isk is one of the most important and least understood issues in the payments arena. Very few sales agents understand the start-to-finish process of underwriting and risk management.

Why? Because as sales agents, you don't need to know how risk works; the processor takes care of that. However, if you want to keep merchants and take care of your money, you'll need to understand the importance of managing risk in all transactions.

Let's look at the most important things that merchants should know when it comes to fraud and chargebacks.

This is often tough material to explain to merchants, but if you understand it and help them understand it, you'll receive fewer questions and hear fewer complaints in the future. Most importantly, merchants will understand how to protect their money, and they'll thank you by continuing to process with you.

Protect Merchants: Fraud Warnings

Once you've signed merchants, in order to keep them processing profitably and retain them as customers, train them. If merchants lose major amounts of money because of fraud while processing with you, they'll likely blame your company for it and take their business elsewhere.

To keep merchants, teach them to be on the lookout for credit card fraud in every electronic transaction.

For instance, imagine the case of a furniture store owner. A well-dressed man comes in and wants to buy several items that are actually showcase items.

He reaches for his wallet and remembers that his wife has the credit card he wants to use. He says he will come back to pay for the furniture and pick it up, and he leaves $100 cash as good faith that he will return.

He comes back, right before closing time, and actually helps the merchant lift the furniture into his truck. He gives the credit card to the merchant, but the credit card's mag stripe is worn and the POS terminal won't read it.

The merchant keys in the credit card number, processes the sale and gives the customer back his $100. The customer leaves with the furniture.

Two weeks later, the furniture store gets hit with a chargeback claiming a fraudulent sale. Guess what? The merchant was scammed. The customer got away with free furniture, and the merchant is stuck with the chargeback and the loss of the merchandise.

If only the merchant would have taken the time to get a manual imprint of the credit card. That imprint, along with the authorization and signature, secures the keyed-in sale. The customer could never have charged the sale back attributing it to the "F" word: fraud.

Now consider the same situation, but assume the card is swiped and the customer leaves with the merchandise. Does the merchant have something actually signed by the customer that shows he left with the furniture?

If not, I've seen customers win chargeback cases where they claim the sale was for the down payment for the furniture at a future delivery time. If the merchant cannot prove otherwise, this might be another situation in which the customer gets free stuff.

By paying attention to the little signs that indicate fraud is about to occur, merchants can protect their money before the acquirer's risk team gets involved.

Remember: Merchants' money is your money too, and funds that are held on a chargeback present a financial burden for you as well as merchants.

Three Simple Ways to Win Chargebacks

Let's face the facts: In today's business world, systems are set up to protect consumers, not merchants. Most chargeback rules, and there are hundreds of them, favor the customers initiating chargebacks over merchants who are at risk of losing their money.

Another unfortunate fact: Customers have 180 days (six months) to decide if they want to dispute a sale. It can happen with no warning. It can happen when a merchant's bank account is empty. It can happen on a $10 sale or a $10,000 sale.

If merchants lose a chargeback, they not only have to refund the customer's money, they're charged a fee on top of it. Merchants need to prepare and protect themselves, so I'll explain a few tried-and-true ways for them to win chargebacks.

Fill Out Retrieval Requests Immediately

Let's say a customer gets his credit card statement in the mail and doesn't recognize a charge. The acquirer sends a retrieval request to the merchant and now the merchant must send a copy of the receipt to the customer before the deadline on the request.

If the merchant is on the ball and sends the receipt in on time, all is well. If he misses the deadline, he automatically loses the chargeback and has to give the customer's money back along with a chargeback fee.

This is a non-reversible chargeback. So, for example, if the merchant is on vacation, or is busy and doesn't open his mail on time, guess what? He will lose the dispute on a retrieval request.

Keep Receipts Organized

When a merchant receives a retrieval request, the request will contain the transaction date, cardholder number and amount of the transaction.

No customer name is listed on the request, and there's no indication of what they purchased. Merchants need to keep their receipts filed and organized according to date or cardholder number in order to find the appropriate receipt.

Make Sure Customers Don't Take the Store's Receipt

I once worked with a merchant who sold and installed hardwood floors. On a transaction of several thousand dollars, the sales rep swiped the card but was called away to take a phone call.

The customer was annoyed and walked out of the store with her copy of the receipt and the merchant's copy. She initiated a chargeback, the merchant couldn't find the receipt (because she'd taken it) and the business lost thousands of dollars.

Educating merchants about these three simple strategies will help them win dozens of chargeback disputes that they otherwise might have lost automatically.

Next month, in the third segment of our merchant training series, we'll discuss how to read, and profit from, a merchant statement.

Kimberley Marvin is the Risk Manager for Cynergy Data, a merchant acquirer that provides a wide array of electronic payment processing services while continually striving to develop new solutions that meet the needs of its agents and merchants. In addition to offering credit, debit, EBT and gift card processing, along with check conversion and guarantee programs, the company offers its ISOs the ability to borrow money against its residuals, to have Web sites designed and developed, to provide merchants with free terminals and to benefit from state-of-the-art marketing, technology and business support.

Founded in 1995 by Marcelo Paladini and John Martillo, Cynergy Data strives to be a new kind of acquirer with a unique mission: to constantly explore, understand and develop the products that ISOs and merchants need to be successful and to back it up with honest, reliable and supportive service.
For more information on Cynergy Data e-mail Nancy Drexler, Marketing Director, at nancyd@cynergydata.com .