Accepting Card Payments
What is card processing? Card processing is a facility that provides you with a simple way to accept debit and credit cards for the payment of goods and services.
Types of Transactions
Customer-Present Transactions (also know as face-to-face transactions): In this case, a point-of-sale (POS) terminal will be used to take the customers card details for payment. These are generally the most secure form of card payments, as they benefit from the use of Chip and PIN technology.
Customer-Not-Present Transactions: These are where the cardholder is not physically at the location when payment is taken. This is usually done either online or by telephone/fax.
- Online, the cardholder enters his/her card details directly into a Web site, or through a third party payment service.
- By telephone, where a cardholder either keys in (IVR) or provides his/her card details to an operator who manually keys the information into a payment solution.
- By fax, where the cardholder faxes a completed payment form to the merchant.
Customer Not Present transactions often require additional security questions or processes to avoid fraud.
Terms Used in Card Processing
There are a number of terms traditionally used in card processing to refer to the various parties involved in the transaction. They are:
- Cardholder – the person who owns the card being used to make the transaction (e.g. Mrs. Jones, buying a new dress and paying for it by card).
- Merchant – the business taking payment from the cardholder for the products or services they are selling (e.g. the shop from which Mrs. Jones buys her dress).
- Acquirer –
the company that provides the processing services that enables the Merchant to accept payment by card (e.g. HSBC Merchant Services).
- Issuer – the Bank at which the account that the card being used to pay is held (e.g. HSBC Bank).
- Card Association – a network such as Visa or MasterCard (and others) that bridges the gap between the acquirer and the issuer for authorising and funding transactions.
How Card Processing Works
There are 4 steps to a successfully processed card payment which takes about 3 days, from the moment the cardholder hands over their card (or gives details online, by post or by phone) to the merchant receiving final payment.
STEP 1.
The cardholder uses his/her credit or debit card to make a purchase.
At this time, the merchant sends the details of the transaction to the acquirer (e.g. HSBC Merchant Services) and almost instantly receives notification as to whether the card number and transaction are valid and authorised.
STEP 2.
After authorisation, the transaction is stored in a batch (a collection of all transactions) by the merchant. This batch is later sent to the acquirer, usually at the end of the working day.
STEP 3.
The acquirer sends the batch of transactions to the card association (e.g. VISA). The Association debits the issuers (the bank that issued the card) for payment and credits the acquirer. In other words, the Association manages the payment between the card issuer and the acquirer.
STEP 4.
Once the acquirer has been paid, it can then pay the Merchant, who is credited with the transaction amount.
Disputed Transactions
A chargeback is a transaction that has been disputed by the cardholder or card issuer and returned to us. A chargeback is also known as a 'dispute.' Each chargeback has specific rules, regulations and time limits within which HSBC Merchant Services must operate. These are set by the Card Schemes and influence the actions we are able to take when dealing with chargebacks. We will work with you to do everything possible within the rules to defend the chargeback on your behalf. There are a number of different reasons why a transaction can be charged back, but they mainly fall into two categories:
- the cardholder or the card issuer is disputing the transaction, for example the card and cardholder were not present at the point of sale and fraud may have taken place
- the cardholder disputes the underlying transaction, for example, in the case of late delivery of goods or services, or the wrong goods have been delivered
We will always advise you by letter of the chargeback prior to the debit or credit being applied to your account. Whether we can defend the chargeback depends on whether the transaction has complied fully with the rules set by the Card Schemes. Where possible, for example, where a transaction has been authenticated by chip and PIN and you are not liable, we will automatically defend the chargeback on your behalf. In the event additional information/documentation is required from you, you will receive notification in writing and the disputed amount will be debited to your account.
What do you need to get started?
There are several things that you need to consider before applying for card processing. These are:
Your business bank account – Please make sure you have a business bank account open as you will need to supply your bank sort code and account number to set up your merchant account with us.
Your start date – You need to allow a minimum of 12 working days from when you return your signed application forms for your account to be set up.*
* All applications are subject to approval
Your business – To help us make sure we set you up with the right facilities, we will need to understand how your business will operate. You will need to make us aware of what products or services you will be selling, how you will be selling them e.g. in store, online, over the telephone, and your target market. Your average transaction value and estimated card turnover will also be required.
Your turnover – HSBC Merchant Services’ card processing solution is suitable for all types and sizes of business.
Your phone line – If you would like a static or portable terminal, you will need a separate, designated phone line for your terminal.
Your Web site – If you wish to open an internet account with us, you must have your Web site up and running so we can link our facilities with your site. Your Web site must also meet HSBC Merchant Services' internet policy requirements for the application to be approved and activated.
