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What does it take to run an in-house payments operation ?


The Life of a Head of Payments, Chapter 5

When managing payments, there are also a lot of operations to manage. Most of the activities below you will need to perform per processor:

  1. QBR (Quarterly Business Review)

Follow up on the performance with each processor. You should analyze the performance of the success rate with your processors on a quarterly basis (e.g. initial success rate per country, per card type, per issuer bank, recurring success rate).Procure strong reporting abilities to follow up on each of your providers, and the success rate per credit card type/country. The success rate is very dynamic, so make sure you’re alerted when something is below a certain threshold and investigate with the processors what is happening. Many times, you will notice a decline in the success rate in a specific country/CC type and find out there was a change in a credit card’s policy or will need to talk directly with the acquiring bank.

  1. Attain Reports and Alerts

I would understand if you wanted to avoid a daily follow up on all reports. But for that, you would need an alerting system that will notify you once a success rate is under a certain threshold (per country/processor/credit card etc.).

  1. Managing Chargebacks

Once you start managing your own payments by connecting to payments processors (assuming the processor does not handle them for you), you can “look forward” to discovering the often-frustrating world of chargebacks, disputes and retrieval requests.

Chargeback - When the user declines the charge. This may be due to fraud – if someone else made a transaction with a stolen card, or the customer simply doesn’t remember buying. Whatever the case, you will be surprised how many chargebacks happen when teens buy online with their parents CC, after which the parents decline the charge.

Dispute - The merchant has the ability to “fight” the chargeback and prove to the acquirer that this customer is responsible for making the purchase. You can do this by proving he logged-in, owns an account or used your service.

Retrieval request - Sometimes (but not always) you’ll receive a “heads up” before a chargeback happens. This allows you to contact or refund the customer yourself, and prevent an additional chargeback to your chargeback ratio.

Chargebacks become a problem in two ways:

First, they cost you quite a lot of money. Not only will you need to return the money to the buyer, but you’ll also get slapped with a chargeback fee from the processor.  Second, the chargeback ratio cannot exceed a threshold, since Visa/MC will close your MID. This is why it’s important to follow up on your chargebacks ratio and “fight” (dispute) what you can per each processor. Each processor has its own way of settling a dispute, either manually, or via written automation. If you receive a second chargeback, it will cost you even more, so you may want to decide on some guidelines for what and when you should exactly dispute (above a certain amount for example).

  1. Managing Fraud

Fraud, as mentioned before, can cause you chargebacks and cost you money. But moreover, you should take every precaution to prevent fraud, as fraud can hurt your business in many ways (stolen cards running through your system, higher churn etc.).How can you prevent fraud? Each processor/payments provider can offer you their fraud system, which is based on big-data (known stolen cards) and logic (for example - too many transactions from the same CC in a certain amount of time). The downside of these system is: first, they cost money, second - false positives, meaning you may mistakenly decline legit charges.The question of whether to develop or buy a fraud system is a topic for another paper. I can just tell you that in Wix we built our own logic and developed reports and alerts on fraud suspicion.

  1. Managing Refunds

Every refund, whether done manually (by your customer support at the customer’s request), following a retrieval request, or done automatically by the system (example- a 14-day money back guarantee), is done per processor.

  1. Reconciliation / Financial Data with Processors

When you have more than one processor, you’ll need to reconcile between them when it comes to transactions of charge / chargebacks / refunds etc.

For this you’ll need to collect the information per processor and collaborate them in a very accurate manner. Each processor has a different format in which it delivers data, and considering issues like multiple time zones, makes this job a tricky one.

A few more interesting reads

COVID-19 Pushes #homecommerce to the Forefront

What fraud trends can we expect to see post-SCA?

Payments 101: Learn the Fundamentals

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