How often do you spend time reviewing your payment processing data? If the answer is rarely or never, you’re not alone. You could be missing opportunities to cut operating costs and improve key business metrics.
Though merchant account transaction reporting may seem complex, taking the time to review it can reveal valuable insights. Regularly accessing the online dashboard that your merchant account provider offers can help you understand how card processing fees work and why customers request chargebacks, along with alerting you to trends you should look out for. This can ultimately help you find ways to reduce fees and better serve customers.
Reviewing your payment processing data regularly empowers you to...
1. Understand your interchange rates — so you can lower them.
The major card networks charge different interchange rates depending on the type of card, as these lists from Visa and Mastercard show. Understanding what to look for in your payment processing data, and why some transactions carry higher fees, can help you make changes that boost your bottom line. Try the following:
- Make sure transactions have cleared correctly. Consumer cards typically clear at lower rates, though this isn’t always the case.
- Examine transaction sizes. Make sure your account is set up so you’re charged the lower fees associated with higher-value purchases. If you have a high volume of lower-value transactions (i.e., $15 or less), consider negotiating lower fees.
- Review your pricing structure. Compare the bottom-line impact of flat pricing versus interchange-plus pricing, and make adjustments if needed. While flat-rate pricing — which charges a uniform rate regardless of transaction size or type — can be appealing to some businesses, interchange-plus pricing — which includes a specified markup above the interchange rate — may be more cost-effective for others.
2. Monitor chargebacks and avoid fees.
Disputed transactions can eat into revenues and saddle businesses with administrative fees and higher processing rates. Worse yet, if your chargeback rate exceeds 1 percent, you could incur additional fees and fines. To reduce the frequency of chargebacks, it helps to know why customers request credits through their card issuers.
Check your billing descriptor, or the business name that shows up on customers’ credit cards statements. Is it easily recognizable, or might it confuse customers? Consider whether there are problems with fulfillment (i.e., do customers receive incorrect orders?) Does your company make it easy to return mistaken orders or defective products? Addressing these issues could help you see fewer chargebacks.
Sign up for any notification services that are available on your merchant account so that you’re alerted and can take quick action when a chargeback is processed. Delve into each one, and if you want to dispute any, start the process immediately — you only have a limited amount of time to do so. For requests that are legitimate, issue a refund. This helps you maintain your merchant account standing — and protect your reputation with customers.
3. Spot fraud so that you’re not a statistic.
An increase in fraudulent transactions, no matter how modest, should be a wake-up call. Fraud losses on credit cards, debit cards and prepaid cards rose to $22.8 billion in 2017, up 4.4 percent from 2015, according to The Nilson Report.
Lower the chances of contributing to such statistics by studying your transaction data. Note any patterns that emerge among fraudulent transactions, and use them to enhance your preventive measures. For example, especially large purchases or requests for rush shipping could signal a need to examine orders carefully before approval. Some companies will only ship to the cardholder’s billing address in an effort to thwart fraudsters, or choose to do so if there are signs the transaction is risky.
The threat of fraud is another reason to revisit your original merchant account setup. Consider these questions:
- Are there empty data fields you should be using?
- Are you set up for the Address Verification System (AVS) and the Card Verification Value (CVV) security code?
- Are you reviewing your batch transactions to identify when a customer repeatedly tries to use the same card number? This can indicate fraud.
Along with taking these steps, you must, of course, be sure to protect your customers’ payment data by complying with PCI security standards. This can help to shield your business from financial and reputational losses resulting from non-compliance.
“The more insight you have … the more quickly you can react and resolve issues.”
These are just a few reasons why you should look at your payment data on a weekly, if not daily, basis. Make it easier by setting up recurring reports that can be emailed to you and imported directly into your accounting or ERP system. The more insight you have into the costs associated with accepting payment cards, the more quickly you can react and resolve issues.
Check out our series on how to optimize your company’s payments tools and processes on SVB’s Payments Trends and Insights page.
This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. You should obtain relevant and specific professional advice before making any investment or other decision. Silicon Valley Bank is not responsible for any cost, claim or loss associated with your use of this material.