Best Practices for Managing Credit Card Processing Risk

By October 25, 2016 October 9th, 2017 Blog

Owning a business is filled with risks. Merchants that accept payment by credit card face risks every day that carry heavy consequences. The move to EMV (chip cards) has been slow and regulation has not kept pace. That hasn’t stopped card associations from moving fraud liability to merchants however.

Additionally, the entire processing chain presents multiple vulnerabilities and potential for hacks, data breaches, system outages, and exposure due to sensitive information going through so many disparate systems before money gets deposited to your bank account.

Sources of Risk for Credit Card Merchants

The credit card processing system has several behind-the-scenes steps, each with its own fees, systems, security, and reports. Every credit card transaction passes through each one of those steps. It’s a target-rich environment for any criminal intent on gaining access to valuable personal financial information.

When a consumer patronizes your business, you’re ultimately responsible for the security of the transaction originated by you for payment. In a way, you’re at the mercy of each of those entities in the settlement chain for the safe keeping of your customers’ financial information.

As a business owner, your risks don’t stop there, either. How do you know when your own bank accounts are in balance with your credit card processing system? How do you make sure each transaction gets completed successfully, and that you’ve been paid for the goods or services rendered to your customer? How much time do you spend trying to wrangle all the systems and points in the chain to make sure you know the status of each transaction? These are critical business issues—if you don’t have control over cash flow, extra time is spent and efficiencies are lost.

There is also the risk of increased fees due to a failure at the point of sale. When a downgrade occurs and fees increase, there is the potential for that condition going unnoticed for a period of time, simply because it’s hard to detect. To achieve the maximum efficiency in the merchant processing system, you would have to monitor every point in the chain, every day, for every single transaction to ensure that each one happens how it should. Do you have time for that? If you did that, what would the cost be to the rest of your business?

Sometimes disputes are a part of conducting business. Unfortunately, when credit cards are involved, disputes are time-sensitive, and the process is complicated. When ignored, chargebacks and disputes can be a drain against the bottom line for any business. It’s in every merchant’s best interests to find efficient ways to manage the chargeback process in order to maximize the bottom line.

Why Dealing With Risks Head-on Matters

It’s said that the simplest way to make a business better is to increase revenue and decrease costs. When a business, large or small, has a complete picture of every aspect of how it’s managed financially, opportunities for increasing efficiencies become more visible. Efficiencies bring reductions in costs. Knowing the details of how credit card transactions are processed leads to better cash flow planning.

For businesses with multiple locations or a high transaction volume, visibility into card processing allows transparency and can identify other business needs, such as increased training, or other business needs that can be beneficial. With card processing among the largest costs in many businesses, transparency and accountability into the process are critical to efficient operations.

How can merchants mitigate payments acceptance risk in their organizations?

Mitigating all possible risks serves to insulate the business from loss of income, loss of efficiency, and ultimately, legal liability. Merchants should have a risk program in place that does the following:

  1. Recognize areas where costs can be controlled and reduced
  2. Have policies and processes to handle all transaction disputes
  3. Reconcile merchant accounts daily across all payment acceptance channels
  4. Leverage technology at each step in the process to bring efficiency to the system of managing payment acceptance risk

Any business that implements a risk program to addresses each of these areas will reap the benefits at the bottom line.

Red Carpet Software: Merchant Dashboard is the tool you need

Red Carpet Software: Merchant Dashboard can bring you alerts for several risk factors that have impending financial impact. Alerts allow management to be proactive in dealing with risks, rather than reactive. Sophisticated alerts can notify all areas of the financial management group about small details that can add up to major dollars if they aren’t managed properly.

Managing downgrades is a good illustration of how alerts work: If your business policy is to never manually key in cards across your locations, RCS Merchant Dashboard will notify you immediately of a transaction that breaks that condition. The alert will allow you to recognize immediately that there’s a problem that needs to be addressed. Both costs and fraud risks are managed proactively in this way.

Red Carpet Software Merchant Dashboard centralizes all your payments data, bringing you unique insights that would be invisible through individual processing portals. In fact, reports and alerts make up the major benefit of Red Carpet Software: Merchant Dashboard, where all processing details are managed in near real-time, in an easy-to-use way that allows you, the merchant, to have complete control over your entire merchant processing business.

Red Carpet Software: Merchant Dashboard provides a high-level view of all business, shows alerts when needed, and makes all the details of individual transactions easily accessible. Having a chargeback automation and reporting solution like Red Carpet Software: Merchant Dashboard will help manage the time consuming process of dealing with chargebacks in a way that can have a positive impact on the business.

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