E-Commerce Merchant Account Chargeback Requests

A chargeback, as previously stated, is the reversal of a portion, or the entire amount, of a card transaction that is being disputed, resulting in a refund to the issuer and debit to the e-commerce merchant account provider or the retailer in the amount listed to the dispute. Chargebacks can be initiated as a result of a processor's or retailer's failure to provide a complete and on-time response to a sales ticket retrieval request or for the failure of the retailer to follow applicable credit card processing procedures.

If the card issuer has sufficient evidence that supports a dispute of a transaction, the e-commerce merchant account provider will not require the submission of a ticket retrieval request prior to initiating a chargeback request. An image of the sales receipt supporting the chargeback request must be submitted to the processor within five business days of the issuer initiating it, except for disputes related to authorizations where the evidence is saved as an electronic record. The content of a processor's or retailer's response to a retrieval request may constitute sufficient evidence needed to resolve the dispute.

Each chargeback request needs to contain the following pieces of information:

• Details of any correspondence between the customer and the retailer documenting the authenticity of the chargeback request; or
• Sufficient evidence supporting the dispute.

Additionally required information regarding some types of transactions may include the following:

• For airline e-commerce merchant account transactions, the original ticket if a paper ticket was produced, a copy of the original ticket with adequate proof that the consumer did not use the ticket or evidence of the sale of an electronic ticket (such as the confirmation code);
• Assignment of claim by a consumer that received a refund; and
• Other documentation that may be requested by the processor.

Upon receiving the chargeback request from the issuer, each processor or retailer is required to repay the amount of the resulting Chargeback to the Association (Visa or MasterCard). If the evidence proves that the chargeback was indeed improper, they should request a re-presentment.

If Visa or MasterCard does not receive sufficient evidence supporting the chargeback request from the card issuer within the time-frame stated (five business days) or if the Association does receive a request that is not compliant with the above requirements, a chargeback may not be processed or if it had done so already, the Association may process a re-presentment.

Merchant Payment Account Easy Payment Service

Visa's Easy Payment Service (VEPS) for merchant payment account users enables face-to-face retailers from more than 98 percent of Merchant Category Codes (MCCs) to accept credit cards and other bank cards without the need for a signature and only need to print out a receipt upon a request from the customer.

The VEPS program offers retailers the potential to speed up the check-out process at the point of sale, improve customer satisfaction and provide operating efficiencies for merchant payment account users. It can also help increase customer retention by helping cardholders use their bank cards quickly, securely and easily.

Merchant Payment Account Easy Payment Service Advantages

For qualifying payments, the VEPS program:

• Eliminates the need for card acceptors to obtain a signature.
• Eliminates the transaction receipt requirement, unless specifically requested by the cardholder.
• Eliminates the necessity for retailers to store sales receipts and bans issuers from placing retrieval requests.
• Provides strong chargeback protection against fraudulent transactions and for the receipt requirement.

Which Transactions Qualify

Transactions qualify for the VEPS service if they comply with all of the following criteria:

• The transaction takes place at a qualified merchant payment account user.
• It is a purchase (as opposed to credit) transactions with a valid card.
• It is a card-present environment (for amounts of $25 and lower) or unattended environment ( for $15 and under).
• Payments are authorized.
• Applies to all MCCs except those explicitly excluded (list is provided below).
• All card types are eligible, including magnetic-stripe, chip-and-PIN and proximity payments.
• The POS device must read and transmit unaltered magnetic-stripe, chip, or contactless payment information.
• The information must be transmitted in the authorization message.

Unqualified Merchants

The following business types are not qualified for VEPS:

• Wire Transfer Money Orders.
• Insurance Services.
• Automated Fuel Dispensers.
• Travel Related Arrangement Services.
• Catalog Merchants.
• Combination Catalog and Retail Merchants.
• Outbound and Inbound Telemarketing Merchants.
• Continuity / Subscription Merchants.
• Manual and Automated Cash Disbursements.
• Financial Institutions - Merchandise and Services.
• Betting, including Lottery Tickets, Casino Gaming Chips, Off-Track Betting, and Wagers at Race Tracks.
• Intra-Government Purchases.
• International Automated Referral Service.
• GCAS Emergency Services.
• Intra-Company Purchases.

There are no program registration requirements. If a merchant payment account user is eligible, they should just run the transaction as they normally would, skipping the signature, and offering the sales receipt as an optional service.

Bank Merchant Services Interchange

Bank merchant services interchange provides incentives for banks to issue credit cards and for businesses to accept them. It is a fee that is paid by the retailer's bank (the acquirer or processor) to the customer's bank (the card issuer) and is designed to compensate the latter for the risks and costs it takes to manage its cardholder accounts. These include the finance costs for the interest-free period that lasts from the time a customer makes a sale to when he pays his bill, as well as for credit losses, fraud prevention and processing costs.

Setting the various interchange fees necessitates achieving a careful balance. If they are set too high, the bank merchant services user' desire for accepting bank cards will diminish. If interchange fees are set too low, on the other hand, the issuers' desire to continue issuing cards and maintaining cardholder accounts will decrease and so will the use of cards.

MasterCard and Visa periodically re-examine interchange fees to make sure that the rates provide to everyone involved: the merchants, the issuers and the cardholders. Each Association keeps dozens of different interchange rates that account for the differences between the various card programs, like e-commerce, gas stations or restaurants.

The discount rate that merchants pay when they accept credit cards is typically a small percentage of the cost of the products or services the retailer pays its bank when a card is used. It includes the interchange fee and is negotiated between the retailer and its bank. The Associations are not parties to these negotiations.

The Associations operate networks that facilitate the communications among four separate parties:

• The issuer markets and issues bank cards to customers and provides credit to cardholders from when a purchase is made until a payment is due.
• The cardholder uses the bank card to buy merchandise and services at millions of locations around the globe.
• The bank merchant services user accepts bank cards for the payment of products and services.
• The acquirer contracts with retailers and provides them with bank card acceptance and processing services.

By contrast, three-party systems, like Discover, charge discount rates that are often higher than the ones for accepting Visa and MasterCard cards. As three-party system providers act as both issuers and processors, they do not have to set interchange rates. They can use the fees collected directly from retailers to cover the costs for the issuing of the cards.

Merchant Bank Account Fraud Liability

To replace the current data compromise recovery compliance process with one that minimizes retailers' exposure while it is cost-efficient and equitable for all involved parties, merchant bank account providers have developed the Account Data Compromise Recovery (ADCR) process.

ADCR is used predominantly for mag-stripe data that have been discovered or suspected to be compromised. It caps counterfeit fraud liability for credit card processing companies to a time frame that is limited at 13 months, whereas the current process where data exposure risk can extend up to the date of expiration of the compromised cards. Moreover, ADCR enables the partial recovery of some expenses incurred by issuers.

Under the ADCR rules, merchant bank account providers first determines the processor's mag-stripe read fraud liability resulting from inadequate data storage by estimating the amount of the counterfeit fraud that would have resulted in the system for the duration of the 13-month event window if the data breach had never occured. This base-line sets the expected level of fraud for which a processor is not liable. The merchant bank account provider then deducts the baseline from the final confirmed amount of mag- stripe read counterfeit fraud that took place during the event window. This gives you the so-called "incremental fraud" assessment of the processor's liability. This is the fraud loss that exceeds the normal level and is so attributable to the mag-stripe exposure. Moreover, any card number that was in a previous mag-stripe exposure event within the previous 12 months is excluded.

Issuers enrolled in the ADCR procedure can recoup $1 per account involved in the compromise to cover some of their operating expenses, such as the re-issuing of the cards and the higher volume of incoming customer service calls. Any card number involved in a previous mag-stripe exposure event within the past 12 months is excluded.

Merchant bank account providers are only liable for up to 80 percent of the entire number of card accounts involved in a magnetic-stripe information type of compromise. The other 20 percent is the approximate share of accounts that will require some or no work by the issuing institutions. Put another way, these are account numbers that have expired or were closed, reissued, or blocked before the time they appeared on the fraud alert.

The Visa Compromised Account Management System (CAMS) provides a secure and effective way for merchant bank account providers, retailers, law enforcement entities, and issuing banks to communicate compromised and stolen or card account data to and from the Associations through an encrypted site.

Novus Credit Card Processing Easy Payment Transactions

Sales of $25 or less represent a substantial ratio of all customer spending. The Novus credit card processing Easy Payment Service (EPS) assists in delivering a greater efficiency and convenience to both retailers and consumers.

The EPS program gives face-to-face retailers the opportunity to take credit cards issued in any given country for sales without asking for a cardholder signature or PIN and not even issuing a transaction receipt unless explicitly requested by the consumer. This program can potentially increase the speed at the point-of-sale, improve customer satisfaction and provide operating efficiencies for the Novus credit card processing account user. It can build customer loyalty by assisting cardholders use their bank cards securely, quickly and easily.

Novus Credit Card Processing EPS Requirements

Sales qualify for the EPS program if they adhere to the following criteria:

• Value is lower than or equal to the specific country's transaction limit.
• Face-to-face setting.
• Authorized.
• Applies to all Merchant Category Codes (MCCs), with the exclusion of those specifically listed by the Associations.
• The POS terminal must read and transmit the entire magnetic stripe data, unaltered chip-and-PIN data, or unaltered contactless
  data.

EPS Qualifications

The following types of transactions do not qualify for the EPS program:

• Fallback transactions.
• Card funding transactions.
• Cash-back payments.
• Manual cash disbursement items.
• Quasi-cash items.
• Prepaid loads.
• Payments where Dynamic Currency Conversion is used.

The following MCC codes are excluded from the Novus credit card processing Easy Payment Service Program:

• 4829 - Wire Transfer Money Orders.
• 5542 - Automated Fuel Dispensers.
• 5960 - Insurance Services.
• 5962 - Travel Related Arrangement Services.
• 5964 - Catalog Merchants.
• 5965 - Combination Catalog and Retail Merchants.
• 5966 - Outbound Telemarketing Merchants.
• 5967 - Inbound Telemarketing Merchants.
• 5968 - Continuity/Subscription Merchants.
• 5969 - Direct Marketers (Not elsewhere classified).
• 6010 - Financial Institutions - Manual Cash Disbursements.
• 6011 - Financial Institutions - Automated Cash Disbursements.
• 7995 - Betting, including Lottery Tickets, Casino Gaming Chips, Off-Track Betting, and Wagers at Race Tracks.
• 9405 - Intra-Government Purchases (Government only).
• 9700 - International Automated Referral Service (Visa use only).
• 9701 - Visa Credential Server (Visa use only).
• 9702 - GCAS Emergency Services (Visa use only).
• 9751 - UK Supermarkets - Electronic Hot File (Region use only).
• 9752 - UK Petrol Stations - Electronic Hot File (Region use only).
• 9950 - Intra-Company Purchases.