Retail Stress Test - Bank of America Merchant Services

Retail Stress Test
Manage your processing procedures and minimize chargebacks
In her advisory series in Retail TouchPoints, Leslie Hand,
research director for IDC Retail Insights, recommends
investing in a variety of merchandizing and operational
improvements such as digital retailing, loss prevention,
marketing and brand management, store operations, and
loyalty and reward programs.
The systems that intricately connect customers to goods,
however, sometimes go unchecked for cost savings that
could be applied to these other areas of the business to
generate additional retail revenue. Payment processing
is an example of a system that is so automatic and so
cloaked that some merchants are often in the dark about
the fees associated with this basic component of how they
do business.
For instance, chances are that you have an integrated solution for
processing payments, managing inventory and tracking sales. But,
do you know what features of a point-of-sale system are designed
to streamline back-office functions for greater profitability? Do
you know that a variety of factors affect processing fees normally
associated with card acceptance? Or that by putting controls in
place, you may minimize transactions with higher-than-usual fees
and reduce frustrating monthly processing expenses? In addition,
a monthly statement review made with a discriminating eye can
point out instances where improvements may be implemented.
These strategies need not be complicated, costly or time
intensive, but rather based in setting best practices.
Confirm that your integrated payments system is easy-touse, affordable and beneficial. A robust retail solution manages
back-office functions and provides flexibility for future
enhancements. Three retail-designed components are:
1. A retail-hardened personal computer powered by a processor at
the point of sale
2. A software package that handles inventory and customer
management
3. Processing capability of virtually every payment type, including
gift cards and paper checks using the Telecheck® ECA® service
Settle transactions in a timely manner. If you tend to settle
transactions more than 24 hours after they are authorized,
the rate could be higher. An easy fix is to set up terminals to
process card transactions automatically at the end of the
business day.
Accept PIN debit transactions at the point of sale. Fees for
credit and signature debit card transactions over $40 are usually
higher than those for debit (non-signature) transactions. By
enabling customers to enter their PINs when paying with debit
cards, you may be able to reduce your cost.
Capture card numbers by swiping them through a card
reader. Hand-keyed information is more likely to be entered
incorrectly and has a higher potential for fraud. Consider obtaining
a card reader instead. In addition, keep card readers clean so they
collect all magnetic stripe information, and train personnel to
avoid unnecessary key-entered transactions.
Enter the correct zip code when a card number must be handkeyed. Sometimes your card reader may be unable to process
a transaction, thus leading you to hand-key information, which
results in higher fees. By asking cardholders for the zip code on
their billing statement, however, you can minimize your exposure.
The zip code must match the one on record to qualify for the
lowest fee. If you still elect to process the card, though the zip
codes differ, you may pay a higher fee and face an increased
chance of fraud.
Limit card-not-present (CNP) transactions. CNP transactions
occur when cardholders provide their card number and
information over the phone, internet, fax or mail. Limit increased
fees by using an address verification service correctly and
answering all terminal-prompted questions.
Process commercial card transactions correctly. Visa® and
MasterCard® business, commercial and purchasing cards carry
higher fees. Educate personnel on entering the customer code
and sales tax for these transactions.
Limit transaction authorization and settlement amount
mismatches. Variation between authorization and settlement
amount usually triggers additional charges. If you’re accepting
tips at your business, ensure your terminal allows you to add and
adjust them.
Evaluate your current risk of chargebacks. A chargeback is a
transaction that has been disputed by the cardholder or the
card issuer. Some business types have a higher incidence of
chargebacks, but every business can take steps to lower risk.
•Check your customer’s card. Accept only major cards with
brand logos and holograms. Compare embossed numbers to
those on the receipt. Be sure signatures on cards are similar to
signatures on sales drafts. Check that transactions are after a
card’s valid-from date, but before its expiration date.
•Provide key information to your customers. Ensure that your
recognizable business name will appear on customers’
statements. Also, verify that your phone number is correct,
so that customers can easily reach you should they have
questions. Additionally, include your refund/return policy on your
sales draft (for card-present transactions, the cardholder should
know in writing what your refund/return policy is; for catalog
purchases, always explain your policy to customers who place
orders by phone; for eCommerce, your website should include a
screen detailing your policy with “I Accept” buttons, indicating
that customers have read and agreed to your terms).
•Follow authorization policies and procedures. Respect the
processes you have in place by adhering to the floor limit, which
is the largest payment you may accept via credit card or check
without authorization. A zero limit requires an official sign-off
on every non-cash transaction. Also, call the voice authorization
center for approval when necessary.
•Maintain back-office best practices. Make a practice of depositing
all transactions within 30 days and retain records for two years.
Some prerequisites for succeeding in the retail industry, such as
superior customer service and brand domination, may not change
with the times. Payments processing, however, is a function of
your business that you should periodically review and assess to
improve productivity and increase profitability — two timeless
essentials for business resilience.
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