Ever thought of what it takes to process one single payment transaction? Our CEO, Petr Kozyakov, explains the complex system in simple works.
At the end of 2020, Mercuryo has rolled out a new financial product that started showing good results almost immediately. The demand for crypto acquiring, a service that allows e-tailers to accept credit and debit card payments, is as relevant as ever.
From the buyer’s point of view, the process of paying for goods and services online doesn’t look complicated. You pick an item that you like, fill in your credit card details, and in a few seconds, the purchase is finalized. However, from the merchant’s and payment provider’s point of view, it is a complex mechanism that requires quite some time and effort to configure. Add if instead of goods and services you’re planning on selling crypto, things get even tricker.
Whether you’re an aspiring web merchant launching an online store or a customer who wants to know how the acquiring magic happens, we decided to demystify the process of internet acquiring and share a few curious insights.
Internet Acquiring: the Basics
When it comes to providing acquiring services, a lot of participants are involved. First, we’ve got a customer who received a credit card from a bank (let’s call it emitting bank). This customer then goes online and decides to buy something in the store. The store works with an acquiring bank. It can be the same bank the buyer uses or a different one; it’s not essential. And this bank provides the store with a payment solution that makes the whole online shopping deal possible.
So when you’re paying for things online, the store sends your card data to the acquiring bank. The bank, in turn, transfers this information to Visa or Mastercard, and then they forward it to the emitting bank to make sure the card is legit and has enough funds on balance.
If everything’s in order, the purchase is finalized. But as the customer has to wait until their order is shipped, money settlements between the banks are also not immediate. The emitting bank will send the funds to the acquiring bank only the next day if they are both located, let’s say, in the EU. As for the US, it might take another day for the funds to arrive. After that, the acquiring bank will reimburse the sum to the store according to their agreement.
That’s only a brief introduction to how internet acquiring works, but the devil is in the details.
Internet Acquiring: Special Aspects
Every financial service has a complex foundation for preventing fraud and creating a highly functioning and secure environment for customers, merchants, and banks.
Below you will find some of the most critical aspects of the internet acquiring model.
Merchant Category Code or MCC is a code that an e-tailer gets during the onboarding process. If you look at your credit card history, you will see it straight away – that’s the category of the shop you’ve purchased from. Be it entertainment, food, travel, cosmetics, or financial services – every merchant has the code that defines it.
There are a few purposes to this metric:
- It determines rewards (cashback) the buyer receives for using the card.
- It indicates whether the transaction data should be reported to the Internal Revenue Service.
- It specifies what percentage a merchant must pay to the credit card processor.
By the way, financial services are among the most expensive categories, and sometimes processors charge extra commission considering these transactions as costly as cash withdrawals.
Luhn algorithm is a mathematical formula that helps quickly identify whether a customer provided valid credit card information. When entering credit card data, mistakes are widespread, and the Luhn algorithm was designed to avoid them and accelerate payment processing.
In case you haven’t heard of it, Bank Identification Number (BIN) consists of the first six numbers of your credit or debit card. And these numbers hold all the vital information about the card, including its brand (Visa or Mastercard), type (debit, credit), level (platinum, gold, regular, etc.), as well as the issuing bank country. Apart from providing crucial info to the merchants, BINs help with preventing thefts and other security breaches.
3-D Secure protocol is an additional security layer meant to protect credit and debit card transactions. Practically it looks like that: when making a purchase, the buyer has to confirm their identity by entering a single-use code sent by the card issuer to their phone via SMS.
It is an effective tool that protects all the participants of the acquiring process and helps with decreasing the number of chargebacks. However, it is essential that both emitting and acquiring banks support the 3-D Secure feature. Otherwise, it would be a lot more challenging to resolve the situation if the fraud does happen. The majority of banks support this functionality, and some countries have made the 3-D Secure feature mandatory.
Another crucial component of the internet acquiring model is the interchange fee. These fees are set by credit card companies and must be paid either by the merchant or by customers. In Europe, the interchange rate stays relatively low – about 0.4%. As for the US, this fee starts from 1% and can go up to 5% and even higher.
Platinum and gold cards have a higher interchange rate as they offer more benefits to their users. Interchange fee stimulates emitting banks to roll out compelling promo offers and encourage users to use their credit cards more often.
Chargebacks were invented to protect credit and debit card holders. For example, if your card gets stolen or you receive damaged goods, you have the right to claim your money back and get a chargeback. Realistically, neither banks nor credit card companies like chargebacks as they symbolize losses. As a rule, the maximum amount of chargebacks approved by financial institutions shouldn’t exceed 1%. If your company goes beyond that, you are likely to have problems with the acquiring bank.
Thanks to the fantastic work of our risk department, Mercuryo’s chargeback rate is exceptionally low – only 0.1%.
What makes internet acquiring by Mercuryo so special? Can your business get the service directly from the acquirer? Of course, you can. However, it will probably take way too much time, nerves, and bureaucratic delays.
Six reasons why you should get internet acquiring from Mercuryo:
- We know exactly how the crypto business works and what questions the banks and credit card companies will ask. By understanding the exact requirements, we accelerate the process of onboarding.
Mercuryo has a highly advanced anti-fraud system thanks to the strong team that handles it.
- Protection against chargebacks. You won’t have to worry about them ever again, everything’s on us.
- Mastercard asks to prepare legal opinions for each country the merchant is planning on operating in, confirming that it is legal. We will handle that too.
- The ability to accept payments in your local currency.
- The ability to accept payments in cryptocurrency. Immediately and without losing any money when converting fiat.
Besides, it is one of the most progressive payment processing solutions on the modern market. Feel free to drop us a line if you’re interested.
We’ve got some outstanding accomplishments ahead of us. The ultimate goal is to create a universal product that will combine acquiring services and other local payments from all over the world. This way, our clients will get a ready-to-use complex solution for all their financial needs.
Shortly, we will add fiat in&out services that will allow our partners to execute fund withdrawals to their customers’ credit cards.
And finally, we’re aiming at Visa and MasterCard principal membership to become more flexible, do not depend on acquiring banks, and offer the best conditions to our partners and their clients.