The ‘High Risk’ Blog

The payment industry’s top consultants, professionals, and other experts offer their best advice, research, how-to’s, and insights, all in the name of helping you succeed as a high risk business accepting payments.

What are Same Day eChecks, And How To Start Accepting Them

An eCheck or electronic check is a method of payment in which a customer’s funds are transferred from the customer’s bank account, over the ACH (Automated Clearing House) network, and deposited into the businesses bank account. Unlike credit card payments, these work more like traditional paper checks, where funds are transferred directly from the customer’s account, to the merchant’s account.

eChecks Are Becoming More Popular

As a business owner, you’ve probably been asked to accept either a paper check, or an ACH (eCheck) from a customer in the past, particularly from customers without a credit card. Given the delays in receiving such funds, the potential for having a check “bounce”, and a host of other perceived problems with ACH payments, businesses have historically preferred to accept credit and debit cards even though they have extra costs as compared to ACH.

Recently, however, the popularity of accepting ACH as an alternative payment option has been on the rise over the last year, in large part due to technological and regulatory changes that have enabled accepting ACH payments to become a more reliable and swift payment acceptance method.

How eCheck Processing Works

Accepting eChecks is similar to accepting paper checks, although faster, more efficient, and typically more secure because of the electronic nature of the transaction. During an eCheck transaction, the following steps occur:

  1. The Payment is Authorized
    Just as with a credit card purchase, the first step in the transaction is the customer approving the purchase. Typically, this is achieved by the customer completing an online authorization form, or confirming via voice over a recorded phone call.
  2. The Payment is Submitted
    Once the merchant has received authorization, the payment details are submitted to the eCheck processor, again, typically there is an online portal similar to a credit card payment gateway that the merchant enters the customer’s payment information into.
  3. Funds Withdrawn from Customer’s Account
    After the payment information has been submitted, the eCheck processor, through the ACH network, oversees the withdrawal of funds from the customer’s bank account.
  4. Funds Deposited into Merchant’s Account
    The eCheck processor then clears the funds and deposits them into the merchant’s bank account.

What are Same Day eChecks / ACH?

Up until the last 6 months, when a business accepts an eCheck, the customer’s funds have been deposited into a merchant’s account on the next business day, but a new NACHA rule change allows ACH processors to offer same day eCheck processing for customers who want their eCheck funds deposited same day. The new rule also creates a “Same Day Fee” which applies to all same day ACH transactions and compensates ACH processors for the service.

What are the Daily Cutoffs for Same Day ACH?

ACH Operators now offer two settlement time windows for Same Day ACH.

  • ACH Transactions Submitted before 10:30 AM ET, are settled same day at 1:00 PM ET
  • ACH Transactions Submitted before 2:45 PM ET, are settled same day at 5:00 PM ET

What eCheck Transactions Are Eligible for Same Day ACH?

Almost all ACH or eCheck payments are eligible for same day ACH under the new NACHA rules. That includes both credits and debits. The only significant exceptions are international transactions (IATs) and high value transactions (those above $25,000), which are not eligible for same day ACH. Combined, these exceptions make up less than 1% of all ACH network transactions.

When is Same Day ACH Available?

In some cases, same day ACH is available now. The first rollout began in September 2016. But actual implementation by many ACH providers is rolling out throughout 2017.

How To Apply for Same Day eChecks

The ACH network is separate from credit card processing, and thus many merchant account providers offer the ability to accept eChecks as an optional add-on to a traditional credit card processing account.

Same day ACH is currently available as an option through a number of ACH providers. Simply contact your existing ACH provider and ask whether same day ACH is available, and decide whether the extra associated costs make sense for your business. If you need an ACH provider, apply with Soar Payments or contact our Sales Team to discuss your business’ eCheck needs.

6 Ways to Use eContracts to Dramatically Lower Chargebacks

An eContract, or electronic contract, is simply a contract sent to a customer electronically, typically via a service like DocuSign or AdobeSign. There are many good reasons to have customers sign eContracts prior to providing a product or service. They can serve to minimize customer disputes, define payment terms, explain the scope of service, set forth return and refund policies, reduce the likelihood of litigation, and dozens of others. Another, often overlooked use for eContracts, however, is to help minimize and win credit card chargeback disputes.

Remember, even though the chargeback system favors the customer over the business, the customer doesn’t automatically win. Rather, if you can prove that you fully explained the product or service, the terms of the agreement, and that you provided the full product or service according to those terms, then your business will win the vast majority of chargeback disputes. And well constructed customer eContracts are perhaps the most effective way of accomplishing that. In fact, eContracts can increase the likelihood that your business wins a chargeback dispute from the industry average of 25-30%, up to 85-95% once eContracts are used.

In this article, we’ll look at ten things that all effective electronic contracts should include, in order to minimize the potential for chargebacks occurring, and to win those that do occur.

1. Breakdown The Purchase In Detail

Your eContract should list with detail exactly how much the product or service costs, any associated costs or fees, taxes, shipping, any future recurring charges, etc. Ideally, all of these charges should be clearly delineated by product or service to a level of detail that the customer clearly understands what they are paying for, and that a third-party (the credit card issuer) can clearly understand when reviewing the eContract during a chargeback dispute.

Free Downloadable Sample eContract

Free Downloadable Sample eContract

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Why It Matters:
Customers often simply misremember how much a particular good or service costs, and claim that the amount charged was not what they agreed upon. By providing a detailed eContract that breaks out specifically what they are going to be charged and why, and having the customer electronically sign (and thus consent) to this document before the credit card is charged, your business can effectively win these chargeback disputes.

2. Identify the Credit Card On The eContract

Your eContract should clearly identify the method of payment. Specifically, it should include the card type (Visa, MasterCard, Discover, AmEx) along with the last 4 digits of the card used, and the expiration date of the card.

Why it matters:
By clearly identifying which credit card was used (without revealing sensitive cardholder data) you minimize the possibility of a “card not authorized” chargeback dispute being successful.

3. Obtain Proof the eContract Was Delivered

Simply keeping a copy of an eContract on file in the event of a chargeback dispute does you no good if you can’t prove that the customer actually received a copy of the eContract. That’s why your eContract software needs to list, on the signed agreement itself, the email address (and/or MAC or IP address) the document was sent to, the customer’s electronic signature, and the date and time of that eSignature.

Why It Matters:
A disgruntled customer may attempt to say that they never saw a copy of your eContract or receipt. By having electronic proof on the actual document that it was sent to the customer and that they acknowledged it by their eSignature prior to the charge being run, you will almost certainly win this type of chargeback dispute.

4. List Full Refund Policy On the Receipt

A lot of businesses prefer to list their refund policy on their website, and merely make reference to it in their eContract because it’s so lengthy. Unfortunately, that’s not always sufficient when it comes to fighting chargebacks where the customer claims they were not sufficiently informed about the company’s refund policy.

Why It Matters:
When a customer is initiating a chargeback dispute as a means to circumvent the limitations of a company’s return policy they will often state that they were not informed of the return policy at the time of the sale, and surprisingly, this is often a very successful way of winning a chargeback dispute by the customer. To ensure that you win these types of chargeback disputes, not only should the return policy be available on the website’s order page (if applicable) but also on the actual eContract that the customer signs and receives a copy of. That return policy should state the time limit, and restocking fees, and any terms or conditions that will apply for a return to be accepted.

5. List Terms of Service On The Receipt

Just as with your company return policy, if there are specific terms of use, terms of service, or terms of cancellation with the products or services that your company offers, they should be listed in full (or as fully as practicable, including all material elements, with a link to the full policy) on the receipt itself.

Why It Matters:
The issuing bank that adjudicates chargeback disputes is going to heavily weigh things in favor of the customer. So a customer claiming that they were unaware of the terms of service, despite the fact that they are clearly listed on your website, is often going to be successful in their chargeback dispute. In order to better ensure that you win these claims, make sure that the terms of service policy is fully listed on the actual eContract that the customer signs.

6. Obtain Notification Authorization For Future Billing

If your business uses a recurring billing model, you’re likely well aware of the potential for customers to initiate a chargeback out of convenience rather than simply going through the company’s cancellation procedure. Unfortunately, unless you can prove that you provided the customer with sufficient notification in advance of the recurring charge, you’ll almost certainly lose this chargeback dispute, even assuming that the eContract properly informed them of future charges.

Therefore, it’s important to make sure that your eContract details how the customer will be notified of the charge in advance (e.g. have the customer write in their email address), and require that the customer inform you if they’d like to update the email address for the notification emails going forward.

Why It Matters:
If you cannot provide evidence that the customer was informed of a recurring charge prior to the rebill, then you’re almost certain to lose the chargeback dispute. In order to prove that the customer was informed, not only will you need a copy of the detailed advanced email notification, but also some evidence that the customer was aware of how they were going to be notified. This prevents a customer from stating down the road that they were not properly informed.

As a business owner, you’re not going to win every single chargeback dispute, and frankly, unless you honestly believe that your business operates without flaw, you shouldn’t. By implementing the six eContract recommendations above, however, you can reduce the overall number of chargebacks your business has to deal with by reducing consumer confusion, and when inevitable chargebacks do occur, dramatically increase the likelihood that by providing a copy of the eContract during the chargeback dispute process, your business will win the dispute.

About Soar Payments:

Soar Payments is a merchant account provider that specializes in high risk merchant accounts, including eCommerce and MoTo based businesses. Their payment solutions include integrated chargeback mitigation and management tools that are effective and simple to use. To apply for a merchant account with Soar Payments, apply here.

Disclaimer: This chargeback mitigation information and the included sample eContracts are provided for informational purposes only, and Soar Payments does not warrant their effectiveness for any individual business. Moreover, Soar Payments encourages all businesses to work with all dissatisfied customers in good faith first, and only resort to the chargeback and re-presentment process when amicable resolution cannot be achieved.

Chargeback Reduction 101

13 Steps to Dramatically Lower Your Chargebacks

At Soar Payments, we speak with dozens of eCommerce and Card Not Present merchants every day. And almost all of them (at least the smart ones) know that they need to take chargebacks seriously from the start. What they’re less clear on, is how exactly to do that. So, in this article we’ll take a minute to review some universally effective ways to lower your business’ chargeback ratio in the short, and in the long term.

1. Provide Excellent Post-Sale Customer Service
This one is easy and intuitive. Many chargebacks (approximately 37%) are due to a customer wanting to cancel a service or return a product. Not all of these can be eliminated due to excellent post-sale customer service (e.g. reaching out via email or phone to confirm the customer was satisfied and / or providing detailed return instructions with the package), but a surprisingly large number can be. The Downside: Effective post-sale customer service means empowering your customer service team to issue refunds and settle customer disputes (usually at a cost to you the merchant) on the fly and sometimes outside of the company’s stated refund policy. That will negatively impact your bottom line, of course, but given how costly and time consuming the chargeback process is, for most businesses the tradeoff is well worth it.

2. Monitor for Duplicate Transactions
With both eCommerce and MoTo transactions, there is a surprising number of inadvertent duplicate transactions which occur. This can be as simple as a customer service agent pressing the ‘process payment’ button twice, or the customer hitting the back button in their web browser and resubmitting their card information. Typically, your payment gateway can be setup to identify and automatically block duplicate transactions which occur within a short time window. Doing this effectively will only yield a 2-3% reduction to the number of chargebacks your company incurs, but because you’re virtually guaranteed to lose any duplicate transaction chargeback dispute, they carry an outsized impact on your bottom line and cash flow.

3. Clearly State Your Refund Policy
A large percentage of ‘friendly chargebacks’, that is, chargebacks where the customer legitimately authorized the charge but later disputes it, are caused because customers are attempting to return a product and either don’t know the refund policy, or find it too burdensome to comply with. To minimize this form of friendly chargeback, a key is to have a clearly stated (on both the product description page, the checkout page and the customer’s receipt) refund policy that is easy to understand and comply with. And for those chargebacks that still occur despite a clearly stated and disclosed refund policy, you’ll be in a much stronger position to win 80-90% of those disputes as long as you’ve complied with the above.

4. Refund Quickly and Consistently
A small but easily avoidable type of chargeback that particularly afflicts card not present and eCommerce merchants is “credit not issued” chargebacks. These are situations in which you and the customer have agreed to a refund, but the customer claims the refund was not issued. Most often, this is because the customer fails to understand that a refund takes 3-7 business days to appear as a positive balance on their credit card statement even when its initiated immediately. To minimize this type of chargeback, make sure that any refunds are accompanied by a detailed electronic receipt that clearly shows the amount being refunded, the card it was refunded to, and that it will take 3-7 business days for the refund to be reflected on the cardholder’s credit card statement.

5. Cancel Subscriptions / Rebilling Appropriately
One of the main reasons subscription businesses are considered high risk is because they can generate so many chargebacks if the business doesn’t take responding to, and terminating recurring billing agreements seriously. In fact, roughly 19% of all chargebacks are due to customers seeking to cancel a recurring bill.

One of the easiest ways to dramatically reduce this type of chargeback is to send an electronic receipt 24-48 hours prior to a recurring bill being transacted. This will give the customer an opportunity to call and cancel before the charge occurs. But at a minimum, make sure that you provide a convenient method for cancelling recurring billing charges. And upon cancellation, the customer should be sent a detailed electronic receipt confirming the date of the cancellation and that no further charges will occur or services provided.

6. Create Detailed Product / Service Descriptions
One of the largest categories of chargebacks is called ‘Product/Service Not as Described’. These are situations, obviously, where the customer is claiming that the product or service delivered wasn’t as advertised. And because the chargeback system generally favors the merchant, any ambiguity in the product or service offered is usually adjudicated in favor of the customer. Therefore, to minimize this category of chargeback, make sure to have as detailed of product / service descriptions as possible. For physical products in particular, offering a video or 360 degree view of the product has been shown to reduce ‘Product Not as Described’ chargebacks by over 60%.

7. List Convenient Contact Information
Nobody likes talking to disgruntled customers. However, avoiding the problem by simply creating a contact form on your website as opposed to offering a direct email and human attended phone number is a surefire way to generate more chargebacks. Remember, the largest category of chargebacks are customers seeking a refund or redress with a problem and turning to the chargeback system as opposed to your company because they find the chargeback system more convenient. Consequently, you can dramatically reduce this category of chargebacks by making it easy for the customer to contact your business to discuss obtaining a refund, handling an exchange, or otherwise dealing with the customer’s issue as easy as possible.

8. Use Clear Shipping Policies
If you’re shipping a product, having the product arrive after the expected arrival date, or leaving the customer in the dark as to when a product will arrive is a surefire way to cause a number of chargebacks. Instead, make sure you have a reasonable shipping arrival window stated on your checkout page and the receipt. And secondarily, try to integrate a shipping tracking code onto your receipt. Finally, if a delivery is significantly delayed, affirmatively reach out to the customer and offer them a few proactive options to resolve the situation (e.g. a refund, or substituted item) before a chargeback occurs.

9. Provide Regular Status Updates
If you offer a product or service that is delivered in more than one increment or over time, make sure to keep the customer informed as to the progress of the order throughout the process. These can typically be automated emails generated by your CRM, but leaving customers in the dark as to how the process is going will almost certainly increase your chargeback ratio.

10. Use Clear Payment Descriptors
A payment descriptor is the phrase that appears on a customer’s credit card statement next to your charge. A surprisingly large percentage of chargebacks are due to the customer claiming that they do not recognize the charge (aka
‘No Authorization’). While some of these chargebacks are simply friendly fraud in disguise, a significant number are legitimate.

You can reduce ‘No Authorization’ due to the customer not recognizing the charge by making sure that your payment descriptor matches the name, service or product that your customer knows you as. That is to say, rather than choosing your company’s legal name, pick a name or phrase that will be immediately recognizable to the customer. Additionally, consider adding your customer service phone number to the end of your credit card descriptor, to make contacting you with questions even more convenient for a confused customer. And finally, make sure any electronic receipts state “Note: Our billing name on your card statement will be _______.” That way, even if the customer never reads that line, when they search their email later with the payment descriptor in an attempt to identify the charge they’ll see that it was legitimate.

11. Manually Review Suspicious Orders
Very large transactions, very small transactions (surprisingly), high frequency transactions, foreign transactions, transactions where the customer has opted for a very fast delivery, and transactions in which there is a mismatch between the billing and shipping address are all indications that a charge may be fraudulent. If fraudulent transactions are permitted to be processed, the vast majority will ultimately result in a chargeback.

To prevent these, make sure to configure your payment gateway to flag suspicious transactions for manual review and block altogether the most suspicious transactions entirely. And then attempt to confirm flagged transactions over the phone prior to processing. Finally, if a transaction is confirmed fraudulent after the payment has been processed, immediately issue a refund and (to the extent possible) halt delivering the goods or services in an effort to avoid an eventual chargeback.

12. Use CVV and AVS Match for MoTo Transactions
A large number of fraudsters who have stolen credit cards do not have the appropriate physical address associated with the card, nor the CVV code. To prevent these transactions (almost all of which will result in a chargeback), therefore, you can configure your payment gateway to require a CVV (the 3 or 4 digit code) and AVS (either the whole address or just the zip code) for all payments taken over the phone or via mail. You can use this added protection on a limited basis for eCommerce payments as well, but a surprising number of legitimate customers enter this information wrong, leading to a large number of false positives. So consider limiting the requirement to only particularly large or suspicious transactions.

13. Enable Chargeback Alerts
Despite your best efforts, if you are a MoTo or eCommerce merchant, you will likely still incur some level of regular chargebacks. Chargeback alerts offer one final means of eliminating 30-40% of those remaining chargebacks that occur. Chargeback Alerts are simply alerts that a customer has initiated a chargeback against your company. And they provide you with a 48 to 72 hour window in which, should you choose, you can fully refund the customer, and by doing so avoid the chargeback process entirely. The downsides are obvious, for Chargeback Alerts to be effective, you need to be willing to issue a full refund to the customer. Moreover, only about 30-40% of potential chargebacks are identified, as the system relies on credit card issuing banks to participate in the program (of which only about 30-40% currently do). Despite its limitations, however, this can be a valuable tool to automatically further reduce potential chargebacks for a business by a significant percentage.

For eCommerce and MoTo merchants, being vigilant about minimizing the incidence of chargebacks is largely about understanding the problem, taking it seriously, and taking the time to put into place company policies and procedures that have proven over time to be effective. Using the universally applicable steps above, a high risk merchant can dramatically reduce the quantity of chargebacks received, and increase their winning percentage for those few that still occur.

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