Credit Card Processing Blog

The checkout process on e-commerce websites is in many ways different and more complicated than it is in traditional brick-and-mortar stores. While in a face-to-face setting, the customer simply swipes a card through a terminal, which “reads” the account’s information from the magnetic stripe and prints out a receipt, at an e-commerce checkout the card’s information is manually entered into a payment form. This opens the possibility not only for a typo to creep in, but also for the customer to unwittingly make a wrong selection in a drop-down menu. For consumers, such errors can lead to frustration and for merchants – to declined authorization requests and possibly to lost sales.

So what can a merchant do to minimize such errors? Well, it turns out that there are a few simple procedures that can be adopted at the e-commerce checkout to help you limit such issues. While merchants don’t have control over the information their customers enter at the checkout, nor can they prevent typos, they can limit confusion by providing guidance and correct errors before requesting authorization.

Credit and debit cards bear several identification features that make them unique and are designed to help merchants and cardholders prevent fraud. These features are used during the transaction authorization process as well and some of them can also be used to detect errors and alert cardholders when wrong information is entered. In particular:

• Card account number. The card’s account number is not only unique, but it also contains information that allows you to check its validity. Request that customers provide both the account number and the card type and ensure that they match. Consider adopting the following procedures:
  • Request that customers select their card’s type (Visa, American Express, MasterCard, Discover, etc.) before they enter the card’s account number.
  • Verify the validity of the provided information by comparing the selected card type and the first digit of the provided card number. The credit card companies use different account numbering systems. The first digit of every payment card identifies its type. Listed in the table below are the first digits that the major American card brands place in their account numbers.
    
    

    Card Type	First Digit of Account Number
    American Express	3
    Visa	4
    MasterCard	5
    Discover	6

  
  

  • Display an error message if there is a mismatch between the selected card type and the provided account number and request that the customer re-enters the data.
  • Use the Mod 10 algorithm (also known as Luhn algorithm). Used to validate various identification numbers, the Luhn algorithm can be used specifically to validate credit card numbers, where it detects all single-digit errors, as well as almost all transpositions of adjacent digits. The first six digits of credit card numbers are known as the Issuer Identification Number (IIN). The rest are allocated by the card issuer.
  • Allow customers to enter card account numbers with or without hyphens, with or without spaces between digits, or clearly identify your preferred format.
  • Account updaters. Merchants processing recurring and installment payments can protect themselves from errors resulting from routine changes in account information over time, such as a card number replacement or a card expiration date change. Typically in a recurring payment plan, the customer provides his or her account information at the time the plan is set up and the merchant processes the first payment as it would process any other card-not-present payment. The cardholder’s account information is then stored and all subsequent payments are processed using the stored data. MasterCard Automatic Billing Updater and Visa Account Updater are services designed to verify that on-file information, including account number and expiration date, is correct, ensuring uninterrupted payments.
• Card expiration date. Always request that customers provide their card’s expiration date. You can either provide a blank field to be filled in by the customer or a drop-down menu from which the customer to make a selection. If you choose the latter option, make sure that you do not provide a default month and year of the expiration date to prevent it from being erroneously selected. The default date will most likely be different from the actual one and the transaction will be declined.

Make sure that all lines of communications are open when a customer is checking out of your store, so that if he or she needs help, they can contact you right away. Otherwise you risk losing the sale altogether!

Learn how to lower your card acceptance cost

Learn how to accept credit and debit cards at the lowest processing costs. The Payment Card Acceptance kit contains a video and an e-book:

• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).
• E-Book – Payment Card Acceptance Guide (19 pages).

Customers who attempt to fraudulently use a credit card at the checkout are often betrayed by specific signs of suspicious behavior. Such signs may have a perfectly reasonable explanation that has nothing to do with an unauthorized credit card use, however statistical data show that they are associated with a higher rate of fraud. You should be able to identify such signs and act according to your organization’s established fraud prevention procedures. We have written at length in previous posts about the way these procedures should be designed and recommend that you review our suggestions. Following is a list of five suspicious signs at the point of sale that you should look out for:

• Purchasing large quantities of merchandise without much attention to details. This is a very strong fraud indicator! If a customer is purchasing a sizable amount of merchandise, without much care for size, color, or even price, he or she is probably interested much more in its resale value than its utility.
• Rushing the cashier into a quicker processing of the payment. Although your customer may really be in a hurry, such behavior may also be intended to force you to circumvent standard fraud prevention procedures. While you would not want to delay a legitimate customer any longer than necessary, you should never forgo regular card acceptance procedures, as this is exactly what the criminal’s goal would be. Explain to your customer that you appreciate the fact that they are short on time, but you are responsible for ensuring that all payments are legitimate and cardholders’ interests are protected.
• Making multiple purchases within a short period of time. If a customer completes a purchase, leaves the store and then comes right back in, he or she may be doing it because they believe that making multiple fraudulent transactions for smaller amounts is less suspicious than making a single large-amount purchase.
• Shopping either right after the store opens or before it closes. A fraudster may be shopping early in the morning or late in the evening, in the hope that the merchant will not be as attentive as during other stretches of the day.
• Ignoring free delivery options (where applicable). If your customer asks no questions or completely ignores a free delivery option, in favor of a quicker but paid one, this could be a warning sign.

Now, it should be reiterated that, although suspicious, a certain behavior might be perfectly well justified and explained in another, completely legitimate way. By themselves, none of the above characteristics constitutes a proof of a fraudulent activity. You should always use your observations of customer behavior in the context of the particular setting. Different businesses attract different types of customers and what is considered a normal customer behavior at one place might be interpreted as completely irregular at another.

Once you have accumulated enough evidence to conclude that a fraudulent activity may be taking place, you should contact your processor’s voice authorization center and make a Code 10 call. You should keep the card in your possession during the call and follow the instructions you are given. If the instruction is to retain the card, you should only do it if it is safe to do so and then ask your customer for an alternative form of payment. If you feel threatened or uncomfortable, complete the transaction and make the call right after the customer leaves.

Learn how to lower your card acceptance cost

Learn how to accept credit and debit cards at the lowest processing costs. The Payment Card Acceptance kit contains a video and an e-book:

• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).
• E-Book – Payment Card Acceptance Guide (19 pages).

Have you noticed how quickly the number of available payment choices on e-commerce websites is proliferating? While credit cards are still the predominant customer choice, there are now all kinds of credit-based options for customers to choose from, including Bill Me Later and eBillme. Multiple providers offer electronic check acceptance. PayPal, Amazon Payments and Google Checkout allow consumers to consolidate all of their payment accounts, including credit cards and checking accounts and manage them all from one point of access. There are also the payment options of the “unbanked,” such as Western Union and MoneyGram.

Merchants have learned that offering multiple choices at the checkout helps attract new customers and reduces the number of lost sales at the last moment, when consumers would walk away if they didn’t see their favorite option. While offering multiple payment choices is great, however, you would also want to make sure that your checkout process makes it simple for your customers to make their payment selections and to avoid the confusion that can often arise when options are plentiful.

There are a number of ways in which a customer can get confused when selecting a payment method. For example, options such as “Debit” and “Credit” can be misleading, as their meaning may be interpreted differently, depending on the customer’s understanding. On the other hand offering the option of selecting a payment brand gives your customer a clear payment choice. It is easy to distinguish a Visa card from a MasterCard or a Discover. You should consider placing a menu of radio buttons for each card brand that your checkout account supports. Additionally, you should consider placing each card brand’s logo next to its button. Also, you would want to keep the various forms of payment separate from one another. Credit cards should be grouped together, separate from bank accounts, which in turn should be kept separate from Bill Me Later and eBillme, etc.

When your customer makes a payment selection, you must honor it. Some payment choices are costlier for you to accept than others, however once you make a decision to support the more expensive forms of payment, you have to stick to it. It is perfectly acceptable to suggest a form of payment or to display your preferred choice, but you cannot mislead or confuse the customer or omit important information in the process. Your customer has the right to use whatever payment method he or she chooses, provided it is supported at the checkout, and once the selection is made, you are required to facilitate the processing of the transaction.

Merchants are not allowed to charge customers additional fees for payments made with credit or debit cards, in order to make up for the associated processing costs. It is allowed, however, to offer a discount if a customer selects to pay in cash, for example, or in any other way that the merchant chooses. Additionally, if a merchant accepts card payments, cards should be accepted for all amounts. It is not allowed to set limits on transaction amounts for card payments. You can lose your merchant account if you do not comply with these requirements.

The most important thing to remember when designing your website’s checkout pages is that the checkout is where you close the sale. Your customer has already made a decision to buy and all you have to do is take the payment. However, if your customer feels like he or she is being misled or otherwise mistreated at the checkout, you will lose the sale. Keep the process simple and straightforward and be sure to play by the rules.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

Hotels participating in the Express Checkout service for credit and debit cards must follow a set of procedures to ensure that transactions are processed in a way that will guarantee that cardholders understand and accept the charges.

1. At the time of check-in, the hotel’s representative should inquire whether the cardholder would like to use the Express Checkout service. Alternatively, the merchant should provide the necessary form (Express Checkout Authorization Form) in its “welcome package.”
2. The hotel’s representative must obtain from the cardholder a completed and signed Express Checkout Authorization Form which should include, at a minimum, the name, address, and phone number of the hotel, and provide space for the cardholder’s name, address, room number, signature, and account number that may optionally be imprinted. The form should state clearly that the cardholder permits the hotel to charge his or her card account number for his or her bill and process the sale without a cardholder signature.
3. The hotel’s representative should print out a sales receipt with the cardholder’s card account number, and follow its normal authorization procedures. The “pre-authorized order” floor limit of $50 does not apply.
4. When the cardholder checks out the hotel’s representative must complete the sales ticket, indicating the total amount of the bill, and print legibly in the space allotted for the customer’s signature the words “signature on file – express checkout.”
5. The hotel’s representative should then process the sales ticket in the usual manner. There are no special deposit requirements imposed on the merchant.
6. The hotel should mail a copy of the itemized bill, sales ticket, and the Express Checkout Authorization Form to the cardholder at the address noted on the authorization form within three business days after the cardholder checks out.
7. All records pertaining to the itemized bill and authorization requests should be kept and made available to the card issuer in the event of a dispute.

Learn how to lower your card acceptance cost

Learn how to accept credit and debit cards at the lowest processing costs. The Payment Card Acceptance kit contains a video and an e-book:

• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).
• E-Book – Payment Card Acceptance Guide (19 pages).