The Funds Transfer Alliance Says Down with Chargebacks

Scenario: You rent a limo-bus for your daughter’s 21^st birthday to squire her friends and the rest of your family around town to celebrate. You give the driver a deposit and the itinerary up front. Everything is set and ready to go until the chauffeur arrives 45 minutes late without working air conditioning in August in Arizona, the bus gets a flat tire along the way, and the driver tells you your time is up as scheduled despite being late and doesn’t seem to acknowledge any problem with any of it.

You attempt to negotiate but get nowhere. So you initiate a chargeback hoping the card issuer will hold the limo company responsible for their failures. Who is responsible for figuring this all out?

Daphnie: Ninja Puppy

Regardless of who’s responsible, chargebacks are excessively unfun for everyone except very unscrupulous customers who attempt to game the system. Most diligent business owners will have very few chargebacks over the life other their business but every once in a while one can sneak up and bitecha like my ninja puppy! Hopefully this article will reveal a little insight about how the industry views them and how you have the best opportunity a result in your favor.

A chargeback can be initiated by the cardholder, your customer, or a Card Issuer (Visa, AmEx, etc.). If it is not decided in your favor as the business owner, your processor will debit your settlement account or settlement funds for the amount of the chargeback and any fees, assessments, and fines that are tacked on depending on the findings concerning your sales practices. While Discover Card prohibits you from doing so, if you have the cardholder’s contact information it is strongly recommended that you contact them to attempt to resolve the dispute so that it is not left to the card issuer’s discretion.

When a chargeback is initiated, you will get an information request asking for transaction documentation. Do everything within your power to respond in the allotted time frame with all pertinent information related to the transaction to have any hopes of reaching a decision in your favor.  Report as much information as you can about the transaction, make every document copy as legible as possible, and include any additional evidence you feel verifies your position about the validity of the transaction.

The most common chargebacks fall into one of the following categories:

1)   Authorization issues such as an expired card

2)   Cancellations and Returns

3)   Fraud

4)   Non-receipt of Goods and Services

5)   Processing errors such as an altered amount or transaction exceeding limited amount

6)   Quality of goods and services for defective or not-as-described merchandise

7)   Non-receipt of information including those cases where the cardholder does not recognize the transaction

Some things to remember:

1)   A valid approval authorization normally has a 4-6 digit number and response of “Approval.” A “Pick-up” response means the card is lost or stolen and you should retain and return it to the acquirer for a refund. Additionally, a referral authorization response indicates you should call the Voice Authorization Center.

2)   For recurring transactions, make sure your customers understand the nature of the arrangement, it’s an excellent practice to pre-notify customers of upcoming payments, and if your business is web-based, make sure the customer acknowledges the cancellation policy.

3)   To avoid fraud, make sure the imprinted card number matches the printed receipt, imprint cards you can’t swipe, get the cardholder’s signature and compare it to the sales draft.

4)   When the item or service is being pre-ordered, don’t process the transaction until the merchandise is shipped, don’t process any card where another method will be used to pay, and be sure to notify customers of the cancellation policy when they are ordering.

5)   Batch out and settle your terminal daily, do not alter an imprinted receipt for any reason, for telephone orders, repeat the account number back to the customer, and make sure your terminal reader is working properly.

6)   Ensure all merchandise is shipped properly, packaged well, and customers are aware of your return polices.

7)   Always prepare legible sales drafts at the time of sale, retain copies of all transaction documents for at least 18 months, and ensure your name is recognizable when people see the charge in their statement.

In the case above, what do you think happened? Was the limo company held accountable for their very poor customer service? Not exactly. While no one would argue the experience was provided as anticipated, this was a dispute for small claims court and not one for the acquirer to mediate. Because the product was provided and it was a close approximation of the what the customer expected, the chargeback was not enforced and the company kept their money.

If you have any wild chargeback stories, we’d love it if you’d share them below for other people to learn from!

Funds Transfer Alliance Explores Gift Cards

Everyone is familiar with Gift Cards. The ubiquitous holiday gift that’s great for almost everyone. It demonstrates you’ve put some thought into their present. You show that you know where they like to shop or snack, but you’re going to let them use it up at their own pace for exactly what they want.

However, gift cards aren’t the only type of prepaid cards out there that may be of interest to business owners and with a little research you may find several very beneficial methods of maximizing these little wallet gnomes in your business strategy.

Image via Wikipedia

Loop d’Loop

The first thing to keep in mind in the Prepaid market is the open vs. closed loop. Open-loop cards are generally (or network) branded. To no one’s surprise, the other type of Prepaid card is a closed-loop system, or retailer-branded card. Both can serve an advantageous purpose for your business. Open-loop cards are the Visa, Mastercard, Discover, and American Express branded cards and can be used for any number of purposes, including payroll, rebate, branded gift, and general purpose prepaid. As you will see, they can serve other purposes as well.

Open-loop cards have grown in recent years due, surprisingly, to federal, state, and local government agencies, which have been moving billions in what would have been checks for payroll, social security, unemployment and other benefits, tax refunds, grants, and other funds transfers to these cards. While there is a widely held assumption that government isn’t interested in inventing efficiencies, they certainly take advantage of them. According to a First Data study, using payment cards achieves lower costs and is a more secure option for funds distribution. In this economy, and with electronic crimes only getting more frequent and complicated, cheaper and safer sounds pretty appealing, at least to the folks at the Funds Transfer Alliance. Not only is it safer in terms of security of the funds, in one unusual use of open-loop cards by government, the city of Chicago offered $75 and $100 prepaid cards to individuals who turned in guns. Additionally, the U.S. Department of the Treasury has committed to phasing out checks and converting all distributions to open-loop, prepaid debit cards by 2013.

The Unbanked and Nonbanked

Image by GDS Infographics via Flickr

Sixty million consumers is a big market for just any product. Research indicates that approximately 60 million Americans are either completely “bank account challenged” (hopefully that’s the politically correct way of saying they have no account) or have limited interactions with banks. Consumers may choose not to have a bank account for any number of reasons including cost, credit problems, budgeting, or privacy. This represents a huge market for prepaid cards. Huge because out of those who fall into the category above, only one in five currently utilize prepaid cards. Industry data suggest in many cases it may be cheaper to use Prepaid cards than have a checking account because of bank fees, which are being reigned in by Congress as you read this, but which remain outrageous in some circumstances. These potential and current Prepaid consumers will literally be spending billions of dollars on these cards and top-ups at grocery stores, convenience stores, and other retail locations each year.

Additionally, as parents use Prepaid cards to test drive their children’s spending habits, a new generation will become very accustomed to having a topped off card with which to budget. Rebates on Prepaid cards are also more convenient for both the grantors and receivers. The Funds Transfer Alliance is also seeing universities distributing financial aid through Prepaid cards, which at some campuses around the country are simultaneously being used as campus IDs and for school-sponsored prepaid accounts.

Some health insurance companies have also issued Prepaids to cover eligible drug purchases for their members. Healthcare cards can simplify employee participation in a healthcare program while helping to reduce administrative expenses. Tax-advantaged healthcare programs, such as such as Flexible Spending Accounts, offer tax savings for both employers and employees, which when supplemented with Healthcare cards eases the requirements of both administration and participation.

Prepaid Aids Your Payroll

Payroll cards are an innovative payment solution that helps businesses reduce payroll costs, increase efficiency, and build employee loyalty. From our perspective, it's seems to be an increasingly alluring alternative to traditional payroll checks. The payroll card is a reloadable network (i.e. Visa, Mastercard, AmEx, etc) prepaid card. Each pay period, the employee’s earned funds are automatically loaded onto the card and available on payday, similar to a direct deposit system. Employees can use their payroll card everywhere these network debit cards are accepted and get cash at compatible ATMs worldwide. And they’re protected. For example, Visa Payroll cards are protected by the Visa’s Zero Liability policy.

Here at The Funds Transfer Alliance, we’ve brainstormed and found these additional benefits of Payroll cards:

·       Reducing payroll processing costs by eliminating check printing and processing.

·        Eliminating the cost of out-of-cycle checks.

·        Avoiding charges for reissuing lost and stolen checks.

·        Expanding your direct deposit program to all employees, including those who do not have a checking account.

·        Employee peace of mind knowing that their pay is automatically available and accessible.

·        Offering employees the flexibility to shop or pay bills by phone, online, or mail, because the card is widely accepted.

·        Saving employees check-cashing and money order fees.

There are also free services that offer relatively convenient methods for Payroll card users to instantly add funds to their card’s account at grocery and convenience stores.

Don’t Fuel Your Gas Expenses!

Many medium and even small companies these days seem to have a company car or fleet. Business owners can manage vehicle fuel, maintenance, and repair expenses with the flexible and often cost-saving Fleet cards. These cards can help your bottom line in the following ways:

• A convenient tool for drivers and owners to handle fuel and maintenance expenses
• Track spending per vehicle.
• Improve reporting with data consolidation that allows your company to group and analyze fleet spending by expense type, merchant category codes, geography, and many other variables.
• Monitor compliance with spending policies.
• Identify under-performing vehicles.
• Reduce the costs of reconciliation against your payroll disbursement account.
• Simplify payroll distribution for all categories of employees including un-banked, contract, temporary, youth, part-time and remotely-located workers.

In Conclusion…

We hope these examples really demonstrate the breadth of possibilities associated with these top-upable cards. If you can transact it, chances are it can be done more efficiently with a Prepaid card. If you have any examples of other ways your company has implemented a program for a different purpose we left out, we’d love to hear about below!