Merchant Account Solutions for Subscription and Membership-based businesses

Different types of businesses require different modes of payment. The right choice of payment option that compliments your business should be based on two important variables; first being the type of business you operate and two being the kind of demographic you cater to and want to attract.

A merchant account is a mandatory requirement in order to accept credit or debit cards. And obtaining one might be quite easy if you are a regular business but just getting one should not be your priority. Instead, finding the right merchant account provider that suits your business operations and goals and offers you the services that will help you run your payment process efficiently is of utmost importance.

This is especially important in case of high risk businesses who struggle to find merchant solutions and end up compromising on the quality of services they receive. One such industry that has trouble dealing with banks is the subscription or membership based businesses.

Businesses with products and services like magazines, cosmetics, spas, lifestyle, healthcare, clubs, fashion etc that are consumed on the regular basis come under this particular industry.

Challenges for Subscription- or Membership-based businesses:

The most common reason why merchants with recurring business models are often denied a merchant account is due to the higher risk of chargebacks. There are many scenarios with such businesses wherein the customers forget that they’ve signed up for services.

There is also a greater possibility of friendly frauds occurring with subscription based businesses with customers denying having signed up for services or authorizing for recurring payments and then calling up the bank to revoke their entire plans. Such instances hurt the business and increases their chargeback significantly.

Hence, it always advisable to disclose clear terms and conditions about your refund policies and payment terms during the check-out process.

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Subscription- or Membership-based Merchant Account Solutions:

If you are one those businesses offering subscription or membership options to your customers, you should opt for a merchant account that will give you the ability to accept recurring payments easily and quickly and ultimately streamline your payment process efficiently. Such businesses have a specific payment processing needs that can only be fulfilled with Subscription- or Membership-based Merchant Account Services.

With a subscription- or membership-based merchant account, a customer need not enter their payment details every time. Plus, you don’t have to remind your customers for payments either since you can receive regular on-time payments automatically. You also have the freedom to choose when your customers will be charged i.e. daily, weekly, monthly, yearly, etc.

Such type of merchant account has extensive customizable recurring billing options for the kind of products and services you sell that will the demands of your business as well as customers.

Tips on How to Avoid Chargebacks for Small Businesses

In this fast-paced world, it becomes imperative for a small business to be flexible in order to keep up with the constantly evolving technology and accommodate customer demands as well. The key responsibility of a business is to be always aware of the customers’ needs and requirements. And the one thing that customers look for in any business is the variety of options available. Whether it is among products or payments, customers enjoy having options to choose from.

Hence it becomes a priority for a merchant to employ the best payment methods available to match your customer preferences. Accepting credit cards as a mode of payment is one of the most important decision that a small business has to make.

And while there are many advantages to accepting credit cards, something that a merchant should be wary of is its one major drawback – Chargebacks!

What are chargebacks? A chargeback occurs when the merchant charges credit card for transaction but the cardholder or customer disputes it. While chargebacks are genuine, some are caused with a malicious intent to rob the business.

Regardless of whether you are a small business or operate a huge firm, chargebacks can be equally daunting for both costing businesses over $4 billion annually.

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Excessive chargebacks can lead to shut down of your merchant account and tarnish your reputation among credit card processors.

But do not worry! There are ways to recognize, prevent and fight chargebacks to ensure smooth transactions for your small business.

How to prevent chargebacks for small businesses?

Check whether your merchant account provider offers chargeback protection tools to analyze, manage and prevent chargebacks.
Integrate a 3D secure payment gateway with your merchant account which gives an additional layer of protection during credit or debit card transactions.
Validate the cardholders’ identity and accept credit cards from authorized customers only.
Avoid misrepresentation and false advertising of products and services. Be transparent about what you sell.
Employ a strict & clear refund policy.
Provide an excellent customer service. Respond quickly to complaints or queries.

While a merchant cannot completely avoid chargebacks, they sure can implement necessary measures to reduce it.

Friendly Fraud: What Can A Merchant Do To Prevent It?

The growing number of fraudulent chargebacks is alarming and something merchants simply cannot afford to ignore and keep a firm handle on it.

In fact, 86% of chargebacks are most probably cases of friendly fraud and the number is increasing at the rate of 41% every year. It’s also predicted that going by current rate, by 2020 the frauds will cost merchants upwards of $25 billion a year.

The concern is especially high in case of e-commerce merchants and high risk businesses that face merchant account shutdowns due to high amount of chargebacks.

What is a friendly fraud? Friendly fraud refers to when customers dispute legitimate transactions. While some chargebacks are genuine and cannot be avoided, others have a malicious intent and strict steps should be taken by merchants to prevent undergoing the expensive chargeback dispute process.

How does a friendly fraud occur?
There are several reasons for a friendly fraud to occur. For instance, when the cardholder does not recognize the purchase made or forgot about it, a family member made the transaction using their card without them knowing, or sometimes they may simply regret the purchase they made.

Sometimes, well-intention customers unknowingly commit a friendly fraud when they are unaware of the difference between asking the merchant for refunds and a bank-issued refund.

But beware though because there are plenty who knowingly file for chargebacks to rip off the merchants.

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What steps can a merchant take to combat friendly fraud?

Merchant Account Solutions with fraud protection tools:

While a business cannot avoid chargebacks completely, one can take security measures to reduce the likelihood of it occurring. Rising chargebacks can ultimately lead to merchant account shutdown which is a nightmare for businesses.

But chargeback risks can be mitigated with the help of the right merchant account provider. While approaching a processor, inquire whether the merchant account is inclusive of chargeback protection & anti-fraud tools. A reliable merchant account provider will help you navigate and offer security tools that will protect your business.

Setting up 3D Secure Payment Gateway:

A 3D secure payment gateway provides an extra layer of protection during card transactions, for customers as well as merchants. Since the customer card is verified during the purchase, it is difficult for them to claim unauthorized transaction.

Integrating 3D secure payment gateway with your merchant account reduces the risk of wrongly disputed or fraudulent transactions for the merchant.

Notify customers of recurring payments:

Before charging for recurring payments, make sure your customers are notified about the same. This is especially important in case of subscription based services wherein customers often forget about signing up for these billings and later demand refunds.

Provide excellent customer service:

Maintain regular and effective communication with your customer. Ensure that customer issues are dealt with instantly so that they are more likely to contact you first instead of filing for chargebacks.