possible disadvantage from a trader's perspective is that these "levels" or "buckets" vary from one processor to the next which prohibits any direct comparison of the tier provided by one provider to the level provided by other providers.
First level - qualification level
Qualified rates are the percentage rates that merchants will charge every time they receive a regular consumer credit card and process it in a manner that is defined by "standard" by their merchant account provider using an approved credit card processing solution. This is usually the lowest rate that will be charged by the merchant when accepting credit cards. Eligible rates are also the usual rate quoted to the merchant when they inquire about the price.
Eligible rates are made based on how the merchant will receive most of their credit cards. For example, for Internet merchants, the Internet exchange category will be designated as eligible, whereas for physical retailers only transactions are swiped through or read by their terminals in the normal manner to be defined as qualified.
Second level - intermediate-qualified level
Also known as a qualified partial rate, the middle-qualified rate is the percentage rate the merchant will charge whenever they accept credit cards that do not qualify for the lowest rate (eligible rates). This may happen for several reasons such as:
- Consumer credit card is inserted into credit card terminal instead of swiped
- Typical credit card types used like gift cards or business cards
The middle-qualified level is higher than the eligible level. Some transactions that are usually grouped into the middle tier can add provider fees in interchange fees, so merchant account providers perform markup at this level.
The use of "gift cards" can reach 40% of transactions. Thus, it is important that the financial impact of these costs be understood.
Third level - unqualified level
Unqualified rates are usually the highest percentage that merchants will charge when they receive a credit card. In most cases, all non-qualified or middle-qualified transactions will fall to this level. This may happen for several reasons such as:
- Consumer credit card put in credit card terminal instead of swiped and address verification not done
- Types of custom credit cards are used like business cards and all required fields are not included
- Merchants do not complete their daily amounts within the specified timeframe, typically passing 48 hours from the time of authorization.
Unqualified tariffs can be much higher than eligible rates and can cost the provider much more in exchange fees, so merchant account providers make markup at this rate.
Six-tier price
As a result of the Wal-Mart Settlement and to compete with PIN-based debit cards (processed outside the Visa and MasterCard networks), Visa and MasterCard lower their interchange rates for debit cards below them for credit cards. Some providers may charge a lower fee from this card directly to the merchant. As a result, the three-tier program has added two classifications for debit cards processed without a PIN or with a PIN for a total of six classification levels.
Price Interchange-plus
Some providers offer merchant account services at "interchange plus" prices. These accounts are based on the "interchange" table published by Visa and MasterCard. This type of pricing creates a discount rate by adding an exchange rate plus a percentage and authorization fee. This is a common price model for very low and very high average tickets. Bill-back/ERR_ (enhanced_recover_reduced) "> Bill-back/ERR (enhanced recover reduced)
Chargeback/ERR is a variation of interchange-plus price. It has some variations but the basic concept is that merchants pay a set rate for eligible cards then billed back for medium or non-qualified cards. Merchants will be charged eligible rates for all their transactions. Then, for a moderate or unqualified transaction, the merchant will be charged again for the eligible tariff difference (the rate they have paid) and the interchange rate (cost) plus the additional fee. There are two reasons why this is called a bill-back. You are charged a single rate and then charged again. Also because you will usually see an additional charge on the statement next month. It takes a lot of time to examine the actual cost per transaction with the bill-back system.
- Example of chargeback/ERR:
- The chargeback price setting:
- 1.75% surcharge 0.50%
- If you make $ 1,000 and you enter a regular credit card, the charge is now considered qualified because you did not swipe it. The interchange for locked credit cards is 1.8% -1.9%. The difference from exchange plus additional cost is 0.55% -0.60%. Below is how it looks on your bill.
- $ 1,000 X 1.75% = $ 17.50
- $ 1,000 X 0.55% = $ 5.50
- Total = $ 23.01
Authorization fee
Authorization fees (actually authorization fees requests ) are charged every time a transaction is sent to the card issuing bank to be authorized. The fee applies whether the request is approved or not. Notice this is not the same as the transaction fee.
Transaction fee
The transaction fee is charged when you receive your authorization. This fee applies only to authorizations received without error.
Cost statement
The statement fee is a monthly fee associated with a monthly statement sent to the merchant at the end of each monthly processing cycle. This statement shows how many processes the merchant performs over the month and what costs occur as a result.
Often, the cost of a statement is not directly related to a "paper" statement but a general charge. This means that the provider will not override this fee if the merchant chooses to have a "paperless" statement.
Minimum monthly fee
The monthly minimum fee is a way to ensure that the merchant pays the minimum amount in the cost each month to cover the costs of the provider to maintain the account. If merchant fees are not the same or exceed the monthly minimum, they will be subject to a margin of up to a minimum monthly.
- Example: A merchant has signed a contract with a minimum monthly fee of $ 25.00. If all costs (clarity: this is only for processing fees, so do not include monthly fees, chargeback fees, etc.) For the last month of the total processing of only $ 15.00, this merchant will incur an additional $ 10.00 fee to meet the monthly minimum requirements. Sometimes there are fees charged that are not part of the monthly minimum, such as the cost of a statement. This is the industry standard to charge a monthly minimum, though not all acquirers charge this fee, nor does all charge a fee for each agreement.
Batch fee
The batch cost (also known as the batch-header fee) can be charged to the merchant whenever traders "settle" their terminals. Settling terminals, also known as "batching", is when merchants send their complete transactions for the day to the bank being acquired for payment. Some providers do this automatically. It is important to close the batch every 24 hours or more will be assessed by Visa, Discover or MasterCard. The term "header batch" originally came from pre-electronics terminal processing, when each batch of credit card receipts was changed to a merchant's local bank for deposit. The batch header is a mini report that summarizes the acceptance bundled in it.
Customer service fee
Customer service fees (also known as maintenance fees) may be charged by some providers to pay for customer service fees. Also referred to as "merchant support fees", "customer support costs", or simply "service fees" by some merchant providers.
Annual cost
Annual fees may be charged by some providers to pay for merchant account maintenance fees. Sometimes this fee can be done every three months. The fee may be from $ 79- $ 399. This fee in some cases includes the Payment Card industry (PCI) compliance fees, which may include cyber insurance policy/infringement.
Early termination fee
Early termination fees may be imposed by some providers if the merchant terminates the contract before the end of the contract period. Although the terms of the one to three year contract are typical, some providers have a maturity of up to five years with one year prior notice to cancel or fees will be assessed. Some providers also assess all monthly statement and minimum fees remaining when the contract is terminated. Some providers may also be able to assess the cost of "profit loss" based on the assumption of the profit they conclude that they will generate during the term of the contract.
Cost of chargeback
Chargeback is the biggest risk presented to banks and providers. This is not to be confused with refunds, which merely a trader refunds the transaction. In the rules of Visa, Discover, and MasterCard, the merchant processing bank is 100% responsible for all trader transactions. This can make the provider open to millions of potential losses if the merchant operates illegally or at risk and generates a lot of chargebacks. The Supplier gives this fee to the merchant, but if the merchant is cheating or has no money, the provider must pay all costs to make the cardholder 'intact'. Risk of chargeback is the biggest part considered during contract application and underwriting process. Some banks are much stricter than others when assessing the risk of a merchant chargeback.
If a merchant faces a chargeback, they can be assessed for fees by the acquired bank. A potential back bill is issued on behalf of the cardholder bank to the merchant credit card processing bank.
Currently Visa and MasterCard require all merchants to retain no more than 1% of the volume of dollars processed as chargebacks. If the percentages are above, there are penalties ranging from $ 5,000- $ 25,000 charged to merchant processing banks and ultimately forwarded to merchants.
In all cases, a chargeback will cost the chargeback fee to the merchant, usually $ 15- $ 30, plus the transaction fee and the amount processed.
Durbin Amendment
On October 1, 2011, a new rule, resulting from the Durbin Amendment, came into effect which reduced the exchange fees for debit cards charged by Visa and MasterCard networks to merchants. The new rule applies only to debit cards issued by banks with total assets in excess of $ 10 billion.
Prior to the application of the Durbin Amendment, the friction charge for debit card transactions averaged 44 cents. Under Durbin, the Federal Reserve has set a limit of 0.05% 21 cents per transaction (22 cents if the card has security features).
Requirements to be known
Here are some useful definitions that deal with merchant transaction rates:
- Base point
- 1/100 percentage points. This term is used to describe the discount rate, which is the largest portion of the card processing fees paid by the merchant.
- Discount rate
- including fees, fees, appraisals, markup and network fees merchant must pay to accept credit and debit cards. Interchange is the largest component of the discount rate.
- Interchange
- fees paid to the card issuing bank by the bank that acquired the card by way of a card brand. The rate of exchange varies by card type, transaction amount, risk, and retail sector. Interchange is assessed on all Visa and MasterCard credit and debit cards.
- Mid-qualified
- merchant tariff percentage billed when accepting credit cards that do not meet eligible tariff terms. Also known as partially qualified, mid-level qualifications apply in cases such as when a card is locked to a terminal instead of swiped or if the cards are a special type such as a gift card.
- Unqualified
- often the highest percentage merchant is charged for accepting credit cards. In most cases, non-qualified or unqualified transactions fall into this category. Most of these transactions are done with a corporate card.
- Qualified
- merchant tariff percentages are billed when they receive a regular consumer credit card and process it with an approved processing solution in a way that is defined by their merchant account provider's standard. Qualified merchants usually the lowest rate charged when accepting credit cards.
See also
- Merchant services
- Credit card
- Payment terminal
- Payment Gateway
- Ecommerce
- Interchange fee
- Credit card fraud
- Backcheck insurance
- Payment card industry (PCI)
- Cardholder Information Security Program (CISP)
- Retired merchant file
References
- "Visa Interchange Rates" (PDF) . October 17, 2015 . Retrieved April 14 2016 .
- MasterCard Exchange Rate (PDF) April 15, 2016. Retrieved 3 March 2017.
- The MasterCard Merchant Rules PDF guide for all businesses that accept MasterCard credit cards.
- Visa USA - Receive Visa Guide and information to receive Visa and other credit cards.
- PCI SCC Reference Document PCI SSC Quick Guide.
Source of the article : Wikipedia
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