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eMatters Online is our core product, providing the basis for every transaction we process. It is an automated Payment Gateway, where customers can submit their credit card details and have the payment deposited into your account next business day. But, before you can start using our award-winning systems, you should understand how the eCommerce world works, what you need to be on the lookout for and how you can increase your business turnover.

Some Background

Let's take a look at Internet Credit Card Processing actually works.

Maybe you've just opened shop. Or maybe you've been in business for years. Either way, if you're about to accept credit cards from your customers you're in good company.

Here's why:

• It's easier for customers to pay you. Plus, they often spend more.
• You can accept orders by telephone or Internet.
• Your business enjoys enhanced credibility.

Every business has its vocabulary. This is ours, starting with the parties in transactions:

• Your customer, the Cardholder, obtains their MasterCard, Visa or Bankcard credit card from an Issuing Bank.
• You, the Merchant, obtain your Merchant Account from an Acquiring Bank (also referred to as Merchant Banks). Merchant banks sponsor you as a business qualified to accept credit cards.
• Payment Gateways are companies such as eMatters that process the credit card transactions through the bank system for you. Merchant banks use eMatters as a third-party service as they offer enhanced processing.
• The Settlement Amount is the amount deposited into your account after a sale.
• Merchant Service Fees (MSF) are a nasty fact of life. They are the fees that the Acquiring Bank takes for their part in processing your transaction..
• Transaction Fees also a required part of this process, and they are the fees that your chosen Payment Gateway takes for their role in processing the transaction.
• Acquiring Bank is the bank which you have chosen to connect to in order to accept credit cards.
• Issuing Bank is the bank which has issued the credit card to your customer.

Credit Card Processing in 5 Easy Steps

When a credit card is used for payment from your website, the following process occurs (usually in a matter of seconds!):
1. The customer orders goods on your site.

2. Your site determines the amount of the transaction and creates an order number.

3. eMatters electronically links to the banking network to transmit the authorization request to the bank.

4. The bank verifies that the account number is valid and that the transaction amount does not exceed the cardholders credit limit. The authorization also puts a hold for the funds on the cardholders credit limit.

5. eMatters instructs the issuing bank to deposit the settlement amount into your bank account at your acquiring bank. A positive response is delivered to you and your customer.

Responsibilities and Rewards

You've seen how transactions work. Now we'll step back and review what keeps the whole credit card system together, namely:

• Built-in Protections
• Trust

Credit cards offer protection for you, your customers, and the banks involved. In fact, protection is why credit cards are safer for everyone.

Merchants

• When you accept a credit card (and the transaction is authorised) you can be sure you'll receive the funds. (Later, we will discuss disputes where funds go back to the consumer.)

• The credit card system protects issuing banks from unscrupulous merchants. When you submit a deposit, you are promising the issuing bank that you have delivered the goods and services promised to the cardholder. If you don't, the issuing bank has the right to charge back the transaction.

• Cardholders are protected from merchants who fail to keep their promises. They're not liable for payment if a merchant fails to deliver as expected.

• Trust holds the credit card world together. The issuing bank doesn't ask a cardholder if he is satisfied before you get your money. They TRUST that the cardholder will be satisfied. Here's how you earn that trust: When you sell by credit card, you must deliver on the cardholders expectations (note that word!) of your goods and services.

• What expectations? Think about it. Either by policy or by practice, implicitly or explicitly, you tell customers that they can expect a level of quality, delivery times, etc. By accepting a credit card for payment, you are promising the issuing bank that you are going to make good on those expectations. If not, your customer can get his money back.

Almost everyone has an idea of how a credit card SALE works. But even some experienced merchants don't know the other side of the system: chargebacks. Understanding chargebacks can save you a lot of money. And help to salvage customer relationships.

If a cardholder believes a charge isn't legitimate, or that their expectations weren't met, she could come to you for a refund. But she has another, more troublesome, option: Chargebacks.

Here's how chargebacks work: Regardless of merit, the issuing bank is obligated to investigate complaints from cardholders, including:

• You never delivered the goods and services you promised.
• The cardholder never ordered the goods that showed up on her credit card bill.
• The cardholder received the goods and services, but they didn't meet their expectations, so they wanted a refund.

Common Causes of Chargebacks

Some common causes of chargebacks can be avoided easily:

If your company name appears one way on your advertising and your receipts, but a different way on the customers credit card statement. (Call eMatters to fix this.) In some cases, this problem results from two businesses attempting to process transactions from the same account. This is frowned upon, so call us if you have a second business.

When you charge the customer before the goods have been shipped. In other words, don't submit a transaction before you have shipped the goods or performed the service..

Credit Card Disputes: Retrieval Requests

Traditionally, the dispute process begins with a Retrieval Request that asks for documentation.
1. The Acquiring Bank sends a Retrieval Request (often called simply a Retrieval) to the Merchant. Sometimes, they start with a chargeback and skip the Retrieval Request altogether.
2. The retrieval asks for proof that you delivered the disputed goods or services to the cardholder.
3. When you provide proof that you delivered the goods or services to the cardholder, the Acquiring Bank forwards it to the Issuing Bank who informs the cardholder. The proof is usually a document (delivery receipt, credit card receipt and/or your store receipt) signed by the cardholder.
TIP: Reply PROMPTLY to these requests. Late responses almost always result in chargebacks.

When You Can't Prove The Customer Wrong

If you don't have documents for the retrieval, or if you don't deliver a copy of the documents to your processor in time, the cardholder is deemed to be right. When this happens, several things occur:
1. The Issuing Bank submits a chargeback to your processor through the Visa/MasterCard network.
2. Visa/MasterCard/Bankcard debits the original transaction amount from your bank account. (Or, it is deducted from your most recent deposit transactions).
3. Your Acquiring Bank records the chargeback on your account record. Besides the obvious financial loss to you, chargebacks are also bad because of that final step. Heres why. Everyone in the credit card system knows that eventually a few transactions will result in chargebacks. They are a cost of doing business. But, if you cause too many chargebacks, the credit card system will start to doubt you and your standing as a credit card merchant. When chargebacks become too prevalent, your merchant account may be terminated by your sponsoring bank. Then you may find it impossible to find another sponsoring bank. In other words, no more credit card acceptance. Ouch! That is why we are so strict with our fraud screening policies !

Chargebacks and Timing

In most cases, chargebacks must be initiated within 120 days of the original transaction. However, if a merchant is alleged to have violated Visa or MasterCard rules, a compliance case can be disputed up to 180 days after the rules violation.

Fraud: The Best Way to Avoid Chargebacks

Preventing credit card losses is not only good for you, but it is also part of your responsibility. Here are some general guidelines on how to prevent fraud and avoid chargeback situations.

• Make sure that the credit card is from the legitimate cardholder . . . Not just someone who knows the card number, or has stolen the actual card.
• Never ship to a person providing just a hotmail address (or similar) and a mobile phone.
• Monitor your transactions for unusual purchase patterns. If your usual order is $100 and then you recieve one for $2,500 without any explanation then warning bells should ring.
• Check the delivery address using the WhitePages and Street Directory where possible.
• Know your cardholder personally if at all possible.
• If applicable, use Fraud Screening Systems and verify the Security Codes (also known as Validation Codes) on the card
• Obtain a signed proof of delivery from the shipper for delivered goods.
• Protect your merchant ID and terminal ID so no one submits transactions without your permission.
• Don't accept expired cards (or accept cards before the effective date!). The date shown on the card is the good thru date and is good through the last day of that month.
• Protect your passwords to our Merchant Desk.

More Tips to Avoid Chargebacks

• Make sure shoppers know your warranty and return policy. Make sure YOU consistently live up to it. When consumers can resolve problems directly with you, you avoid the hassles of dealing with chargebacks.
• Do not submit a transaction until you deliver the goods or services.
• If you rent equipment or sporting goods, do not attempt to cover damage to your products by charging the customers credit card without doing the following: You must run a separate transaction for the damage after swiping the card again and having the customer sign a separate sales draft and invoice for the damage claim. You must never attempt to charge for damage or loss using only the credit card draft obtained when performing your rental transaction . . . NEVER.

Your processor and merchant bank expect you to be honest with your customers (thereby managing expectations). And you're expected to live up to your bargain.

This translates into four requirements:

1. Fulfill your shipment dates and commitments to your customers.
2. Promptly respond to requests for refunds according to your policy AND submit the appropriate credit transactions to your processor. Do not refund a customer with a cheque or cash.
3. Prevent fraud
4. Only charge cardholders after delivery of the goods or services.

• Don't share, sell, purchase or exchange cardholder names and account numbers in any form.
• Secure all records, electronic or otherwise, that include cardholder names, account information, transaction information etc. to prevent access by anyone other than your processor.
• Never store magnetic stripe data. In the electronic commerce arena, a number of best practices to help protect data from unauthorized access include:
• Encrypt cardholder data and only store that data in encrypted form.
• Back up files only in encrypted form.
• Secure encryption and communication keys in a secure hardware device or tamper-resistant security module.
• Limit personnel access to computers.
• Encrypt and decrypt within a secure hardware device. This isolates the encryption keys and minimizes their exposure.
• Manage all keys using split knowledge and dual control so no one person can have access to data in the absence of other employees.
• Protect access to file servers.