Re:6 Credit Card Processing Facts Nobody Tells You
by spohlenz on Tuesday December 09, 2008 @11:39AM
(#391421)
Can anyone explain the reason for these attitudes? Is it just because expected fraud rates for that particular industry are higher?
Re:6 Credit Card Processing Facts Nobody Tells You
by mcdowall on Tuesday December 09, 2008 @02:54PM
(#391676)
Its not that the fraud rates are high but rather that if an airline or supplier in the chain fails then the credit card company are liable for the refund to the customer. The Risk lies with them.
So for example XL Airways going bust earlier this year had a massive impact on the merchant service provider as where products werent sufficiently bonded the liability lay with them.
In such a high value turnover industry I can understand the risk element to the credit card company, but you would assume that becoming a member of 3 required bodies with bonding in place would be adequate! Clearly not in 99% of the cases!
It has taken us 7 months to get a card merchant facility, the bonding and legal registration requirements alone for trading are pretty damn difficult within the UK so following this we were hit with little or no co-operation from Merchant facilities, despite holding an IATA bonded Licence, UK TTA Licence and ATOL Licence, literally no card acquirers would touch a new travel startup it really shed some light on the way the industry can make or break a business. Common conversations would start with..."what sector"...."online Travel"..."oh we dont like that..sorry"!
If I were aware of the utter disdain towards travel companies worldwide from card merchant services then I certainly would not have gone into the sector.
Suffice to say we eventually got our card acquirer 2 weeks ago after 7 months of applications!, we eventually tried 7 UK merchant services & high street banks, 7 offshore merchant services - Panama / Belize / Delaware / Amsterdam / Estonia / China / Cayman Islands and were not even entertained by Google Checkout / Paypal / Neteller!!
Additionally to give you guys an idea, our margin is about 10-12% of the Total Transaction Value, on the two occasions we actually got to terms of business they wanted a 10% rolling reserve for 6months (our margin!!) and on top would require a rate of 5.5% on credit AND debit cards!! therefore for each transaction when charging the customer a 2% CC fee we would infact be losing 3.5%. A completely unworkable situation, in essence...we've seen your business plan and your financials and if you want to trade your gonna have to bootstrap and borrow for your first year at least!!
Luckily we have managed to find an excellent company in Moneybookers who are very open to negotiation...terms started at 180 rolling reserve of 10%, we have negotiated down to 45 days and 3% Rolling Reserve and a credit card rate of 1.9% which given our margins is MUCH more workable!!
Sorry if this sounds like an anti merchant rant but when i saw this topic I had to share the problems we have experienced, after finishing complete integration with 45 xml suppliers, building a custom platform and new social media elements for travel and obtaining every licence under the sun its literally been 7 months of uncertainty and hell while we have had a fully working site just sat there!!
Rant over!! lol