Payment processing errors are mistakes made by merchants when processing a payment. These types of errors can result in chargebacks, which of course are costly and detrimental to the merchant.
Processing errors happen in both physical stores and online environments. And there is an even greater chance of error if any information is entered by hand, such as when taking telephone orders.
The best way to reduce chargebacks from payment processing errors is to try and make sure that they do not happen in the first place, as they are frequently caused by the merchants themselves. Some errors may be picked up by card networks, issuing banks, or payment processors, but there are others such as duplicate processing that may go unnoticed until the cardholder picks it up and files a dispute.
Let’s look at some of the most common processing errors that merchants can make.
Credit processed as a charge
This happens when a merchant uses the incorrect transaction type and instead of issuing a refund the transaction is processed as another charge. So the cardholder is charged twice instead of being refunded for their first transaction. This often leads to two chargebacks being filed – one for the incorrect transaction and another for the second. Not only that, it will frustrate the customer and create bad faith.
This means the amount processed does not match the amount on the receipt. This can happen if the merchant manually changes the amount after the transaction was completed without seeking pre-autherization. Examples of this could be adding a tip to a restaurant bill, or adjusting the price of an item with a long delivery time without informing the customer of a price change.
In this case a single transaction is submitted more than once. This can happen when merchants accidentally run a transaction twice, submit a batch twice, or if there is a software error on a website.
This happens when a merchant deals in more than one currency and the transaction currency does not match the currency transmitted to the card network. Merchants must be sure that they process the currency type that the user agreed to pay with.
Authorization is a very important part of the payment process, but it’s not uncommon for merchants to attempt to bypass or override authorization for various reasons. Examples of this may be that the merchant is trying to help an established customer, or simply feeling pressured by a pushy customer. The latter is a classic technique used by fraudsters. However, attempting to circumvent a declined transaction can result in chargebacks. Declines exist for a reason and the merchant will have no valid defense if the transaction is disputed.
Credit card transactions have multiple steps for merchants, one of which is submitting all of their authorized credit card transactions for a period in one go to the payment processor. The common term for this is “submitting the batch”. Usually, this is done after the close of the business day and all the transactions for that day are submitted in a batch, but the timing can vary. If you leave it too long to submit the issuing bank can file a late presentment dispute. It is important that the processing agreement terms are adhered to and that batches are submitted timeously.
So what can merchants do to reduce their transaction errors?
The majority of payment processing errors are made by the merchants themselves and are therefore completely preventable. Mistakes will always happen, but merchants can take steps to reduce these costly blunders.
- Keep all hardware and software up to date
- Make sure you are fully conversant with the payment processing rules provided by your payment processor and acquiring bank, and be vigilant about updates in processes
- Have checklists and procedures in place for processes such as refunds and batch submissions
- Train all staff in procedures and update them with any changes when necessary
- Always obtain authorization prior to completing a transaction
- Finish processing well within the allowed time
- If you need to cancel a transaction while it is in progress, make sure that it is voided completely to prevent duplicate processing
- Encourage staff to take their time when entering information or processing refunds, and to double-check before committing to the transaction
There is an old carpenter saying: “measure twice, cut once”. The same can be applied when processing payments. Rushing leads to costly mistakes.
Another factor to consider is your choice of payment partner. Choose a partner who makes it easy for you to understand the rules and processes that you need to follow, and who can provide help when you need it.
At Baer’s Crest we provide comprehensive and secure payment solutions to merchants, at reasonable rates. In addition, we offer many value-added services to qualifying merchants such as chargeback dispute services and fraud prevention tools. Talk to us about simple, effective payment solutions for your business.