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my company is currently evaluating the possibility to switch from our current payment service provider to a payment system we implement inhouse. We're selling online game subscriptions over credit cards.
Therefore we're looking for an appropriate CC merchant account. The problem is, that our chargeback rate lies between 1% and 2% on average, which is no problem to us. However the merchant account contracts we've seen so far all require chargeback rates below 1% which are almost impossible to guarantee for us.
So my question is, are there institutes offering merchant accounts allowing chargeback rates of up to 2%? Any suggestions?
Thanks for any advice you might share,
Stephan "Steve" Vogler
[edited by: lorax at 6:07 pm (utc) on Sep. 8, 2005]
[edit reason] no email addys please [/edit]
Most processors usually look at the past three months sometimes 6 months. Sometimes only one month. It all depends on your monthly volume, etc. As well as where you are located
Will your current MAP / electronic gateway not support the move that you are trying to make?
I think you will be better of with a third party processing solution. They will probably only require an extra holdback on the account and a Rollover Reserve of 5 or 10%, but they will not make you sweat to keep everything below the 1% limit as they can normally compensate for this with other accounts.
Another alternative would be to go with an high risk merchant account with an offshore acquirer, but usually the rates for these companies are between 7-10% per transaction, sometimes even more.
What is the location of your business?
Some more info on our business:
We're running indeed "Nintendo-like" games. It's something like World of Warcraft, if that rings a bell. Only that we're around since 1997. :P We're based in Germany and we're processing more than 10.000 CC transactions per month. Our current payment service provider is pretty expensive and is not willing to help us lower the processing fees in any way.
Looking at the number of 10.000 transactions, 1% CB-rate, means 100 chargebacks per month. We can struggle to get the rate to say 0,8% creating a "buffer" of 20 chargebacks per month. This is like nothing. A single criminal kid with a bunch of stolen credit card numbers can easily trigger 20 chargebacks and push us above the 1% limit.
So, you say there are no direct merchant accounts allowing more than 1% chargebacks?
Miklo, what do you mean by high risk merchant accounts?
Sign up, get your chargebacks reduced and go back to them in 3 - 6 months for a rate review. Changing processors and gateways is very difficult. Well it is easy but it is a pain because you are so used to how "it used to be".
Also consider telephone verification as well - like varilogix, fraudgate, fraudguardian, etc
@Corey: Our current PSP is using 3D Secure since a couple of months. And yes, it does help a bit. But only in certain countries where 3D Secure is supported. Unfortunately in most countries 3D Secure isn't supported and therefore won't affect the chargeback rate. You still get the "liability shift" but we don't care about that. All we need is an higher allowance of chargebacks.
In regards to your question on being able to get an account that will allow you to go beyond 1%. It doesn't look promising. If you hit 1.5% Visa/MC will put you on the Global Monitoring Program.
But what you are asking for - well your option would be a 3PP - which is almost downgrading your business.
Let me ask you this - do you have recurring billing or a one-time payment?
Does recurring billing help? Certainly it increases the overall amount of transactions. But I'd say it increases both: the valid payments and fraudulent ones... not giving you any advantage concerning the chargeback rate. Or am I mistaken?
And talking about 3PP: Any recommendations for a solid company that is likely to accept our CB-rate at a reasonable price level?
They have a 3PP and a merchant account. They push all their first-timers thru to the 3PP. They let the 3PP do the fraud checks etc. Once it passes, fantastic. And most of them then push the 1st recurring payment. After they, the recurring payments go thru the merchant account.
This way, it has aleady been "screened" and chances are very unlikely about it being fraud. And usually by 60 days, you will know if it is fraud or not (from the customer).
Another option - virtual check. No chargeback fees. The downside though, the check could be "hot". Using virtual checks is not the same as credit cards, but once you get the money, you got the money :)
I would suggest to just being honest with them and explain your situation.
Just another question: How come that the chargeback rate is that high? Is it usually really fraud or don't people like the game?
Most 3PP have some extra security features installed, like country blocking, bounce email system, Maxmind etc. which will decrease the chargeback figure. If you can keep it up to the level of 0.8%, that would be good.
Virtual checks won't really help. We cannot abandon CC, which is by far the most commen payment method.
@Miklo: Thanks for that list! Worldpay is an option we are currently investigating. Even though there are complains about them, they are owned by the Royal Bank of Scotland, which makes them a whole lot more trustworthy than most other 3PPs... 2CheckOut 1)doesn't accept online games 2) requires you to keep the CB-rate below 1%. Too bad. I'll take a look at the other names.
The largest part of our chargeback-rate origantes from fraud of individuals who live in Brasil, Mexiko, and Poland. They "resell" subscriptions (without our knowledge of course) for less money, in-game goods, or whatever. When they've got what they wanted, they chargeback their money...
Thanks for your suggestions, folks. I really appreciate your help.
I just purchased something from Metacharge the other day actually and it used VBV as well. I did not enter anything extra since I am not enrolled though
Personally, I wouldn't want my money to be in Israel.