The Green Sheet Online Edition
November 25, 2019 • Issue 19:11:02
How to avoid setbacks at installation
By Dee and Emily Karawadra
Having been in the industry for over 20 years, we have seen our fair share of setbacks when trying to board merchant accounts. From the underwriting process to the equipment install, a deal can go wrong in various ways. And those setbacks can sabotage deals. Often, a deal you submit can go stale or not move through underwriting due to errors made during the merchant-application stage. We avoid the bulk of these errors by taking measures to catch mistakes before merchant setup. Here are several ways a merchant application can cost you a deal:
- Wrong or missing information on application: This can stop a deal before it even starts. An incorrect or missing Social Security number, for example, can cause an account to be pended, awaiting correct information.
- Wrong signature on application: If, say, the signor is not the owner, this can cause the application to be rejected or pended.
- P.O. box for owner's address: This mistake is common; most processors will not allow a P.O. box to verify an owners information.
- Missing or misprinted tax ID: During the business verification process, this number must be correct. If the business is a sole proprietorship, the owner's Social Security number can be used.
- Incomplete or illegible pricing addendum: The processor cannot set up an account without clear pricing that has been agreed and signed on by the merchant.
- No guarantor signature: Some business entities such as corporations and LLCs are not required to have a personal guarantor. Most processors do not require this unless the business is new or has high processing volume.
- Inaccurate estimated percentages of card types accepted: This is where you break out the percentage of sales that are card-present, card-present but not swiped, and card-not-present MO/TO transactions. Together, these must add up to 100 percent. This is important to processors in assessing merchant risk. If all transactions are card-present, the business is typically considered less risky. If the majority of sales are card-not-present, this must be disclosed upfront to prevent funds being held or the account being frozen after processing begins. If actual percentages differ greatly from those stated, funds could be held while the processor clarifies how cards are being processed.
- Incorrect industry type/MCC code and description: It's important to use the correct MCC/SIC code when setting up a merchant. If you designate a restaurant as a retail shop, this can cause issues when processing begins. A restaurant must be able to have tips and edit those tips at end of shift. If the restaurant is set up as a retail shop, it won't have this ability, so the agent will likely have to get the designation modified, which takes time. Some processors may have to re-underwrite the account, causing further delay.
- Inaccurate estimated annual card volumes: This is where the sales agent estimates by card type the merchant's annual dollar volume, as well as size of average daily sale. If an MLS puts the estimated yearly volume at $20,000 and the merchant processes that much in one month, the processor could ask for additional information because this is not what the account was approved for.
This information can be found on a merchant's previous month's processing statement if they provided one. It's crucial to estimate the average ticket and a high ticket amount. For example, maybe their average sale is approximately $50, but once a month they have a $2,500 sale. This helps set the account's parameters. If the MLS only enters a $50 average ticket and the merchant runs a couple sales at $2,500.00, the processor could suspect fraud and hold funds. It's always good to provide a range so the processor can build the merchant's parameters for risk correctly and avoid holding of funds.
- Inaccurate or illegible merchant bank account information: Previously, most processors required a voided check to avoid this error. Today, many processors don't require this. We have learned from this, and require a voided check or a bank letter verifying the correct account information. The most critical errors involve merchants' money and deposits. If this information is incorrect, they won't receive their deposits; someone else will or they will be rejected. This can make merchants uneasy, or worse. Always confirm banking information.
- Confusion about communication mode: The merchant application will ask what communication method is needed to dial for authorization. It could be variations of traditional phone line, internet or vpn. Installation can be delayed, for instance, if the terminal was programmed for internet communication and the MLS arrives to do an install and the business is utilizing a phone line. The download for the terminal will need to be modified to reflect the correct communication method. This can take time to correct on the processor's side, causing a delay and possible partial download to the terminal.
- Funding needs not specified: Does the merchant want the traditional deposit time of two days or does the business need same-day or next-day funding. This should be identified on the merchant application so the merchant receives funds within the expected time frame. If an MLS doesn't indicate same-day funding and sets up the merchant as traditional, two-day receipt, this can cause an unhappy merchant right out the gate.
These are the biggest issues we come across when a merchant account is held up or stuck in a pending status before approval. A high percentage of merchant application never makes it to install due to these preventable errors. The goal is to get through this process quickly and without error so the merchant install goes smoothly. Being aware of what can cause a pended application can greatly reduce the errors and shorten the underwriting process. Once an account is approved, it's time to reprogram or deploy equipment. Half the battle is done on the merchant application; the other half is installing and training the merchant.
The aim is to get merchants set up correctly with no errors so they can process cards, get deposits in the expected time, have access to reporting needed to reconcile, and know who to contact if they have questions. Communication during the install is crucial to getting merchant accounts up and running without causing merchants to question their decision to work with you. Always make yourself or your support office/ISO available to the merchant to ensure a positive outcome.
Dee Karawadra is president and CEO of Impact PaySystem, and Emily Karawadra is the company's chief financial officer. Since 2001, Impact PaySystem has been a leading provider of payment processing technologies and services to merchants throughout the United States. Through alliances with payments industry leaders such as Chase Paymentech, First Data, Buypass, Sage and more, Impact PaySystem offers tailored solutions to meet the unique needs of each merchant. Dee and Emily will welcome your questions and comments at firstname.lastname@example.org and email@example.com, respectively.
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