Doing Business Internationally
December 28, 2008
The more you expand your business, the more customers you can reach – that is true. However, when you open your market up to potential new customers, you can also begin a whole new set of programs as well. If you’re looking to start an international portion of your business, here are some things that you will want to keep in mind.
There are two main questions that you will need to ask about this new marketplace:
- Is the customer going to pay me?
- Is the customer going to want to pay me?
The truth of the matter is that the more customers you have the more risk you are taking on. Because you’re increasing the possibility of things going wrong, you need to be a little concerned about these questions – because if you’re not going to get paid, it’s not a wise move.
The first thing that you will want to do is consider how you will want to be paid for your services. You might want to accept credit cards as these accounts can be verified quite easily and without much added cost to you. Things like checks can take longer to verify and can even cause legal troubles in some cases, so those kinds of payments might be easier to limit to countries with which you are most familiar.
However, there are ways to put safeguards in place so that you can be sure that you’re getting paid for services or products that you are selling on the international market. For one, you will want to have some sort of merchant account of third party processor in place to watch the credit card payments that you are receiving. These services will be able to detect fraudulent accounts and stop the transaction from continuing until the situation is remedied. These services can also keep your information secure by acting as an intermediary in financial transactions.
You will also want to create standard shipping policies for international orders that include the full shipping price, insurance as well as tracking. You will also want to make sure that you are never shipping orders that you haven’t verified the payment for. What sometimes happens is that you will ship an order, but then never receive payment, though the product is gone.
Another concern that you might want to consider is that prevalent fraud that is coming from international sources. Your business email accounts might become targets for international schemes when you start to open up to the international market. You should always be on the lookout for any offers for purchases that aren’t coming directly from your secure shopping cart or standard methods of purchase. And if anything doesn’t quite seem right, don’t follow through on any actions that are asked of you.
All of this is not to discourage international business, but rather to realize that you need to be careful when your customers aren’t right in front of you – just as with any online customer. But when you have international customers, they can be harder to track down for legal actions, if at all. Being too careful is always the best policy.
Qualifying for a Merchant Account
December 28, 2008
Just as with anything to do with your business, you need to do more than just sign up for a merchant account. Because the merchant account bank will want to make sure that you aren’t a fraudulent business, they will be asking you a lot of questions about your business as well as what you are doing. It isn’t as simple as just signing up for them to handle your credit card transactions – but for most businesses, it can be.
The first thing that a merchant account will want to do is check your background. This means that they will need information from you in order to do this – social security numbers, addresses, etc. Provide them this information so that they can make sure that you don’t have a previous record of fraud or anything else that might cause suspicion of your intentions.
They will also want to do a credit check on you to see what your credit history is. If you have a lot of outstanding debt, they may be concerned that you won’t be able to pay their fees in a timely manner or handle your finances well enough to help them make a profit too. In truth, having a lower credit score will affect your chances of getting merchant account service, so you may want to try to clean up your credit report first before trying to apply. To get a copy of your credit report, you can talk to one of the large credit reporting agencies – Experian, TransUnion or Equifax – and request your free copy. You are allowed to get one of these each year without any charge, though you can order one for a nominal fee as well.
The next thing that the merchant account bank will check is what you are selling as a part of your services. They are doing this because they want to know that you will not be having a lot of chargebacks (returns) that will bounce back to their accounts and require them to dispense refunds in addition to managing the purchases. Most merchant account banks feel that businesses that send tangible goods are more likely to have lower chargeback costs, while those that sell services might have a higher likelihood as the services can not necessarily be replaced before a refund would need to be issued.
The merchant account back will also want to know how you are accepting payments from your customers. If you’re accepting payments in person, getting the signature and matching the credit card with the driver’s license, that’s considered the best way to manage a transaction – and it’s safer for the merchant account to handle. However, this doesn’t mean that your internet business is disqualified. You just might have to pay higher fees in order to set up a merchant account.
You will also need to show the merchant account bank the statements and records of any previous dealings with merchant accounts. This will give them an idea of what kind of business you are and how you will handle their services.
What is AVS or Address Verification Service?
December 24, 2008
When you want to add another layer of security to your online business, you should consider adding AVS to your arsenal against fraud. AVS, or address verification service, allows you to verify the personal address and even the billing information of the customer that wants to make a purchase on your website. This allows you to see if who is shopping with you is really the person that they say they are.
The AVS system works by taking the credit card information that you have been given by the customer and then runs it against what the credit card company has listed for the cardholder. If the two do not match, the charge will be not go through and the cardholder will either need to type in the information again or the card can be taken from the person that is trying to use it.
AVS uses a list of response codes that will help you determine how accurate of information you have received from a customer and what you think is ‘enough’ to allow them to make a purchase. In this day of not being able to see your customers, this code system comes in handy.
X = exact match - address and nine digit zip code
Y = exact match - address and five digit zip code
A = address matches, but the zip code does not
W = nine-digit zip code matches, but the address does not
Z = five-digit zip code matches, but the address does not
N = address and zip code do not match
And then there are these other responses:
U = address information is unavailable at the time
R = retry the transaction - system is unavailable at this time
S = service is not available at this time
E = data not available/error invalid
What’s also great about this process is that the customer will never see that it is happening, even if they are right in front of you. If the information does not match up, the customer is told to re-enter their information or the transaction is denied. The customer can then try to correct the information or they will have to call you to place their order.
There are a number of reasons why you should consider using AVS or a merchant account with AVS:
- Reduce fraudulent charges – When you’re not accepting payments from those whose information does not match up, you can significantly cut down on transactions that are not legitimate.
- Reduce chargebacks – Because you will be verifying information with the customer, you can be sure that it’s the customer that is doing the ordering and really wanted to make the purchase.
- Create customer confidence – When you are verifying information, your customers will feel as though their information is safe and secure.
- Assists online business – Instead of having to track down the right shipping address, you will already know it.
With an AVS system, you can make sure that credit cards aren’t being used when they shouldn’t be used and that you are always getting the money that you desire for the purchases that have been made.
What is a Chargeback?
December 23, 2008
When you order something online, you’re charged to your cerdt card account for the transaction – everything is fine. However, when you get your monthly statement and there’s a charge that you didn’t approve, you want to get your money back. You call your credit card company or the company that charged you and you get a refund for the charges – this is called a charge back. The money is being ‘charged back’ to the credit card account.
There are a number of reasons why a chargeback may be issued:
- There was an error in the transaction
- The customer accidentally used an expired card
- Someone is disputing the charge
- Fraudulent use of a credit card
While this process works out well for the customer, it doesn’t always make a business owner feel as good. Each time a charge is given back to a customer, they are losing money from the sale – even if it wasn’t a legitimate sale. In addition to losing that money, many merchant account providers can also charge a fee to handle that chargeback process. If there are a lot of chargebacks, the fees can begin to be excessive.
This is why many merchant account providers will have a preset limit that businesses need to keep in their merchant accounts to cover chargebacks. When there isn’t enough money in the merchant account after you have taken some out, the merchant account will have to use their own funds to refund the customer – and they would rather not do this.
There are even a few merchant account providers that will be hesitant to accept certain businesses as clients because of their probability for chargebacks. In the case of businesses that offer services that can be paid for with credit cards, there is a higher likelihood of these businesses receiving calls about charges not being authorized – so, more chargebacks. But in the case of businesses that provide goods, this is less likely.
Merchant account providers may also increase the levels of fees that businesses will have to pay when they are going to have a high likelihood of chargebacks. These fees will help support the extra processing and extra time that will be given to managing the account’s activities. They will also want to be paid for the time that they will spend handling any disputed claims that take more than just a phone call to resolve.
While this doesn’t mean that businesses shouldn’t offer chargebacks, it does mean that businesses should be aware of how their customers are giving their information. If you create a system in which you have a superior product or good, you will have fewer returns, of course, but if you also have a secure website in which customer information is not subject to hackers and other problems, you will also reduce the possibility of chargebacks.
Chargebacks are just a fact of life for online businesses, however, they can be controlled with some close monitoring of your website’s procedures as well as who can see your customers’ personal information.