What Are ACH Return Fees & How Do They Work?

When handling transactions with Automated Clearing House (ACH) payments, awareness of ACH returns is a must. While these ACG payment returns are not commonplace, it’s possible to experience them every now and then, especially if the bulk of your transactions are ACH payments.

ACH payments are electronic transfers regulated by the National Automated Clearing House Association (NACHA). These payments rely on the routing and account numbers of the sender and recipient to move funds from one account to another. These transactions process in one to three business days, and they often cost less to use than credit and debit or wire transfers.

In addition to payments to providers and merchants, ACH payments are often used for direct deposit from employers, recurring bill payments, business-to-supplier transactions and many other scenarios.

Standard and mobile ACH payments are a notable aspect of modern businesses. As a merchant or provider, receiving notice of an ACH return means you don’t receive the money you’re owed. Knowing what these returns are and how to respond ensures you earn your expected revenue.

 

What Are ACH Return Charges Or Refunds?

You may be asking, why did I get an ACH refund or return? An ACH return charge occurs when the payment transaction fails to be completed. These failed transactions are referred to as “returns” because the money will return to the originator’s account, rather than transferring to the recipient. The merchant will never see the money in their account when an ACH return occurs.

An ACH return scenario starts with a standard ACH payment. A merchant will send a request to debit a client’s account, and the involved ACH network will receive the request. The network will then send the request to the client’s bank to fulfill the transaction. If all required conditions are met, the payment will go through.

In circumstances where the required conditions aren’t met, the client’s bank will alert the ACH network that they cannot complete the transaction. The money then stays in the client’s account—this is an ACH return.

ACH payments are a generally secure and reliable form of payment, and these returns likely only make up a small fraction of payments. However, understanding how they work can simplify the resolution process.

 

Important Terms for ACH Payments

When discussing ACH returns, it’s valuable to understand the different terms involved in the transaction. There are two parties affected by an ACH return:

• Originating Depository Financial Institution (ODFI): The ODFI is a financial institution that has agreed to request funds with an ACH operator. The operator will enter funds into the ACH on behalf of the ODFI. Most banks are ODFI-approved, meaning they approve ACH transfers. Other types of ODFIs can include payment gateways, payment processes and ACH payment APIs. In the case of an ACH return, the ODFI does not receive the money that is owed for a given transaction.
• Receiving Depository Financial Institution (RDFI): The RDFI is the bank being debited or credited in an ACH transaction, meaning they respond to an ACH payment. Just as most banks are ODFI-approved, many are also RDFI-approved. The RDFI alerts the ACH network when a transaction cannot be completed in an ACH return.

 

What Causes ACH Return Charges?

There are various reasons an ACH return might occur, and some are more common than others. On an RDFI’s end, an account may lack sufficient funds to cover the charge. Other times, the account may not be authorized to fulfill the transaction, or the payment information could be incorrect.

ACH payments don’t process in real time like credit or debit card transactions, so there is always a chance something could change between the time the ODFI requests a payment and the RDFI processes the transaction. ACH returns can come down to a small mistake, like a mistyped account number. Many times, these returns are simple to resolve with a phone call or two, especially when dealing with a returned mobile ACH payment. More complex causes for these returns can involve revoking authorization, which may involve more time to resolve.

 

Codes to Know for Common ACH Return Fees

Understanding the reason for an ACH return is key to recovering the funds your company is owed. To make the resolution process possible, the ACH network provides return codes that signify the reasons for the failed transaction. Examples of return codes include:

• R01 Insufficient funds: If a client or consumer does not have enough money in their account, an ACH return will occur. This reason typically occurs when a customer has unknowingly overdrawn their account. Returned mobile ACH payments are common in this case.
• R02 Account closed: In these cases, either the ODFI or RDFI closed the account for sending or receiving funds. If you know you haven’t closed your account, your client or customer has likely closed theirs.
• R03 No account: This reason differs slightly from R02. Rather than signifying that the account no longer exists, this code claims the account never did. R03 can also arise if the account’s owner is not the same as noted by the debit entry.
• R04 Invalid account number: You will receive the R04 return code if something is wrong with a client’s bank account number. R04 ACH returns can also result in the account number not passing the validation process for completing the transaction.
• R05 Prenote not received: If the client has not authorized the use of ACH transfer when the RDFI submits a request, the R05 return code will apply.

There are more than five return codes, but these five are among the most common. Of these codes, R05 works differently from the other four. The return time frame for this code is 60 days instead of two days. This longer time frame exists so the originator has time to provide authorization before the ACH return becomes official.

Other return codes may involve the RDFI requesting a return, the client submitting a stop payment request, and other more complex scenarios. These codes are subject to evolve as ACH payments become more common.

 

What Happens if an ACH Payments is Returned?

If ACH payments are returned, you—as the merchant or provider—don’t receive the money you need for your product or service. Once you receive a return code for the transfer, you can move forward with the next steps.

In accordance with NACHA, the RDFI and ODFI are responsible for handling the resolution of these returns. While the provider and the client can contact each other directly to discuss the issue, the return cannot be undone until at least one of the involved financial institutions is contacted.

For example, if you receive the R02 return code, you can reach out to the client and ask them about their closed account. It’s possible the client switched banks and forgot they had an ACH arrangement with you. The client can then set up ACH payments with their new bank, and you can contact your bank to alert them of the change. With ACH debit return charges, your bank can retract the debit request from your client’s old account and make arrangements for the new account.

Other return codes may involve direct discussions with your bank or the RDFI. An R04 return code may need further explanation as to why the account number did not pass the validation process. Getting more information from the financial institution can help you determine if you need to reach out to the client, or if there was an issue on your end.

Sometimes, you may also receive a Notice of Change (NOC) in addition to an ACH return. These two alerts are separate, but they’re not mutually exclusive. NOC occurs when a customer’s bank account information changes as a result of a merger, shift in the account or another reason. You might receive the R04 return code with a NOC where the RDFI will send updated account information for the ACH request.

NACHA compliance requires operations to keep their rate of ACH returns below 15%. For administrative returns—R02 to R04—the return rate must be 3% of transactions or lower. These percentages are notably larger than the practical percentages of returns, so managing this aspect of compliance shouldn’t be challenging.

 

What Are ACH Return Fees?

Return fees are similar to transaction fees. When a client or customer causes an ACH return, they will be charged anywhere from $2 to $5 in response to the return. This fee is similar to the cost that comes with a bounced check, so ACH payments can bounce. Financial institutions charge these fees because it costs additional funds to process an ACH return.

 

How to Dispute ACH Returns and Charges 

ACH returns can be disputed in certain circumstances. To qualify for a disputed return, your return must meet one of the following:

• The request was misrouted.
• The request was a duplicate.
• The information was incorrect.
• The transaction was not returned in the proper time frame.
• The receiver incurred unintended credit as a result.

With most ACH returns having a turnaround time of two days, these disputes must be handled efficiently. Returns that meet one of the five conditions must be sent in within five days of the return’s settlement date. Once the dispute has been received, the RDFI still has the ability to contest the dispute. If contesting occurs, the dispute is no longer an issue within the ACH network.

 

Streamline ACH Payments With CSG Forte

Payment operations can be complex. If you want to use ACH payments at your organization, simplify the process with CSG Forte’s Dex. Our payments platform automates all processes through a cloud-based solution. Save time managing administrative hurdles and cut down on the costs related to resolving problems.

Dex supports online, in-person and mobile ACH payments. Built-in account verifications, recurring payment capabilities and returns management make every process simple. We have experience working with small- and medium-sized businesses (SMBs), enterprises, government organizations and integrated software vendors.

Get in touch with us today to learn more or get started by opening an account.

Mode of Payment – Guide to All Payment Types

Cash, check or card—it wasn’t long ago that these were the only options people had when paying for a purchase. Today, customers have more choices than ever, including using their phones to pay at a store or restaurant or transferring money directly from their savings or checking accounts.

Accepting as many different methods of payment as possible allows your business to accommodate numerous customers. But first, you must understand what types of payments are available to use and what your company needs to do before accepting them.

 

What Is a Mode of Payment?

A mode of payment is how a customer pays for a purchase. When out with a group of friends, someone might pull out their phone and use a digital wallet to pay for a round of drinks. While shopping online, that same person may reach for their credit card to buy a new outfit. If they’re browsing a farmers market, they may hand over cash when purchasing their fruits and vegetables for the week.

The type of payment method a person uses can be dictated by what they’re buying and where they’re making their purchase. If they’re ordering online or over the phone, they can’t use cash or another physical payment form. Some merchants also prefer contactless forms of payment for in-person sales, as these are faster and easier than using cash or swiping cards.

 

Types of Payment Methods

Many payment methods are available today—integrating them into your operations is just a matter of which ones your business chooses to accept. Among your options are:

 

Card Payments

Card payments are convenient for customers, as individuals can carry less cash or make purchases online with their cards. Compared to cash, cards offer a sense of security. If a card gets lost or stolen, the cardholder can block it and report any fraudulent purchases made without paying for them.

Each type of card payment has different rules:

• Debit: Debit cards typically connect to a checking or savings account. When a customer uses their debit card, the purchase amount gets pulled directly from their account.
• Credit: Credit cards are a type of revolving credit or loan. When someone pays with a credit card, they are borrowing to make the purchase. Depending on when they pay their card balance, they may also have to pay interest.
• Prepaid: Prepaid cards are similar to debit cards, but they don’t connect to a standard bank account. Instead, a person purchases a card for a specific amount, such as $200. Whenever they pay for something using the card, the purchase amount gets subtracted from the card’s balance.
• Contactless: Contactless cards can be debit, prepaid or credit cards. Instead of inserting the card into a terminal or swiping it through a magnetic reader, a person paying with a contactless card waves or taps the card over an interface.

 

Phone Payments

Customers can use their phones to pay for purchases. They may place an order over a phone or use the device itself as a mode of payment.

Digital Wallets

Digital wallets store people’s payment card information on their smartphones. A customer can load their debit and credit cards to their digital wallet, along with gift cards for certain stores. Many digital wallets can communicate with credit card terminals through contactless near-field communication (NFC) technology.

Digital wallets are meant to be more secure compared to carrying around a physical card. To access the payment information, a person may need to input a special code or provide biometric information, such as their fingerprint.

People can use digital wallets when shopping online, too. When they use their digital wallet, they don’t share their credit or debit card number, making the transaction more secure.

IVR

Interactive voice response (IVR) is another payment method that uses a phone. Your customers can call into your messaging system and use IVR to pay a bill. The system is completely automated, allowing customers to access it 24 hours a day.

With customers paying over the phone, CSG Forte Engage enables leading organizations to streamline call center operations, improve payment security and enhance the customer experience. Businesses of all industries, ranging from government entities to insurance companies, can benefit from this user-friendly call center payment solution.

By Text

While people use their phones more than ever, they aren’t always making or receiving calls. Text messaging is often the preferred communication form. It can also be an easy way for customers to pay. Text to pay systems send customers a payment reminder through text. They can then click a link in the text, which directs them to a payment gateway.

Text to pay methods help ensure timely payments.

 

Online

Customers have many payment options when paying online, from inputting their credit card information on a checkout page to using their digital wallet. They can also pay through the Automated Clearing House (ACH) or eChecks to pull funds directly from their checking accounts.

Depending on the platform your company uses, customers can save their preferred payment method and information. The next time they visit your online store to place an order, all they need to do is click on their saved information to complete their purchase.

Buy Now, Pay Later

Buy now, pay later programs allow customers to split up payments into equal installments. Instead of $100 upfront for a sweater, a customer who chooses a buy now, pay later program can make four $25 installment payments. They can pay the first $25 after one month and then pay $25 per month for three more months.

When someone opts to use a buy now, pay later program, the company providing this service pays the merchant the full cost of the purchase (such as $100 for the sweater). The customer then makes payments to the buy now, pay later servicer. Whether they pay interest depends on the terms of the agreement and if they can keep up with the payment schedule.

Crypto

Most payment methods use the currency of the country your business is based in, such as U.S. dollars for U.S.-based companies. If your company accepts cryptocurrency, it receives payments in a completely digital currency. Crypto payments are based on the blockchain and are meant to be more secure than other forms of payment.

 

Benefits of Accepting Different Payment Types

Between credit card payment methods, digital wallets, buy now, pay later schemes and old-fashioned payment methods like cash and checks, you may feel your head start to spin. While you might want to keep it simple and limit the number of payment methods you accept, sometimes more is better.

You can reach out to more customers by casting a wide net and accepting more methods of payment. Everyone has their preferred way to pay, whether it’s a credit card, digital wallet or third-party payment system like Paypal or Venmo. You don’t want to alienate customers or turn down a sale because you can’t accept their preferred payment.

Accepting multiple forms of payment also creates a more positive customer experience and helps your business stay competitive.

 

How to Choose the Right Payment Method for Your Business

While you do want to accept multiple payment options, this may not be possible with all forms of payment. Your business’s format might automatically rule out some payment types. For example, if you’re entirely online, you probably don’t want to accept cash or paper checks, as doing so would mean you’d have to wait for those payments to physically arrive. You may also not want to deal with the hassle of setting up a crypto wallet.

Similarly, if your average order size is on the small side, such as less than $25, offering buy now, pay later options may not make sense.

Beyond that, consider your business’s structure. If you operate on a subscription model, accepting digital and card payments can streamline the process, as customers can provide their payment information once. ACH payments may be another appropriate option for a subscription-based company.

 

What to Consider When Choosing a Payments Provider

Once you’ve settled on the types of payment methods to accept, you need to choose a payment provider that offers them. There are a few essential features to look for in a payment provider.

• Price: Providers use various pricing structures, such as taking a percentage of each transaction or charging a flat fee. Look for a provider with an upfront, crystal-clear pricing structure so you know what you’re paying and why.
• Security: Your customers are counting on you to protect their payment information. Look for a provider that puts security first.
• Scalability: Ideally, the payments provider you choose will work with your business now and accommodate your needs as your company grows in the future.
• Revenue: The payment methods you accept influence how quickly your company gets paid for products or services. The right payment provider can help you boost your revenue.
• Integrations: Your business may already use certain platforms, and you may wish to continue using those platforms. Look for a payment provider that integrates with your current systems.
• Reporting: The more data you have about transactions, the better able you are to make decisions for your business. Choose a payments provider that offers insights into and reports on your transactions.

 

How Can CSG Forte Help Your Business?

CSG Forte is your partner in payments. We can help you grow your business through our unified payments platform. Whether you choose to accept payments online, by phone, in person or all of the above, we can help you do so.

Our platform quickly integrates with your current systems, allows for multichannel payments, and support is available when you need it. Our platform also has built-in Payment Card Industry (PCI) compliance and follows the industry’s highest security standards.

 

Choose CSG Forte

Expand your accepted payment methods and grow your business. Talk to us today to learn more about how we can help.

NFC Mobile Payments

When customers use their phones to pay for purchases at supermarkets, restaurants or stores, those payments are in part powered by near-field communication (NFC). NFC is a type of wireless connection that lets two devices in close proximity to each other communicate. A smartphone with NCF enabled can send data to a nearby credit card terminal, for instance.

NFC makes paying more convenient for customers and businesses. If your company isn’t yet accepting NFC mobile payments, learn more about how it works and the benefits of using it.

 

What Are NFC Mobile Payments?

NFC mobile payments are contactless payments. To make a mobile payment, a person must first have a smartphone with NFC enabled. They also need to install a digital wallet app on their phone. A few different digital wallets are available, including Google Pay and Apple Pay. Each type works with a specific type of mobile device. Apple Pay works with iOS devices, while Google Pay works on either Android or iOS devices.

Once someone has a digital wallet on their phone, they can load their payment information onto it. They will provide their credit card information, including their account number, expiration date and security code. The app stores that information securely. When they want to make a payment, they can open the app, choose their payment method and wave their phone near the credit card terminal.

 

How Do NFC Payments Work?

NFC is a type of radio frequency identification (RFID) that lets devices talk to each other when they are within a certain range of each other and when NFC is enabled. Most smartphones let users toggle NFC on and off. RFID isn’t new—it’s been used for decades in barcode scanners. However, NFC is a newer form of RFID—it’s been in use since the start of the 21st century.

NFC uses a specific frequency that lets devices talk to each other when they are very close together. For an NFC payment to work, the user typically needs to place their mobile device about 2 inches away from the NCF-enabled terminal.

When an NFC-enabled mobile device with a digital wallet app installed gets within range of an NFC-enabled credit card terminal, the two devices start talking. The smartphone sends encrypted payment data to the terminal, which then sends that data on to the appropriate banks. The banks approve or deny the transaction, the data gets sent back to the terminal and mobile device, and the payment is completed (or declined).

The entire process takes just a few seconds. It’s usually much faster than swiping or inserting a credit card for payment and quicker than handing over cash and waiting for change.

 

Advantages of Using NFC Mobile Payments

NFC payments offer benefits to businesses and consumers. If you haven’t yet started accepting mobile payments, here are a few reasons to do so.

They’re Fast

A lot happens when a customer presents their mobile phone to pay, but all of it occurs in pretty much the blink of an eye. Data travels from phone to terminal more quickly through NFC than it does when a card is physically swiped or inserted into the machine.

All that speed is good news for business owners, as it lets you serve more customers in less time. It’s also good news for buyers, as they don’t have to wait a long time at the checkout counter for a sale to complete.

They’re Convenient

Who hasn’t forgotten their wallet at home, only to realize it when they’re at the front of the checkout line? With mobile payments, all a customer needs to do is pull out their smartphone to pay for their groceries, meal or new wardrobe.

NFC payments also allow for a smoother transaction process. Most people keep their phones within easy reach, but their wallets are securely tucked into a bag or pocket. Using mobile payment eliminates the need to dig around for a wallet. Customers also don’t have to wait for change or spend time counting out the correct number of bills.

They’re Secure

NFC mobile payments are as secure, if not more secure, than card payments—and they’re way more secure than using cash. If someone loses cash or has their wallet stolen, there’s no way to get it back. But, if someone loses their smartphone, they can lock it down to prevent anyone from accessing it or their payment information.

Digital wallets often have multiple security features built in to prevent unauthorized access. For example, a digital wallet may open up after the phone’s owner scans their fingerprint. Some apps use facial recognition software and only open after scanning the phone owner’s face. A slightly less secure option is for the app to require a person to input a code or draw a pattern before getting access.

When sending data from the phone to the credit card terminal, digital wallets encrypt the information. If a third party intercepts the payment data, they’d have to spend a lot of time and effort cracking the code and deciphering the information.

Some digital wallet apps also use a security measure called tokenization. Once the user provides their payment card information to the app, the app creates a series of random numbers, which it then uses in place of the payment card. Outside of the NFC payment system, the random numbers are worthless. If a third party gets access to them, they wouldn’t be able to use them for anything.

They Give Customers Options

For some customers, the more payment options they have, the better. Adding NFC mobile payments to your business’s point-of-sale (POS) system means your customers have another choice when it’s time to complete a transaction. They can feel confident running to the store with only their phones.

They’re Flexible

Most digital wallets allow customers to use them for in-person payments—such as when someone is picking up their morning coffee or grabbing groceries after work—and online payments, such as placing a weekly Amazon order.

They’re Easy to Set Up

Your business needs a terminal that accepts NFC payments before you can start accommodating digital wallets and mobile payments. If you use a complete payment solution, your card terminal will already be NFC-enabled, making it easy to start accepting digital wallets.

Once you have an NFC-enabled terminal, your business is ready to accept mobile payments from customers, speeding up their time in the checkout line and making life more convenient for everyone involved.

 

Examples of NFC Payments

Digital wallets turn smartphones into payment methods. The type of digital wallet a person has installed on their device depends on the operating system. Some of the most readily available NFC payment digital wallets include:

Apple Pay

Apple Pay works on iOS devices, such as the iPhone, and pre-installation means users don’t have to download the app on their own.

Apple Pay users can save their credit or debit card information to the app, plus membership cards and gift cards. Individuals in the U.S. have the option of using an Apple card or Apple cash, which is digital prepaid card. Users can choose which payment method to use as their default payment.

When someone wants to use Apple Pay to complete a purchase, they need to open and unlock the app using either FaceID, which scans their face, or TouchID, which scans their fingerprint.

Samsung Pay

Samsung Pay is similar to Apple Pay but only works on Samsung devices. It works the same as Apple Pay does, letting individuals save their membership cards, gift cards and debit or credit card details. Users can also take advantage of a prepaid Samsung card when using Samsung Pay.

For security, the app only opens after scanning the user’s iris or fingerprint.

Google Pay

While Apple Pay only works with iOS and Samsung Pay only works with Samsung, Google Pay works on Android and iOS devices. It allows users to save payment information that they can then access to make payments from the Google Pay app or when using the Chrome browser.

To use Google Pay, a person needs to verify their identity. They can use their fingerprint or a personal identification number (PIN) or draw a special pattern.

 

How Can CSG Forte Help You?

Are you ready to accept mobile payments at your brick and mortar location? CSG Forte’s payment solution can help. Our platform makes it easy for customers to pay using their chosen method, whether it’s their digital wallet, a physical card or cash.

If you’re ready to streamline payment at your business, contact CSG Forte today to learn more about our payment solutions.

E-Commerce Payment Methods

E-commerce is big and getting bigger. In 2023, mobile e-commerce sales, in particular, are expected to top $415 billion, making up 6% of all retail sales. By 2025, mobile sales could be as much as $710 billion.

To reach today’s shoppers, your business must accept online payment methods, from credit cards to digital wallets. Learn more about e-commerce payment options and what your company can do to increase the number of payment methods it accepts and the number of customers it can reach.

 

What Is E-Commerce Payment Processing?

E-commerce payment processing is what allows a business to accept electronic payments. The process of paying online is usually over in what seems to be only a few seconds, but payment information actually makes a fairly long and detailed journey from submission to approval.

E-Commerce vs. Traditional Payment Processing

E-commerce payment systems differ from traditional payment processing methods in a few ways. With traditional payment processing, a merchant connects a third-party payment gateway to the checkout process. The customer needs to visit a separate page to provide their payment details. They are then redirected back to the checkout page of the merchant.

E-commerce payment processing removes the intermediary, as it integrates payment processing into your website. It’s perceived as more secure and trustworthy by the customer, as they aren’t being taken to an unknown third party. Integrating e-commerce payment processing into your retail website helps build trust with your shoppers, which can lead to more sales.

 

How Does E-commerce Payment Processing Work?

Several parties are involved in the online payment process. Most of the work happens behind the scenes and moves quickly, so a customer may not realize their payment information has to go through several steps before it’s approved and the sale is complete.

1. Customer Inputs Payment Information

The e-commerce payment process begins when a shopper inputs their payment information during checkout. They may use a credit or debit card or a digital wallet such as Apple Pay, Google Pay or PayPal. The customer inputs their payment information into the checkout page on your site. The data is then encrypted and sent over a payment gateway to a processor.

2. Information Reaches Payment Processor

Once the processor receives the payment information, it reaches out to the bank connected to the debit or credit card. The bank confirms that the customer has enough funding to cover the transaction. If all is well, the bank approves the transaction. If there isn’t enough money in the account or on the credit line or the bank suspects fraud, it declines the transaction.

3. Transaction Is Accepted or Declined

From there, the payment processor lets the payment gateway know if the transaction was accepted or declined. The payment gateway then shares that information with your website. If the bank approved the transaction, the sale is complete and the customer gets an order confirmation. If the bank declined the transaction, the customer receives an error message and is asked to try again or seek help.

4. Approved Transactions Go Through

After the transaction is approved and complete, the total amount is deducted from the customer’s bank account or credit line and sent to your merchant account.

 

Who’s Who in E-Commerce Payments

There are several participants in the e-commerce process. Take a closer look at what each party does and their roles.

Payment Processor

A payment processor is the service provider your business uses to accept credit cards and other digital payment methods. It facilitates the e-commerce transaction by sending payment data to the customer’s credit card or bank and your merchant account.

Payment Gateway

A payment gateway is necessary if your business wants to accept payments online. It’s a platform that connects your website to a merchant service provider, enabling data transfer between the payment processor, issuing and receiving banks, and your website. When a customer’s bank or credit card approves or declines a transaction, the information is sent to your website through the payment gateway.

Merchant Account

After a customer’s bank or credit card authorizes an e-commerce transaction, the money needs a place to go. The funds are deposited into your merchant account.

A merchant account is separate from your business’s bank account. To get a merchant account, you need to have a relationship with a merchant services provider, which provides software and hardware for e-commerce sales. Some banks offer merchant accounts, but before choosing a provider, you should consider factors like:

• Hardware and software costs
• Quality of customer support
• Contract length and other terms

Once you’ve opened a merchant account, you can link it to your business’s bank accounts. You can transfer any funds in your merchant account to your business checking or savings, usually after a day or two.

 

What Are the Types of Global Payment Methods?

E-commerce payments take place over the internet, but the payment methods vary considerably. Several e-commerce payment methods exist, and the available options are evolving.

The payment method a customer is likely to choose depends largely on the options available and their preferences. To facilitate the payment process and reduce the chance of turning a customer away, consider accepting as many payment types as possible.

Details From Physical Cards

Types of e-commerce payment methods with physical cards include:

• Credit cards: Credit cards have 16-digit numbers assigned to them, plus an expiration date and security code. When a customer uses a credit card to pay, the sale amount is deducted from their credit line. If they have enough remaining on their credit line, the issuing bank typically authorizes the transaction.
• Debit cards: Like credit cards, debit cards have 16-digit account numbers, an expiration date and a security code. They’re connected to a customer’s bank account, typically their checking account. When a customer pays with their debit card, the funds are pulled from their bank account. 
• Prepaid cards: Prepaid cards work similarly to debit cards but aren’t connected to a bank account. Instead, a person purchases a card and “loads” a certain amount of money onto it. Every time they use the card, the purchase amount gets deducted from the amount loaded onto it. Some prepaid cards are reloadable, while others aren’t, like gift cards. If there aren’t enough funds on the card, the transaction gets declined.

Payment With Account Information

In the digital age, customers can also use account details or securely stored card information to make purchases online. These are digital payment options like:

• Digital wallets: Digital wallets “store” customers’ credit and debit card information. Examples include Apple Pay and Google Pay. The wallets can be used on any device, including a smartphone, laptop or tablet. They’re designed to make paying for purchases more convenient and secure because they encrypt and tokenize payment information.
• Online payment services: Sites like PayPal or Venmo connect to a customer’s bank account. Shoppers log in to the payment platform at online checkout instead of needing their bank account details.
• Bank transfers: A bank transfer, or an automated clearinghouse (ACH) transfer, pulls money directly from a customer’s bank account. To perform the transfer, the customer needs to provide their bank’s routing number and account number. They can usually use a checking or savings account.
• EChecks: EChecks are often confused with ACH payments, but the two methods differ. ECheck is a form of ACH, but it’s not ACH itself. When paying by eCheck, a customer provides information that would be found on a paper check and authorizes the payment. It does take slightly longer to receive funds from an eCheck, but it processes as quickly as ACH.

Other E-Commerce Payment Methods

Other payment methods include:

• Buy now, pay later: Customers split the cost of purchases into installments with this method. Typically, buy now, pay later programs are offered through a third party, which collects the payments from the customer and may charge them interest.
• Cash on delivery: Cash on delivery (COD) is a relatively old-school payment method that’s still popular in some parts of the world, often in places with a large unbanked population or where credit or debit card use is uncommon. With COD, a customer orders a product or service and pays in cash when the item arrives at their home or the service is performed.

 

What to Look for in an E-Commerce Payment System

Make it easier to choose among your many e-commerce payment system options by knowing what to look for. Because each business has different needs, a payments platform that’s right for one store or merchant may not be right for you.

Keep an eye out for these qualities when choosing your payment system.

1. Security

The payment solution you choose should be secure. Security can take several forms, so look for the following features:

• Tokenization: Tokenization turns sensitive credit card and other payment data into randomly generated tokens. On their own, the tokens have no value, so if they are intercepted by a third party, the third party can’t use them elsewhere.
• Hosted payment pages: Holding on to customers’ sensitive payment information puts you and them at risk. Hosted payment pages mean that your company doesn’t store payment details on its site and that any payment information is kept secure.
• End-to-end encryption: Encryption transforms data into strings of gibberish, making it worthless if intercepted. Look for a payment system that uses Payment Card Industry (PCI) validated, end-to-end encryption.

2. Ability to Accept Different Payment Types

The more payment types you can accept, the wider your customer base. Choose a payment system that lets you accept credit and debit cards, digital wallets, eChecks and other payment methods.

3. Costs and Fees

All payment processors charge fees for using their services, but the fees vary. Before deciding to work with a payment system, review the costs associated with it and the fees it charges. Typical fees include:

• Monthly subscription fee
• Transaction charges, which can be a flat fee or a percentage of the purchase amount
• Setup fees

4. International Payments

When you sell online, you may have customers from all over. To accommodate people living in countries other than yours, you may want to look for a payment system that lets you accept payments in other currencies.

 

Why Work With CSG Forte?

CSG Forte lets you manage your payment operations from a single location. Our complete payments solution lets you accept any payment method, from cards to digital wallets to ACH. Our solution goes beyond online sales, allowing you to accept payments in person and over the phone.

We also have several pricing structures available. Choosing the pricing model that works best for your business, based on your sales volume and transactions.

 

Contact Us Today to Get Started

If you sell online, you need a payment system that’s secure, affordable and flexible. Contact CSG Forte to learn more about our complete payment solution or to sign up for an account.

What Is a Merchant Services Provider?

The days of cash-only payments are over. Customers today often prefer to use electronic or digital payments for increased convenience and personal hygiene. If your company wants to accept credit cards, debit cards and other electronic forms of payment, it needs to work with a merchant services provider.

You have plenty of choices when looking for a merchant services provider (MSP), but not all companies are created the same. Knowing what services you need and what features to look for ensures you find the MSP that’s the best match for your business.

 

What Is a Merchant Services Provider?

A merchant services provider is a go-between company that acts as a mediator between your business and credit card companies and banks. If your company wants to accept multiple forms of payment beyond cash, it needs to work with an enterprise that offers secure merchant services.

The goal of most MSPs is to facilitate and secure the payment process for companies and their customers. Along with acting as the intermediary between banks and your company, an MSP may also allow you to connect your online and physical stores’ payment systems, ensure you stay compliant with security regulations and offer customer support.

Depending on your needs, your MSP may provide payment processing, payment gateways, point-of-sale (POS) systems and a merchant account.

 

Merchant Account Provider vs. Payment Gateway

Payment gateways and merchant account providers fall under the merchant services provider umbrella. In some cases, an MSP may provide both payment gateway and merchant account services.

Merchant Account Provider

A merchant account provider offers your company a merchant account, which you need to accept credit and debit cards. The merchant account holds funds for you while a bank authorization occurs. Once the authorization takes place, the money transfers from the merchant account to your business’s bank account.

A merchant account isn’t the same as a typical bank account. While the money in the account technically belongs to your business (provided the credit or debit card company approves the transaction), you can’t directly access the money and withdraw it as you would funds in your savings or checking account.

Instead, you must rely on the account provider to transfer the money from the merchant account to your business bank account. The merchant account provider subtracts any fees related to the transactions from the balance before transferring the funds to your bank.

You need to have a merchant account before you can accept credit and debit cards. Some merchant account providers also offer payment processing services and products such as card readers, point-of-sale systems and mobile payments.

Payment Gateway

A payment gateway is a type of merchant services allowing your company to process credit and debit cards and other electronic payments. Online shopping, in-store shopping and using a credit or debit card in-store wouldn’t exist without payment gateways.

Payment gateways provide the software that transfers data about a transaction from point A to point B. When customers provide their credit card information online, that information travels along the payment gateway to the issuing and acquiring banks. The payment gateway encrypts the card information, protecting it from third-party interception.

 

Merchant Services Products

Merchant accounts and payment gateways are just two examples of the products an MSP can offer. Additional products that may be available from a merchant services provider include:

Credit Card Terminals

Credit card terminals are machines that allow you to swipe, insert or tap a payment card during an in-person transaction. The machines capture the card’s account number and other relevant details either through the embedded computer chip or a magnetic strip. Often, the terminals have keypads that allow a customer to tap in their security code or personal identification number (PIN) to verify their identity during a transaction.

Once the terminal has captured and verified the card data, it then sends it through the payment gateway for authentication and approval.

The number of credit card terminals your company needs depends on its size. If you have a small brick-and-mortar store with a single checkout register, you may only need a single terminal. If you have a larger store with multiple checkout lanes, you’ll need one terminal for each lane that accepts payment cards.

Some card terminals are meant to be portable. These versions attach to a smartphone or are handheld, allowing your employees to carry them around your store or restaurant and accept payments on the go.

POS Systems

A point-of-sale system is the machinery and software that allows you to ring up customers’ purchases and accept their payments. Typically, POS systems are a combination of hardware and software. They include the credit card terminals you use to accept payment cards and the computers or tablets your employees use to input orders. POS systems may also include a barcode scanner or connect to the camera in a smartphone to read Universal Product Code (UPC) labels on products.

Traditionally, a POS system was the cash register used in-store. Today’s systems are much more complex. Along with the terminals and tablets you may use to ring up in-person purchases, your POS system can include online shopping carts and checkout processes. You may also be able to use a POS system to track your store’s inventory and run customer loyalty or engagement programs.

Mobile Payments

A merchant services provider can allow you to accept mobile payments or use your mobile device as a terminal.

When a customer wants to use their mobile device to pay for a purchase, several components must come into play. First, the customer needs to set up a mobile wallet on their smartphone and load their credit or debit card into the wallet. Then, they must enable near-field communication (NFC) on their device.

To use their mobile device as their payment method, customers need to visit companies that have NFC-equipped terminals and accept mobile wallet payments. Your merchant services provider may offer mobile payment options.

Virtual Terminals

A virtual terminal allows your business to accept card payments without having the card physically in front of you. If you accept online payments, you’ll need a virtual terminal to collect customers’ card numbers and other pertinent information. You can also use a virtual terminal to accept payments over the phone.

When using a virtual terminal, you must manually input the customer’s card information, typing in the number, expiration date and security code. Some virtual terminals also require the billing ZIP code as an added layer of security. You also must put in the sale details, including the amount of the transaction.

Virtual terminals can be web-based, part of an app or a component of a larger POS system.

 

How Does a Merchant Services Provider Work?

As the go-between for a business and a bank, the merchant services provider is responsible for facilitating payment transactions. While a lot goes on behind the scenes when a customer makes an electronic payment, the process itself typically lasts a few seconds. A merchant services provider goes to work once a customer provides payment information:

1. The MSP sends the payment information to the acquiring bank.
2. The acquiring bank passes on the payment details to the issuing bank to get authentication and approval. The issuing bank can either approve or deny the payment.
3. The approval or denial gets sent to the acquiring bank, which then sends the information to the MSP.
4. If the payment is approved, the merchant account receives an approval and confirmation of the transaction. The money is then transferred from the customer’s bank account or credit card to the merchant account.

 

Merchant Services Pricing

Several pricing models are available for merchant services. At CSG Forte, we charge a per-transaction fee based on the type of payment. For example, a credit card transaction, we charge 2.95% of the amount. For Automated Clearing House (ACH) transactions, the per-transaction fee is 1% plus 25 cents.

The exact pricing structure can vary based on your agreement with your MSP.

 

How Quickly Can You Get Started With a Merchant Services Provider?

If you’re ready to work with an MSP, the first step is to gather the information the provider will need to review your company and confirm you’re eligible to receive its service. Providing as much information as possible on your application helps streamline the process, meaning you can start more quickly.

Some of the documents you’ll want to include with your MSP application are:

• Your business’s tax ID
• Your website
• Your mailing address
• Your business’s bank account information

 

Who Can CSG Forte Help?

If your business wants to accept more forms of payments than it currently does, CSG Forte can help. We offer merchant services for small- and medium-sized businesses. We’ll allow you to accept electronic payments, including credit and debit cards, in-person payments, online payments and over-the-phone payments. You’ll get peace of mind that your transactions are secure and your customers’ payment data is safe.

If you have any issues with our merchant or payment processing services, our customer service representatives will assist. We help you troubleshoot issues and provide support with customer disputes.

 

Choose CSG Forte for Merchant Services

Take the steps toward achieving a simpler payment process by choosing CSG Forte as your merchant services provider. Contact us today to start your application or learn more.

 

FAQs

Have questions about working with a merchant services provider? Check out our answers to some of the most frequently asked questions.

 

Do You Need a Merchant Services Provider?

If your business wants to accept credit and debit cards or other forms of electronic payments, then you need to work with a merchant services provider. While you’ll need an MSP, the type of MSP your business requires can vary depending on the services and the type of payments you want to accept.

 

What Is the Difference Between a Merchant Services Provider and Merchant Account Provider?

A merchant account provider is a type of merchant services provider. A merchant account provider can give your company access to a merchant account. Some merchant account providers also handle payment processing, but not all do.

 

What’s the Difference Between a Payment Service Provider and Merchant Account Provider?

A merchant account provider gives your company access to its own merchant account. Payment service providers can also provide access to a merchant account, but the account won’t exclusively belong to your business. Instead, a payment service provider groups businesses together and uses the same merchant account for them.

While either a payment service provider or merchant account provider allows your company to accept electronic payments, it typically takes longer to receive an account from a merchant account provider than to be approved by a payment service provider.

Payment service providers typically take on more risk when accepting businesses than merchant account providers. They may have stricter transaction limits or put more holds on transactions compared to merchant account providers.

 

How Can You Ensure Payment Security?

Security is critical in this day and age. Customers want to feel confident that their payment information is safe from hackers, and companies want to know that the MSPs they work with prioritize security.

There are a few things to look for to ensure payment security. All payment details should be encrypted during transmission and when the system is at rest. Fraud management tools are also important, and the MSP should comply with Payment Card Industry (PCI) standards.

 

How Do You Choose a Merchant Services Provider?

Choosing an MSP can be a straightforward process. You need to assess your business’s needs and the type of payments you wish to accept, then do your research and look for a provider that offers them. Also, consider how you want to accept payments, such as online, in person or over the phone. Pay attention to the security measures the provider has put in place, the fee schedule and the amount of customer support the MSP provides.

It’s also useful to look for an MSP that can integrate with your existing systems or provide ample support to help you migrate over.