Online payments are the main payment force of the present century. Not just offering them, but establishing them well makes a customer satisfied with a purchase, and a merchant more secure. Today we at Maxpay explain how to avoid some common problems with internet payments and what are the key factors in it.
Friendly fraud and its prevention
Friendly fraud is the type of fraudulent activity that is shaped into a false chargeback request. Normally, to issue a chargeback, a customer must be evidently unsatisfied with some aspect of the service or product, or its delivery. But when it comes to friendly fraud, a customer falsifies the reason for dissatisfaction to get their money back.
Friendly fraud is a fraud, so it is a crime. It harms the business, as it takes away the good quality product or service from a merchant and then the value of it. On top of that, friendly fraud results in chargebacks, so it harms the business again.
According to Chargebacks911, 81% of customers voluntarily admit to issuing a chargeback out of convenience. And around 40% of customers who have performed a friendly fraudulent action will repeat it within the next two months.
To avoid friendly fraud, you need special fraud prevention technologies that gather multi-channeled data about each customer and analyze the behavior type as fraudulent or not. If this interests you, we recommend checking out this article: “Fraud prevention for merchants: protect the payments with tools from Covery”.
In the previous paragraph, we have mentioned that a chargeback is a danger for a business. And it is true. A chargeback is a legal right of a customer to issue a return of money for an unqualified service or unsatisfying product. Chargebacks can occur because of many reasons: the wrong item purchase, damaged product, multiple purchases, delivery issues, and so on. Friendly fraud is also included as one of the chargeback reasons.
So when a customer is issuing a chargeback, it requires an acquiring bank of the merchant to forcibly pay back the spent money. An acquiring bank pays back, taking money from the merchant’s account and also taking chargeback fees. And when chargebacks pile up, the merchant risks crossing the chargeback ratio line established by the bank. As a result, the merchant can get into a high-risk category or even lose a merchant account. In this article, we’ve described the chargeback nature in all detail: “What is a chargeback?”.
To avoid chargebacks, a merchant must implement a chargeback alert service for internet payments. A chargeback alert service is a special technology that freezes the process and notifies a merchant about the issue. After, a merchant has 24 hours to solve a problem personally without acquiring bank involvement. The solution, in this case, can be a return or refund. If you are interested in a chargeback alert service, here is one of the best of them: “What are Ethoca alert services”.
When it comes to internet payments, a merchant must be as inclusive as possible. A merchant should choose wisely a payment gateway, focusing on the most comfortable payment methods for a customer.
If the customer audience is mostly young, it would make sense to include not only usual credit and debit card methods, but also Apple Pay, Google Pay, and other alternative payment methods. And to be inclusive for a specific region, we recommend focusing on the popular local payment method, such as WeChat Pay for China, American Express for the United States of America, and Klarna for some European Union countries.
Here we have listed the best payment gateways and their specifics that you should take into consideration: “The Top 10 Most Popular Online Payment Gateways for Your Website, Compared”.
Another aspect of internet payment inclusivity is payment mobility. In 2021 we do not only talk about young people who want to use various payment platforms. It is quite common to expect not just desktop possibilities of transactions, but mobile phone and tablet versions as well.
According to Statcounter, in 2021 alone, mobile phones present almost 55% of the traffic, while desktops bring around 43%. Same time Oberlo claims that the time customers spend on mobile phones has risen by nearly 25% in the last five years. Thus, in 2016, the time spent on the mobile platform was 188 minutes on average, when now it has increased by 55 minutes. Besides that, Oberlo says that mobile eCommerce purchase shares have also gone up to 72.9%, compared to just 39% in 2016.
Payment processing for your high-risk business
A high-risk business is a business that is classified as such by the acquiring banks or other financial institutions for certain reasons. These reasons can vary from such simple things as registration location – most businesses outside of Canada, the US, Australia, European Union, Japan, South Korea, or Singapore are high-risk. Accepting multiple currencies and selling internationally also puts a merchant into this category.
Clearly, bad credit history, high chargeback ratio, and terminated merchant account affect the situation. But some industries become high-risk only because they offer subscription-based services or products, and businesses that operate in the industry with a potential high chargeback ratio. Thus, even some movie streaming services, airline companies, and video games companies end up on the list. For more info, read the article: “Which industries do banks consider high-risk?”.
Payment processing for a high-risk business requires more attention, along with higher fees for applying and maintenance, and detailed documentation. Often, acquiring banks are not willing to deal with high-risk merchants, but fortunately, there are alternatives like payment service providers and payment gateway services. Before continuing reading, we advise you to get informed on how payment processing works: “The basics of online payment processing”.
Both payment service providers and payment gateway services can offer help in setting up the technology to accept internet payments for businesses. A payment service provider can offer full payment technology, along with opening a merchant account, setting up a payment process with a payment gateway.
A payment gateway service provider offers a payment gateway for the website, which is essential for accepting electronic transactions. Maxpay helps clients with the merchant account opening and offers anti-fraud services to secure companies’ revenue.
Any of the options is good if it serves the need well. Choosing a provider, a merchant must consider fees, security, check-out experience, accepted payment methods, transaction location, and design.