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What’s Payments Processing?
Ever wonder what happens when your customer taps their credit card on your Point of Sale Terminal? The funds don’t magically transfer from one bank account to another. That single tap of a card spiders its way back-and-forth through an ecosystem of Financial Institutions and technology.
Payments processing is the technology that enables a seamless transaction.
Let’s break down how a transaction gets settled:
- Once that card is tapped, your Point of Sale terminal initiates the transaction. Data about the purchase is then transferred to your gateway
- The Merchant’s gateway acts as a bridge between the Point of Sale and Acquiring Bank. It captures and sends data about the purchase to your Acquirer
- Your Acquirer routes the purchase through the card holder’s Card Network (VISA, Mastercard, AMEX, etc.)
- The card network acts as a highway—it enable a quick communication between the Acquirer and Issuer (card holder’s bank). They set the rules about what is and is not a valid transaction, and provide the infrastructure to route transactions to the correct parties
- The card holder’s Issuer authenticates the transaction. They verify available funds and asses the fraud risks. Their response, declined or approved, is sent back up the chain—to card network, Acquirer, gateway and back to the Merchant
- If approved, the transaction is settled. The Acquirer credits the Merchant account (minus processing fees) and funds are moved over.
What’s more, that tap of a card only take seconds!
February 2, 2024
Why is Getting Underwritten a Big Deal?
It’s not always possible or feasible to get underwritten for a Merchant Account. Not to worry. You still have options.
Are You Wasting Money on Dispute Mitigation Fees?
Chargebacks and fraud are an expensive hassle. Merchants might have access to many options for addressing disputes, but those tools can further siphon money from your bottom-line.
There’s Gold in Authorization Response Codes
Auth codes are more than a simple yes or no. They can also give Merchants insight into the underlying issues hitting their bottom-line.
Merchants Need to Watch Affiliates and Distributers
Merchants spend money and time to get up and running with payments. It only takes one poor partnership to tank your compliance thresholds.
Why Do Merchants Have Compliance Thresholds?
Your Processor is trying to remain compliant and manage a portfolio of risk exposure. Compliance thresholds help keep the Processor safe and their Merchants healthier.
How Can Merchants Stop Friendly Fraud?
Merchants won’t be able to completely eradicate friendly fraud. That’s because friendly fraud is not always malicious. It tends to be cardholders thinking their card was stolen or forgetting that they made a purchase/subscription.
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What are Decline Codes Anyway?
Every time a customer taps their card or pays on your website, that transaction is either approved or declined. For every declined transaction, there is a 2-digit alpha numeric code that tells the Merchant why a card was declined.
For example, when you swipe your card to pick up a new TV and that transaction gets declined for insufficient funds. The Merchant’s POS will tend to generalize the Issuer’s decline codes so the clerk can ask the customer to swipe again or use a different card.
With eCommerce (Card Not Present) and subscription business models, where the card holder isn’t always present, decline codes can be an invaluable tool. They give Merchants insight into retrying payments, if card holders are committing fraud, if there is missing payment information, and more.
Decline codes are two-digit codes that tell the Merchant why a credit card was declined.
Decline codes can break down into:
- Soft Declines – temporary issues that can be retried
- Hard Declines – permanent issues that (most of the time) shouldn’t be retried
- Referral Codes – the Issuer wants to handle the transaction
- Service Codes – problems with the processing infrastructure are preventing the transaction
- Fraud – suspected fraudulent activity on card
Stay tuned as we make sense of Merchant decline codes.
April 15, 2024
What are Soft Decline Response Codes?
Soft Declines are temporary and resolvable issues with a transaction, like expired cards and insufficient funds, that can be retried.
What Does a Hard Decline Mean?
Hard decline means that there is a permanent decline on the card. Most of the time, they indicate transactions that should not be retried.
What are Merchant Advice Codes (MACs)?
MACs give insight into how to move forward with a declined transaction. Though absolutely critical for Merchants to understand and monitor, many still have never heard of a MAC.
Hungry for more Bytes?
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Are You Leaking?
There is never an occasion when leakage is good.
And in Payments, it’s a massive problem that goes unresolved.
What do we mean by leakage? Merchants pay out of pocket to enroll into a handful of mitigation services. These services are necessary for managing disputes and chargebacks, and ultimately, for keeping within compliance.
But what happens when these tools don’t work correctly? Merchants can start to see previously refunded disputes show up as chargebacks. And after a while, all of those extra chargebacks start to chip away at the Merchant’s compliance thresholds.
Leakage is wasting margin. It’s when a Merchant gets enrolled with dispute mitigation services to manage chargebacks, but still ends up paying out of pocket for chargebacks that were previously refunded.
Why is plugging the leak so important?
Because leakage can be life or death for a Merchant.
Merchants can quickly find themselves falling out of compliance. And once they’re in the middle of a storm; it’s too late. Merchants can eventually get dropped by their Processor, and without processing, that Merchant runs the risk of being put out of business.
But don’t worry, leakage is solvable. Over this next series of Bytes we’ll breakdown everything you need to know.
May 9, 2024
Mitigation Services that Leak
From our experience, some mitigation services are particularly prone to leakage. Read on…
How Can I Track Leakage?
Tracking leakage is essential for any-and-all Merchants. But tracking it can be a massive slog. Let’s look at the two ways that leakage has historically been tracked.
How Can I Manage Leakage?
It doesn’t matter if you do everything right, Merchants can still get burned by leakage. Slyce360 is the easiest way to manage and resolve leakage.
Hungry for more Bytes?
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What are Authorization Response Codes?
What’s in a code? Apparently, quite a lot!
When you, as a merchant, attempt to process a consumer’s credit card, the issuing bank of that consumer’s credit card needs to make a decision regarding that specific request. The issuing bank ultimately makes their determination based upon a wide range of screens, heuristics, analytics and “AI” to determine the outcome of the transaction.
Regardless of the outcome, the issuing bank (via your processor) is going to tell you what the outcome is via a numerical code with a description.
While there are standardized response codes (e.g., “0” for approvals) what you receive in your response payload will vary based upon the payment processor and/or gateway that you’re using. Also, be aware that these entities frequently add or re-map authorization codes which can throw a wrench in your reporting and operations.
From a categorization standpoint, authorization response codes come in three general flavors. The first is “Approved”. This means you’ve been successful in your request for funds. Second is what is called a “Soft Decline”. This category is made up of things like “over limit” where the customer has no available funds on their card. The third category is “Hard Declines”. This category is made up of things like “Stolen Card” or “Account Closed”.
Historically, I think it is safe to say, authorization response codes have been a neglected area of analysis for merchants. The extent of the analysis has been limited to whether or not an authorization code is a “Hard” or “Soft” decline and the impact on a merchant’s reauthorization strategy.
The authorization response process is evolving at the card associations and becoming increasingly more complicated. In order to maximize revenue, and minimize expense, you need tools to help unlock the opportunities that lie within your authorization response data.
Slyce360 can help you open up a treasure chest of opportunities.
June 20, 2024
What are Soft Decline Response Codes?
Soft Declines are temporary and resolvable issues with a transaction, like expired cards and insufficient funds, that can be retried.
What Does a Hard Decline Mean?
Hard decline means that there is a permanent decline on the card. Most of the time, they indicate transactions that should not be retried.
What are Merchant Advice Codes (MACs)?
MACs give insight into how to move forward with a declined transaction. Though absolutely critical for Merchants to understand and monitor, many still have never heard of a MAC.
Are You Leaking…
… Margin? Leakage is our way of defining margin that’s being siphoned by dispute mitigation services that aren’t working correctly. Let’s break it down.
How can Credit Card Authorization Rates Impact a Merchant’s Business?
The immediate and most apparent answer is that authorization rates, specifically poor authorization rates, can impact your top-line revenue and increase expenses.