How MasterCard is Using Open Banking to Make Fasten ACH Payments?

The payments industry is continuing to shift, and the latest technologies are bringing changes every single day. The switch from cash to checks and digital payments such as ACH has increased significantly. Especially in high-dollar or recurring payments such as rents and utility bills. These technological advancements provide a great experience for both merchants and consumers. Simply said, it provides better choices, simple experiences, and greater speeds when it comes to payments. But these advancements come with a couple of challenges. 

Unsuccessful transactions create unnecessary friction in the process and force customers to find new methods. And in some cases, it can cause customers and merchants to pay a penalty fee. There’s always a risk of fraudulent accounts or account credentials being used. 

To improve the process of these payments, Mastercard unveiled a new range of smart payment decisioning tools that help in reducing the friction of the process.

The new process named:

  • Payment Success Indicator
  • Payment Routing Optimizer

Rely on real-time bank data consented by a user to show payment indicators that raise successful payment completion rates and reduced transactional costs.

When it comes to ACH transactions, NACHA reported that the payment volume on the modern ACH Network increased by 7.7% in the third quarter of 2021. This shows that customers are responding positively to making direct payments from their bank accounts.

With the increased volume of ACH payments, there are a few challenges that may show the slow adoption of services, delaying the improved merchants and consumer experience. 

  • Settlement Risk: Lack of payment visibility leaves merchants exposed to potential returns, which adds friction to the customer-merchant relations. When a customer walks away from the payment process, the merchant of the surety of ACH Payments. This can increase the costs for merchants as it creates a costly return process. 
  • Security: At times, the merchant experience failed payments all because of a consumer adding fake or incorrect credentials. 

Payment Decisioning: Having multiple ACH payment options such as the payment rail and settlement date, provides consumer choice and minimizes expense. However, a lack of greater visibility can add risk to payment settlement.

Minimizing Payment Failure, Boosting Cash Flow

So how does fixing these pain points play out in the market? According to research done by Mastercard, every time an ACH payment fails a merchant has to pay some fee. Fraud continues to be a major issue in payments. According to a 2021 fraud survey, checks and wire transfers are by far the most preferred methods that fraudsters use to make money. In recent times, the ACH debits have seen an increase in fraudulent activities as well. 

Now add everything that open banking has to offer. By leveraging consumer-permissioned data, these challenges can be eliminated or reduced. 

With the new Payment Status Indicator, the risk of failure is reduced by scoring the likelihood of a payment going through even before initiating it. Then with Payment Routing Optimizer, payment originators are provided a recommendation for the most optimal payment day and payment rail to choose from. This increases the chances of a payment succeeding and offering great speed.

Better Data, Better Decision Making

With smart data comes better decision-making. This is true in almost every part of life, and it’s especially true in handling account-to-account payments. Leveraging machine learning and predictive modeling, Payment Success Indicator, and Payment Routing Optimizer can help in eliminating ACH payment failure. This can easily improve cash flow and improve the bottom line while creating a more positive experience for customers.

Customers are using more and more apps and services that leverage digital checkout and payment methods. It’s more crucial than ever to minimize fees and reduce costs, reduce the risk of fraud, non-sufficient funds, and returns and make payment settlement a cost-effective process.

By leveraging consumer-permission banking data, the Payment Success Indicator offers the payment originator a score out of 10 future calendar days, and individual scoring of each of these days. Scoring is based on real-time balance and historical behavioral risk patterns. This system is used to evaluate the likelihood that a given amount will settle successfully. 

If there’s a payment that has a high risk of settlement, or non-sufficient funds over a specific time period, then the merchant can use the information available to request an alternative payment method.

The analytics engine then provides a score separating the risk factors across 4 separate tiers, providing merchants with the advantage of maximizing available customer data. This helps in better decision-making. 

Here’s a breakdown of risk levels:

  • Tier 1: Highly likely to settle
  • Tier 2: Likely to settle
  • Tier 3: Less likely to settle
  • Tier 4: Do not process, Errors present

Each score includes weighted reasons for the scoring. Some common factors include:

  • Account balance
  • NSF history
  • Consumer spending
  • Consumer deposits
  • Other financial data

Payment Routing Optimizer will provide the payment rail, cost, and payment date suggestions based on the scoring provided by the Payment Success Indicator. 

The technology aims to eliminate the friction of the process of choosing between digital payment options with future updates of the Payment Routing Optimizer including a debit card option.

Fraud Payment

Steps Payment Gateway Can Take to Detect and Prevent Online Fraud?

When you have started your online business, you wouldn’t consider online fraud as a challenge when you’re processing less than 10 transactions a day. However, when your business and the number of transactions increase, you need to be more careful. Statistics state that in 2018, US merchants lost an estimated $6.4 billion in payments card fraud. Small businesses especially face the highest number of frauds and an estimate of $155,000 per year.

Credit card processors offer merchants basic security measures to reduce the risks of credit card fraud. Although some merchants don’t offer seller protection, including PayPal, this is the case in the case of digital goods. You can decide which payment gateway to use. This also tells how your business will be protected in case of fraud transactions.

With the digital goods and services landscape on a boom, businesses of all sizes need to re-evaluate their position and tools when it comes to fraud management. In this article, we will take a look at the most effective techniques when it comes to tackling card payment fraud.

How to Prevent Payment Gateway Fraud?

1. Address Verification Solution

Address verification solutions are used to detect online fraud. When customers purchase items, they have to provide their billing address and ZIP code, and address verification solutions check whether this address is real or not. Part of a Card-not-present transaction, the payment gateway can send a request for user verification.’

2. Card Verification Value (CVV)

The CVV or Card Verification Value is a 3 or 4-digit code on credit cards. The code should never be stored on a merchant’s database. A CVV filter acts as an added security layer, allowing only the card owner to use the card. If an order is placed on the website and the CVV doesn’t match, the transaction should not go through. While making a CNP transaction (online, email, or telephone orders), merchants get the required information from the customers.

3. Device Identification

Device identification analyzes the computer instead of the person who’s visiting the website. It verifies the internet service, and browser to see if the transaction has to be approved. All the devices (phones, computers, tablets, etc) have a unique fingerprint, similar to human fingerprints. 

Fraudsters are unable to impersonate a computer’s unique identity, making it a viable option for your business against online payment fraud.

4. Flag Large Transactions

With stolen card information, fraudsters will take a shot at making transactions before the card is blocked. This would be harmful to your business where you’ll have to take on the cost of allowing fraudulent transactions to take place. Constant instances of fraud can lead to payment processors terminating your processing account.

You can easily limit the number of large transactions by specifying a flat amount. In addition to this, you can limit the number of failed transactions.

5. Payer Authentication (3-D Secure)

Payer authentication, sometimes called Verified by Visa (VeB) and MasterCard SecureCode, is a cardholder authentication measure that secures all online transactions for customers. This method allows cardholders to create a PIN that can be used during checkout. By using payer authentication, merchants are offered chargeback protection and lower interchange rates. 

This is one of the most sought-out fraud prevention tools that businesses rely on. 

6. High-Risk Countries

If you’re sending products overseas, then you need to exercise greater caution for these orders. Pay more attention to orders that come from high-risk countries. Customers in these countries need to be verified by the countries before the transactions are processed. 

According to the online fraud guide, some of the highest-risk countries include Israel, Malaysia, Egypt, Pakistan, Ukraine, Russia, Bulgaria, Romania, Lithuania, Nigeria, and Yugoslavia.

7. Risk Scoring

Risk scoring tools are based on statistical models designed to recognize fraudulent transactions based on a number of rules and regulations. When a payment is done on your website, the risk scoring tools will indicate the probability of the transactions being fraudulent. A higher probability of a transaction being fraudulent means that you should verify the transaction.


Best Payment Options for an Online Marketplace

The marketplace economy is booming and it is becoming a very profitable industry. Currently, Amazon sells more products online every minute than any other store in the world. Now, think of the millions of other marketplace websites online, and how much revenue they generate every single day. It’s safe to say that online shopping has become our primary method of shopping.

Online marketplaces are websites or apps that connect buyers with sellers, and they offer a great level of convenience for the customers. Marketplaces act like the middleman, providing customers with the products they need by procuring them from the sellers. They charge a certain amount to provide this service. The amount of products that are being sold online has turned “marketplace payment processing” a hot topic. While the “storefront” style of eCommerce stores is still going strong, the changes in technology have provided new methods to connect buyers and sellers. Niche marketplaces are continuing to grow and will keep doing so in the near future. 

With customers spending almost $16 trillion in the Q3 of 2021, it’s more crucial now than ever to integrate payment processing solutions. These can lead to affordable, reliable, and secure collection of funds from customers. Account-to-account payment solutions like ACH, push-to-debit, and real-time payments offer businesses a great way to process payments. 

Instead of relying on outdated methods of payments like cards or paper checks for marketplace payment processing, account-to-account payment processing provides a better advantage to online marketplace owners.

Steps to Improve Marketplace Payments

Every single online marketplace needs to find an ideal platform for online payment processing. Online marketplaces need to have online payment processing methods to run as smoothly as possible when it comes to handling customer payments. 

Marketplaces are constantly accepting payments from buyers and paying their merchants. This is why it’s crucial to have a smooth payment process. But with an unsuitable payments integration. Without it, you may not know about unnecessary charges on both sides of the transaction. If you want your online marketplace to succeed, then you need to collect payments as smoothly as possible.

Important Aspects of Marketplace Payments

You need to make sure that the buying experience for customers is as smooth as possible. The ideal account-to-account payment solution builds a brilliant user experience and allows them to buy whatever they want.

The online marketplace user experience can be broken down into 5 main elements:

  • How easy is it for users to accomplish easy tasks
  • Once the user understands the design, how quickly can they perform a task?
  • Whenever a user returns, how easily can they reestablish proficiency
  • How many errors do the user makes, how severe do these errors are, and can customers prevent from making these errors?
  • Is the design pleasant to use?

Marketplace Payment Processing Options

1. Credit Cards

The first and foremost method should be credit cards. This is because of how commonly they’re used by customers all over the world. Accepting credit cards during the payment part is pretty common. Cards are available everywhere and they provide a convenient user experience for the consumers. Although, these cards are expensive for marketplaces. Most marketplaces tend to increase their prices to keep up with these costs.

2. ACH Payments

ACH payments can get rid of the mailing and managing of paper checks by sending funds from bank to bank accounts. This can reduce the time and cost of making payments for online marketplaces.

As online marketplaces collect payments from buyers and sellers, they need to have a simple monitoring process. ACH Payment integration can help in managing data in an easy-to-use format by monitoring transactions and reporting issues. Online marketplaces need payment service providers that allow businesses to operate smoothly, instead of slowing down the workflow.

3. Instant Payouts to Debit Card

Instantly send money to debit cards with push to debit payments. Online marketplaces can use these payment methods to combine the speed of card transactions and the affordability of account-to-account transfers. Marketplaces businesses want to receive payments quickly and this is a great way to do so.

4. Real-Time Payments

One of the newest payment standards in the United States is the RTP Network which is owned and operated by The Clearing House.

Real-time payments can be initiated at any time of the day. These are balance-sourced account-to-account payments that clear and settle near instantaneously.

How to Secure Payment Process?

While it is important to have a seamless payment settlement process, it is also crucial to make sure that the process is as secure as possible. The online marketplace can reduce the risks of payment fraud by verifying payment merchants before onboarding.

DIRO online document verification solution can be used by online marketplaces to verify online payment processors. This can help in reducing chargeback fraud, and other types of payment fraud.