How to Process E-Commerce Transactions E-commerce transactions are much more vulnerable to fraud, customer disputes and chargebacks than card transactions.
There are several main reasons for this How to Process E-Commerce Transactions :
the most obvious of which is that neither the merchant can physically verify the validity of the card used for payment and the authenticity of the cardholder, nor can the customer physically check the product they are buying.
. Then there are the potential complications that can arise from the late delivery of a purchased product or the premature posting of a transaction to the cardholder’s account, which are usually not an issue with face-to-face payments.
It is unlikely that we will ever be able to reduce the risk of e-commerce to the level of brick-and-mortar stores, but we can certainly take measures to make it tolerable. Below are eleven specific best practices you should follow when accepting credit card payments on your website. Make them part of your sales process and you’ll see fewer chargebacks and fraudulent transactions.
11 steps to processing e-commerce transactions
1. Get the cardholder’s name, address and phone number. If the shipping address is different from the billing address, please call or email the customer to verify the order. Do not proceed with the transaction until you receive a satisfactory response from the customer.
2. Collect card account information. Get your card number and brand. Most consumers, including criminals, do not know that the card brand can be determined by the card number, so a discrepancy here may indicate that the customer does not physically own the card.
Also, get the card’s expiration date and security code – the CVC 2, CVV2 or CID number, which is located near the signature panel on the back of the card (or on the front for American Express cards). The security code is another tool used to ensure that the customer is in possession of the card.
3. Sign up for Verified by Visa and MasterCard SecureCode. These services are used to verify cardholders who have previously enrolled in the programs. Participating merchants are protected from certain fraud-related chargebacks, even if customers haven’t signed up.
4. Always use the Address Verification Service (AVS). AVS allows you to verify the billing address of the cardholder with the issuer. Fraudsters often do not know the correct billing address of the account.
5. Authorize each transaction. All e-commerce transactions must be approved by authorization.
6. Avoid using voice authorizations. These cannot be used as supporting evidence in re-billing.
7. Do not use forced permissions. A transaction that enters a merchant key after the authorization request is rejected is forced. Do not do this, nor should you repeatedly request authorization in the hope that you will eventually receive approval.8. Submit within seven days of receiving authorization approval. If this is not possible, submit a new authorization request How to Process E-Commerce Transactions .
9. Inform your customer about the expected delivery date. If the purchased goods or services are not delivered to the cardholder at the time of the transaction, inform your customer of the delivery method and (expected) date. If the delivery is delayed, inform the customer immediately and indicate a new delivery date.
10. Save transactions after shipping or product delivery. In a card-not-present environment, the transaction date is the date the product was shipped, not the date payment was received. Make a deposit within three days of the date of shipment (transaction) How to Process E-Commerce Transactions .
11. Use the original authorization number for your deposit and refund transactions. This eliminates the possibility of entering refunds for sales transactions for which authorization approval was not received and which should not have been processed. This is a great fraud prevention measure How to Process E-Commerce Transactions .
This is a very short list and many more can be added.
However, if you stick to just these eleven best practices, you’ll be in good shape and have far fewer chargebacks, customer disputes, and fraudulent transactions to deal with How to Process E-Commerce Transactions .
As you gain experience and your business grows, it’s a good idea to start building an internal negative file, setting up speed limits and controls, implementing fraud screening and other risk management best practices.
E-commerce merchants do not have the advantage of interacting with consumers face-to-face, which increases the risks of processing fraudulent transactions. It also presents communication challenges that brick-and-mortar retailers don’t face. To minimize fraud risks and promote customer satisfaction, all e-commerce organizations must adhere to the following principles and policies How to Process E-Commerce Transactions :
Authorize all transactions. The minimum limit in e-commerce transactions is always zero, which means that all transactions must be authorized.
Approval of the authorization assures the merchant that there are sufficient funds in the account and that the card has not been reported lost or stolen. However, approval is not proof that the purchase is made by the actual cardholder or that a legitimate card is used.
Follow the Association’s no card chargeback rules. Due to the greater risks of fraud in a card-not-present environment, a merchant may still be liable for a fraudulent transaction even if the transaction has received authorization from the card issuer How to Process E-Commerce Transactions .
Internet marketers need to build adequate risk management systems to counter these risks How to Process E-Commerce Transactions .
Enter an accurate Electronic Commerce Indicator (ECI) for all online transactions. The ECI must be part of the authorization and settlement report and identifies the transaction as “electronic commerce”.
Comply with Payment Card Industry (PCI) Data Security Standards (DSS). PCI DSS is a global information security standard created to help organizations that process card payments prevent credit card fraud through increased data control and data exposure.
Compliance with the standard is mandatory for all organizations that store, process or transmit cardholder information from any card bearing the logo of one of the card brands.
Never store card security codes. Card security codes are 3-digit numbers located on the back of Visa (CVV2), MasterCard (CVC 2), and Discover (CID) cards and 4-digit numbers on the front of American Express (CID) cards. These codes are used as another way to verify that the customer is in physical possession of the card at the time of the transaction How to Process E-Commerce Transactions .
Display the logo of the credit card brands that your organization accepts on your website.
Accept all credit and debit cards that belong to the brands you choose to honor. Cards should be accepted regardless of the dollar amount of the transaction How to Process E-Commerce Transactions .
Please include all applicable taxes in the total transaction amount. You should not collect taxes separately. Cardholders must have written records of the total amount of their purchase including taxes.
Store transactions with your processing bank just for your business. Accepting card payments for other businesses is prohibited under any circumstances.
Save the transaction confirmation within five calendar days of the transaction date. Please note that for card-not-present transactions, the transaction date is the ship date, not the order date. Transactions deposited more than 30 days after the transaction date may be charged back to you.
Tell customers the expected delivery date. For card-not-present transactions, cardholders should be informed of the method of delivery and the expected date of delivery. Transactions cannot be saved until products or services have been delivered How to Process E-Commerce Transactions .
Make your organization’s return and credit policies available to consumers through clearly visible links on your website. By placing these links in the footer or header of your site, they will usually appear on all pages.
When the delivery is delayed, follow the steps below to get two authorizations:
Create two transaction receipts, one for the deposit and one for the remaining balance. Write “Deposit” and “Balance” on the receipts How to Process E-Commerce Transactions .
Obtain authorization for each transaction receipt on the relevant transaction date and ensure that the authorization response code appears on each receipt.Write “Delayed Delivery” on each transaction receipt.Never increase card transaction fees.
You have the right to offer a discount if your customer chooses a different payment method, such as cash or check How to Process E-Commerce Transactions .
Never use the card to collect other debts or dishonored checks.
Please note that card issuers have 120 days from the transaction date to account for transactions that the cardholder did not participate in. In a card-not-present environment, the transaction date is the ship date, not the order date How to Process E-Commerce Transactions .
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