The chargeback process can be initiated by either the merchant or the cardholder’s issuing bank. If initiated with a merchant the process is similar to a standard transaction; however, the funds are taken from a merchant’s account and deposited with the cardholder’s issuing bank.

If a chargeback is initiated by the issuing bank, then the issuing bank facilitates the chargeback through communication on their processing network. The merchant bank then receives the signal and authorizes the funds’ transfer with the confirmation of the merchant. In some cases, such as with fraudulent charges, the issuing bank may grant the cardholder with a chargeback while also sending the claim to a collection department. In this case, a bank takes on the liability and expenses the chargeback through reserve funds while researching and resolving the claim.

Merchant acquiring banks will generally charge a fee to merchants for chargeback transactions. These fees are detailed in a merchant account agreement. Fees are typically charged per transaction to cover the costs by the processing network. Additional penalties for chargebacks may also apply.

After the liability shift, if a person pays with a counterfeit EMV card in person and the merchant process that transaction as a magstripe payment, the merchant may be held liable. Reason being that if the merchant had processed that transaction as an EMV payment, the technology would have caught the fraudulent activity. However, if someone paid in person (card present) with a magstripe card, the fraud shifts to the party with the lesser technology.

Credit card authentication is the process of confirming the validity of a customer’s credit card by checking with the company that issued the card. Authentication is roughly the first half of the transaction process when using a credit card.

A CVV is the three- or four-digit number on your card that adds an extra layer of security when making purchases online or over the phone. It serves to verify that you have a physical copy of the card in your possession and helps protect you if your card number falls into the hands of hackers and identity thieves.

The term EMV is used alongside the terms “Chip-n-Pin” and EMV “Contactless” to describe the applicable payment standards

The EMV liability shift refers to the 2015 transfer of responsibility for fraudulent losses from the card brands to businesses in cases when the fraud occurred on an incorrectly processed chip card.

Will a Merchant Account Reserve Withhold Revenue?

Each merchant account, acquirer and processor is different. However, there is one element of credit card processing that is universally dreaded by all merchants—the merchant account reserve.

What is a Merchant Account Reserve?

A merchant account reserve is a set amount of the business’s money that is put aside by the acquiring bank as a security deposit. This safeguards the financial institution from unplanned liability.

What’s the Purpose of a Reserve?

The funds in a merchant account reserve are similar to equity required for a loan. Acquiring banks are essentially extending a line of credit to merchants until the chargeback time limit expires.

Acquirer

An acquirer, or acquiring financial institution, is a bank that processes and settles a merchant’s daily credit card transactions, and then in turn settles those transactions with the card issuer/association. Merchants must maintain such an account to receive credit for credit card transactions. Daily card transaction totals are deposited in the merchant’s account after settlement and discount fees are deducted. In this way, such a financial institution acquires, or serves as the intermediary, to facilitate the credit transaction and pays the merchant, less a discount fee for the service.

The EMV liability shift refers to the 2015 transfer of responsibility for fraudulent losses from the card brands to businesses in cases when the fraud occurred on an incorrectly processed chip card.

An Agent Bank lets Financial Institutions offer their own branded card to consumers and businesses while not taking credit or fraud risk, usually taking a fee for each customer account they originate, and a % of associated issuer interchange volume

What Is PCI Compliance?

Payment card industry (PCI) compliance is mandated by credit card companies to help ensure the security of credit card transactions in the payments industry. Payment card industry compliance refers to the technical and operational standards that businesses follow to secure and protect credit card data provided by cardholders and transmitted through card processing transactions. PCI standards for compliance are developed and managed by the PCI Security Standards Council.

The acquirer, also known as the acquiring or merchant bank, is the financial institution that maintains a merchant’s account in order to accept credit cards. The acquirer settles card transactions for a merchant into their account. Sometimes the payment processor and the acquirer are one and the same.