For every business owner, a merchant account is the backbone of all fund transfers across card processing systems. Merchant accounts act as the link between issuing banks and businesses for seamless settlement of payments by customers. However, setting up a customer-friendly merchant account does not always come without a fair share of challenges. As such, to establish an efficient card payment system, businesses must face major problems impacting merchant accounts.
Here is a quick look into 5 common problems associated with merchant accounts.
High Fees
The high processing fees surcharged against a merchant account are often generated from poor customer services and manipulative marketing strategies. In such cases, fees and charges are hidden by deceptive service providers, resulting in unpleasant surprises to businesses. For instance, various merchant account providers do not charge for such services as termination and PCI Compliance. Therefore, an account provider featuring these charges is definitely too costly for any business.
Again, banks are quite skeptical about issuing certain types of merchant accounts to businesses under specified industries. As a result, operating in what is considered a high-risk industry can only afford you a high-risk merchant account, which attracts ridiculous fees and commissions. The cost of having a high-risk merchant account can be high across every facet of the payment service, including account opening, maintenance, and other functions.
Difficulty Cancelling an Account
Business owners are entitled to cancel their accounts following such circumstances as business closure and transfer of rights. In cases where merchant contracts are month-to-month, cancellation of services is seamless and almost cost-free. However, where a service provider charge you for early cancellation, calling off a merchant contract can be extremely difficult.
First, you would have to pay an early termination flat fee, adding up to several hundred to cancel your account. Not to mention other associated cancellation fees, such as liquidated termination and prorated termination fees.
Secondly, the cancellation process can be extremely complicated and tedious. From following up with unavailable agents to getting shuffled across departments, calling off a merchant account is easier said than done.
Fraudulent Activities
Fraudulent activities associated with card payment systems and merchant accounts are probably the biggest concern for most merchants. These are illegal schemes carried out over digital spaces against the card payment processes.
Merchant account acquirers are often subjected to these three types of fraudulent activities.
- Payment Fraud – Payment fraud is any illegal transaction initiated by cyber attackers online. Often, payment fraud results in unauthorized fund transfers, falsified money-related requests, and stolen property. Payment fraud occurs in different formats, including;
- Pagejacking – This is rerouting webpage traffic from a popular online store to a malicious website for fraudulent undertakings.
- Phishing – This is a deceptive request to disclose personal details, such as bank account information, through emails or websites. Often, the emails used are disguised as communication channels from reputable organizations.
- Identity theft
- Merchant identity fraud
Chargeback Abuse
Businesses cannot fully avoid chargebacks. This is because cardholders are entitled to reclaim funds for disputed charges. However, the process of reclaiming a disputed transaction is sometimes abused by malicious actors. Statistics reveal that over 50% of all merchant chargebacks are fraudulent. With most of these transactions going back to legitimate customers, the process of recovering a chargeback abuse can be quite complicated.
Unfortunately, chargeback abuses have led to massive losses in the place of merchants. These losses occur in the form of chargeback fines and penalties, loss of property, and damaged customer trust.
Credit Card Data Theft
Credit card data theft occurs when the cardholder’s confidential information is exposed to unauthorized persons. In most cases, card data criminals use credit card skimmers to scan through customers’ data every time there is a credit card swipe at a POS machine.
The consequences of credit card data theft include the initiation of illegal transactions and the impersonation of cardholders for fraudulent actions.
Delayed Funds
When setting up your merchant account, sometimes you may be required to consent to Automated Clearing House (ACH) payment policies. Such policies include ACH delays, where funds are temporarily held from the acquirer to your direct deposit account.
While ACH delays are temporary, enterprises guided by tight cashflows may suffer from impaired business operations. This is because such operations may never have the laxity to wait for some extra days for payments to be settled by your merchant bank.
Poor Customer Support
Merchant accounts are always faced with technical and transaction issues. In this case, businesses working with service providers unavailable beyond regular business hours may find it difficult to sort out technical problems arising during such hours.
This is why you must consider merchant account providers offering round-the-clock support to easily mitigate unpredictable concerns.
Scour through their website and evaluate the provider’s customer support policies. Some of these merchant providers will shift their attention immediately after signing up with them. Not to mention the frustration of dealing with automated answering bots integrated into their customer support systems.
Conclusion
Not all merchant accounts experience similar problems. However, it is always advisable to scrutinize a merchant provider for potential problems before signing up with them. Look out for complaints and negative reviews associated with a processor. Ultimately, you should strive for an optimal service that minimizes merchant-related risks and problems.