Amazing and true: You can lose your merchant account when chargebacks and fraud are caused by another company processing with your bank.
Some companies contract with third parties to manage chargebacks and fight fraud. This adds expense to payment processing. But it is a short-sighted solution to protecting your payment processing account.
Ultimately, controlling chargebacks and fraud at the merchant level does little to secure a high risk account. The real problem in processing payments for online games and digital merchants resides at the acquiring bank level.
Most financial institutions are woefully inadequate in managing chargebacks and fraud throughout the entire portfolio of the bank. When a bank depends on each merchant to manage chargebacks and fraud, every merchant processing with that bank is at risk.
You may do a great job of managing your high risk merchant account. But you have no way of knowing if other companies processing with the bank are managing their accounts properly. And you can bet your bottom dollar that some of them are not.
A problem arises when a merchant or group of merchants at a bank exceed chargeback and fraud ratios. A single large account that has high chargebacks or fraudulent transactions can endanger the entire payment processing portfolio of the bank.
When a bank is faced with high ratios of chargebacks and fraud, it must rebalance ratios across the portfolio. At the same time, the bank must remain compliant with the risk/reserve capitalization thresholds required by international banking regulations.
In the last few years, many banks faced with chargebacks and fraud simply purged all high risk merchants from the portfolio. The banks terminated the accounts with very little notice to the merchants.
Merchants who thought they were safe because they did not have high chargebacks or fraud levels suddenly found themselves out in the cold.
An exclusive network of international banks provides the solution for long-term, secure payment processing for online games and digital merchants. The banks are located throughout the world.
Every bank resides on a single payment processing platform controlled by patented technology. Sophisticated algorithms monitor and track all transactions and are checked against a myriad of international databases. As a result, merchants using the banking network have extraordinary low chargebacks and negligible rates of fraud.
The banks are keen to process for high volume online games and digital merchants because the technology is proven to slash chargebacks and fraud. You get long-term secure banking relationships and worry-free payment processing.
The banks in the network “bid” on your account which means rates are aggressively competitive. Additionally, accounts can be setup in multiple jurisdictions allowing merchants to take advantage of lower “in country” processing rates.
Online games are big business. This year, revenue from online games is projected to be $10–12 billion worldwide, according to DFC Intelligence. MMOG, casual game publishers, and companies with games in social networks need safe and secure ways to accept payments from players.
Online games are considered high risk merchant accounts because of the high number of chargebacks digital content businesses receive. Some experts estimate high risk industries such as online games, lose up to 10% of revenues due to chargebacks alone.
Companies selling games, movies, music, software, and virtual goods are especially susceptible to “friendly fraud”. Up to 70% of chargebacks initiated against digital merchants are considered friendly fraud.
Friendly fraud occurs when a consumer actually receives the goods or services but claims non-receipt. This is easy to do in a virtual goods situation because there is no physical product.
Consumers are savvy about how to chargeback digital items. Many consumers justify the chargebacks saying the merchant has no “real cost” for the product.
In addition to friendly fraud, online games and other digital merchants are often targeted by cybercriminals because the average ticket is low. By running a small transaction on a stolen card, a criminal can determine if the theft has been reported and if there are available funds on the card.
Chargebacks and fraud cause more than lost revenues. The long-term danger of chargebacks and fraud is the loss of merchant processing due to excessive chargebacks and fraud at the acquiring bank level.
Online games and businesses selling digital products are considered high risk by banks. Yet, you can still readily obtain payment processing for your digital business. Along with the chargeback & fraud protection tools necessary to keep your high risk processing safe & secure.
Are you an online game or digital merchant ready to explore payment processing solutions?
Contact firstname.lastname@example.org today