Many business owners do not understand what makes one business low risk preferred versus another similar business being higher risk. That’s our fault in the payment industry for our lack of education for business owners.
Well, here is a crash course in evaluating the risk of a business regarding merchant services. Many business owners see that you are handling their money for them and making a profit for doing that, so why is there risk to the processor?
Susie’s Shoe Store
Let’s say that Susie owns a shoe store has been in business for 10 years and never had any issues with accepting credit cards. Then, in 2017 they had yet to upgrade their equipment to EMV secure hardware with the latest software. Fraudsters know this, and start targeting this business in December 2017 by purchasing thousands of dollars of shoes on fraudulent credit cards. Because the terminal does not allow for EMV, there was no alert to the business owner that the card was a fraudulent card and should have a chip.
Instead the transaction goes through, so the fraudster senses 3 more friends over the next 24 hours. All together they come away with $10,000 worth of shoes from this business. The business owner believes that they just had a near record week of sales until he starts getting the chargeback notices and realizes he accepted fraudulent cards. Because he did not run it through an EMV terminal, he has no protections and the store owner is out the $10,000 that was charged on the cards and he is out the $5,000 in wholesale shoe cost. Assume, the business owner already used that $10,000 windfall and he may not have the money available to cover the losses.
The expense would then fall on the process to cover the losses from the fraudulent transactions. Knowing these risks, do you suppose a processor would want to as much information as possible about a business owner and their business?
That’s why factors such as personal and business credit, length of time in business, type of business, whether you take deposits or not, whether your goods/services are delivered on the spot, the size of your transactions and the amount of processing in an average month all factor in. By being a sound business with strength factors that outweigh risk factors, means your business may be recognized as a low risk preferred merchant.
To learn more simply request an appointment with a local representative.
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