Four ways to avoid transaction downgrades and optimize your payment processing

For most small businesses, finding new ways to cut costs or avoid fraud and chargebacks is critical for daily operations and business growth*. Even if you think you have trimmed all the fat, you should still take another look at your point-of-sale solution to optimize your processes. When you first began accepting credit card transactions, you probably shopped around for the best discount rate available – but to ensure all transactions clear at the optimal rate, make sure you understand how certain interchange downgrades work and what you can do to prevent them.

Issue: Not entering the Address Verification Service (AVS) when prompted.

Solution: When your terminal prompts you to enter a zip code, it’s worth the extra few seconds to do so.

Payment processors offer Address Verification Service* to merchants for Card Not Present Transactions to help detect and prevent suspicious or fraudulent card transactions by checking the billing address submitted by the card user against the cardholder’s billing address. It is possible to complete a card not present transaction without entering a zip code, but it will result in a less-than-optimal interchange qualification and also increase your risk of fraud and chargebacks. For card-not-present (CNP) transactions* – in which the cardholder isn’t physically presenting their card, like online shopping or phone ordering – an exact match via AVS is not required to qualify for optimal interchange rates; for CNP transactions, it only matters if there is a response value that proves the service was used.

Issue: Not balancing and settling electronic deposits daily.

Solution: Settle batches daily, at the end of business hours.

There are numerous reasons you should settle your point-of-sale devices at the end of every business day – faster funding, accurate cash flow tracking, and lower processing costs. In general, even a 24-hour delay in closing out a batch* can result in higher interchange fees – while authorization for each transaction happens at the time of purchase, transactions are not actually charged to your customer’s card issuing bank until processing occurs when the merchant submits a batch of transactions for settlement and subsequent funding.

Issue: Completing force-posted transactions manually.

Solution: Collecting authorization codes electronically from card issuers via your POS system.

There are times when a customer may ask a merchant to complete an offline transaction and bypass the electronic authorization process that typically occurs when a card is card is inserted into a point of sale terminal. For example, if the customer’s card produces several errors when inserted, they may have the option to call the number on the back of their card and ask their bank for an offline authorization code to allow the transaction to be completed. While there are honest instances of force-posted transactions*, these are increasingly rare and are more often a lucrative way for individuals to commit fraud – which is why obtaining a voice authorization and manually entering a reference number into your POS terminal will result in a higher interchange fee. Instead, you should always try to collect the authorization code electronically from the card issuer through your point-of-sale solution, or ask customers to use a different payment method to complete their purchase – ultimately, reducing acceptance costs and avoiding potential fraud and chargebacks.

Issue: Not investing time or resources towards achieving optimal interchange rates on Commercial Card Transactions.

Solution: Work with your payments provider to optimize eligible commercial card transactions and qualify transactions for lower interchange rates.

Any organization that accepts business, corporate, or purchasing cards can lower commercial card acceptance costs by collecting and passing Level 2 and Level 3 transaction date to Visa or Mastercard. This additional transaction data submission is known as Level 2 and Level 3 processing; however, it typically requires an investment of resources, time, and investment in a new POS system to qualify commercial transactions for the lower rates. Our Commercial Card Optimization solution can allow you to use your current POS environment without additional upgrades, while supporting the qualification of your eligible commercial card payments for the available lower interchange rates.

As a small business owner, you don’t have to navigate transaction processes and savings opportunities alone – trust a dedicated payments provider to help you understand best practices and help you optimize your card acceptance costs.

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