Credit Cards - The Right Tool for Merchants
Despite all the weak points in the credit card system and all the frauds that happen daily, the boom in online payments can't be denied. More and more merchants are accepting credit cards as a way of payment. There are many merchants, who accept all major credit cards and nothing else – not even checks, money orders or PayPal payments. So, it seems that after all, credit cards are not that bad as a way of payment, right?
One of the indisputable advantages of credit cards is that they are the fastest way for a merchant to receive money. Unlike checks and money orders, which take a couple of days or more, credit cards offer instantaneous payment. Compared to money transfer services like PayPal, credit cards are more secure for both merchants and shoppers. Additionally, major credit card issuers operate globally, so if you have clients from all the over the world, it is possible that they live in a country where PayPal or your payment processor of choice does not operate or your shoppers distrust them more than credit cards, so if you don't offer credit cards as a way of payment, you are losing customers.
So, it is a safe bet that doing business online will inevitably make you accept credit cards, if you are still reluctant to use them simply because credit cards are one of the best options for both you and your customers. Some time ago the situation with offline payments was similar – many merchants refused to accept credit cards (and still some d0) but pressure from customers, together with improvements in the security of the credit card system, made them accept credit card payments.
If you are operating a business, in which the item prices are low – i.e. you sell cheap stuff like CDs, books, consumer goods and so on, rather than million dollar houses, you simply will not be able to survive without accepting credit cards as a way of payment. For cheap goods credit cards are the leader in payments. What is more, even not so cheap goods like home appliances worth hundreds of dollars are also sold online via credit cards, so the risk is worth.
The thing that worries online merchants most is fraud. Unlike shoppers, for whom fraud is also the main concern, merchants are worried by a different type of fraud. For customers the greatest risk is that somebody might steal their credit card number, make purchases with it or even steal their identity. For online merchants the greatest fraud-related risk is that a customer will declare a transaction fraudulent and the merchant will have to make a charge back. Another fraud-related risk for merchants is that shoppers will claim that the goods were not delivered at all or in the promised condition and again, the merchant will suffer losses because of that.
It is not true to say that merchants mustn't worry about this. On the contrary, in some businesses the losses due to chargebacks are incredibly high. This is partially due to the specifics of the industry but more often than not, it is a merchant's fault because he or she has not selected the right payment gateway. Yes, choosing the right payment gateway is incredibly important because out of the hundred payment gateways available, there are some that offer really a good anti-fraud protection and some that offer almost no protection at all, so it really makes a difference which payment gateway you choose.
The best payment gateways are those that offer thorough checks of the customer and his or her offer before the goods are actually ordered and shipped. These checks vary from one gateway to the other but generally they include additional security features like passwords or special codes. Some other systems employ address verification, secret questions, or personal identification techniques, which also adds an additional layer of security. More details about how a merchant can protect his or her business can be found in this article.
But still, no matter how sophisticated checks are employed, there is always a risk of fraud. You can't eliminate it. The only thing you can do is to try to reduce it as much as possible. It is up to you to decide if it is cheaper for you not to offer credit cards as a way of payment or to make additional measures to protect yourself from fraud. Even if you still manage to stay in business, this is a little comfort because when you lose money due to fraud, the only thing you can do is to increase your prices in order to compensate for the losses. When you increase your prices, you become less competitive and as a result of this your profits go down.