Common Problems with Merchant Accounts and How to Fix Them

So you've got a merchant account and, hopefully, a dependable online payment gateway. What comes next? For starters, you can finally expand your business and begin accepting online payments.

However, risks are lurking in every aspect of our lives, and payments are no exception. And, as a merchant, you must be ready. As a result, we're going to go over some of the most common online payment issues and offer advice on how to deal with them today.

Payment fraud

One of the most serious concerns for merchants. To be clear, payment fraud encompasses a wide range of illegal online transactions. After all, committing financial crimes is easier when no one can see your face on the internet. Multiple lockdowns occurring around the world only added to the unfavourable statistics. Fraud examiners observed a significant increase (31 percent) in global payment fraud in August 2020 and predicted that it would continue to rise (47 percent) throughout the year.

To prevent fraud, businesses must use security tools and reputable payment gateways. But we'll get to the solutions later.

Types of payment fraud

Identity theft

This type of scam occurs when a criminal steals an individual's data and uses it for financial gain, as the name implies. The majority of merchants face this online payment issue when fraudsters use people's bank card information to make purchases, transfer funds, and so on. This type of fraud is usually avoidable if your best online payment gateway offers 3D secure services.

More elaborate schemes are also carried out: scammers can obtain enough information to obtain a substantial loan on behalf of a person, which is terrible news for the latter.

Phishing

The next scam is one that leads to identity theft. Phishing is the practice of criminals attempting to obtain personal information through emails or websites. All it takes is providing your credit card information or other relevant information, and you're unfortunately on the hook for the scammers.

Friendly fraud

This online payment issue causes a slew of complications for merchants. When a customer purchases something on the internet but then disputes the payment due to a misunderstanding or malicious intent, this is referred to as friendly fraud.

The problem is that there are various types of friendly fraud, some of which can be resolved, while others will cost you:

A customer forgot about a purchase. This happens by chance. Here's an example: someone bought something from your website. Then, a few days later, they check the transaction history and discover that the payment was not recognised. It could be that your company's name does not match the one on the bank statement, or that the product description is incorrect. As a result, they file a chargeback request. If you're not sure why chargebacks are bad for business, read our article on the subject. We also explain how a good online payment gateway service can help to reduce chargebacks.

A relative used a person's payment information. This occurs when a cardholder's family member uses their card to make a purchase. There may be nothing illegal about it, but the cardholder may object to the purchase and cancel it.

A case of buyer's remorse. When it comes to making purchases, customers can be hesitant. This may cause them to cancel their order later or result in chargebacks.

A deliberate tussle. This type of fraud is not at all friendly. It occurs when a customer requests a chargeback on purpose. For example, they may lie that they did not receive the product or that it was of poor quality in order to obtain it for free.

Triangulation fraud

This is another method by which criminals prey on people's financial information, similar to phishing. They create fictitious e-commerce websites or pose as existing businesses, luring customers in with extremely low prices. When a customer enters their information on the malicious website, the scammers steal it.

Pagejacking

Another data-stealing scam, but this time the fraudsters reroute traffic from a legitimate e-commerce site. After that, the traffic is redirected to another malicious website.

Chargebacks

Chargeback is dreadful news for some businesses: if you face it too frequently, you risk losing a large portion of your revenue and putting your company in the high-risk category. Why is this the case?

Chargeback is the process of reversing an electronic transaction – a customer receives their money back if they did not receive a product/service or are dissatisfied with it. So, what's the problem? Unfortunately, merchants must not only refund cardholders' money, but also pay additional fees.

As a result, a refund is a preferable way to return money to a customer because other parties (acquirer, issuer banks) are not involved in the process and businesses are not required to pay chargeback fees.

Merchants should always keep an eye on their chargeback ratio: if the percentage of chargebacks compared to successful transactions is too high, your bank may refuse to provide you with services. You will be classified as high-risk, and you will have to pay higher fees for using your merchant account and additional features.

Credit card data theft

This is a type of credit card fraud that can occur with any type of payment information used to conduct transactions (debit cards, e-wallet data, etc.).

A criminal steals the cardholder's physical card or hacks into their account/website where the information is stored in order to steal the card data. The fraudster then uses the data to conduct unauthorised transactions in order to purchase goods or transfer money to their account.

Multi-currency payment methods

Fortunately, this online payment issue does not include any fraudulent transactions. Multi-currency payment methods refer to a merchant's ability to allow customers to pay for goods and services in multiple currencies.

The good news is that it allows you to significantly expand your customer base. The bad news is that implementing such services is difficult, and you may need to open additional merchant accounts to process cross-border payments.

Solution for each problem

Some methods can assist you in significantly reducing or eliminating the aforementioned online payment issues. Let's take them one at a time.

Payment fraud

The most common issue for merchants with this type of fraud is that they are at risk of receiving fraudulent transactions, which result in chargebacks and traffic losses.

Several steps can be taken to avoid such unfortunate events:

Turn on 3D Secure. The 3D Secure protocol allows a cardholder's identity to be verified twice when they make an online purchase.

So, when a customer purchases something from your website, they must not only enter their payment information, but also confirm that they have authorised the transaction, either through an OTP, biometrics, or interaction with their phone. Due to the fact that this verification requires the cardholder's direct participation, it is much more difficult for criminals to pass it and thus make unauthorized transactions.

Use anti-fraud software. When you have specialised services for detecting suspicious payments, it is much easier to detect them. As a result, we recommend that you find a payment service provider or an online payment gateway that provides anti-fraud features.

Chargebacks

You can't avoid chargebacks entirely, but you can try to minimize them with your efforts and seek assistance from your bank, PSP, or payment gateway.

What merchants are capable of. As a business, you must ensure that your refund policy is clearly stated on your website – your customers should understand that a refund is preferable to a chargeback for both parties.

Merchants should also clearly state the product description in order to avoid dissatisfied customers who receive "not-as-described" goods. Explain the delivery process to your customers: tell them how long it takes for a product to ship and whether or not they can track it.

What financial institutions are capable of. Banks and payment service providers (PSPs) can provide businesses with additional tools to help them reduce chargebacks and avoid other online payment issues.

Credit card data theft

In addition to the fraud and chargeback prevention tools mentioned previously, we recommend that you indemnify your website and services:

1. Use SSL technology to encrypt the data on your website.

2. Merchants must comply with the PCI DSS requirements.

3. Locate a secure and dependable payment gateway.

Multi-currency payment methods

If you don't want to open new bank accounts, you can always find a payment service provider or a payment gateway that accepts multi-currency payments.