Online credit card payments: FAQ
Two questions for websites selling goods and services to the world, but quoting prices in New Zealand dollars. One: are you losing the business of people wary of an unfamiliar currency? Two: are potential customers suffering from "dollar shock", mistaking your $NZ prices for $US? A new solution is multi-currency credit card billing.
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1. What is this FAQ about? 1.What is this FAQ about? 1 Businesses that sell goods and services via the web most commonly have an online facility for accepting payment by credit card. There are a number of issues that arise when implementing this facility on a web site. Some of these issues are common to credit card transactions generally and some arise specifically because a web site facilitates selling internationally. There are also some technical issues. The most important issue is the need when selling via the web to be able to charge credit cards in a variety of currencies. This is called multi-currency credit card billing, and it is now available in New Zealand. The purpose of this FAQ is to assist businesses with information about these issues. If you have any comments or additions to this information please email them to ecat@med.govt.nz. 2. Why do ordinary credit card merchant facilities only deal in the currency where the merchant is located? Ordinary credit card merchant facilities - the type offered by any New Zealand bank - are set up to deal only in $NZ. The reason for this is that there was no demand for dealing in other than the local currency when the credit card systems were originally set up. The idea of ordinary consumers routinely buying books, compact disks or other goods and services from other countries was simply on nobody's radar screen. 3. Is this situation unique to New Zealand? No. This is the case in all countries, including Australia. For instance, if I buy goods from a US web site using my credit card I must pay the US dollar price, if I buy from an Australian web site, I pay in Australian dollars, and if an American buys from a New Zealand web site, they must pay the New Zealand dollar price. This is the rule unless the web site concerned has a multi-currency credit card billing system installed. 4. What are the implications of selling on the web only in New Zealand dollars? One of the great benefits of the web is that you can easily start selling into other countries. However, American and other overseas consumers are wary of unfamiliar currencies and so selling in $NZ can lead to a loss of sales. This might be because American consumers (for instance) are not familiar with the value of the $NZ, or because they simply prefer paying in their own currency. There is also the issue of dollar shock. American consumers can mistake prices listed in $NZ for $US and think the prices are inflated. 5. What about quoting a "ballpark" $US price? Trying to resolve this problem by quoting a "ballpark" $US price can cause additional difficulties due to currency fluctuations. This is because two exchange conversions have to take place to complete the transaction. One when the merchant converts the transaction to $NZ from the ballpark $US price and the second when the card company converts the $NZ amount back to $US in the case of a US customer. If the price appearing on the customer's credit card statement is greater than that quoted then this is not good for your reputation as a vendor, and can be a reason for chargebacks (see 13 below). 6. What about international currency converters? A partial solution to this problem might be linking your web site to a web based international currency converter - of which there are a number. The difficulty with this is that the consumer’s card is not usually charged at the same moment that they purchase the item, and in any case the exchange rate used by the currency converter will likely differ from that used by the bank and card processor. The result is that the amount actually charged to the card may differ from the amount given by the currency converter. This can lead to a chargeback situation (see 13 below) as well as uncertainty and a lack of trust. 7. How about setting up a US based credit card merchant account so you can charge in $US? Another solution is to use a US based credit card merchant account, but the problem here is that you need to have a US bank account. In order to set up a US bank account a person needs to have a US social security number, or be registered as a commercial entity in the United States. This is not a problem for many multi-national companies, but it is probably not a viable solution for most small New Zealand businesses. The solution for most small New Zealand businesses is multi-currency credit card billing. 8. What does multi-currency do? How does it work? Multi-currency allows you to offer a price on your website in $US, or any other currency you choose, depending on what is offered by the multi-currency service you choose, and this is the price the customer pays regardless of any currency fluctuations. This gives the customer certainty and you can be paid in New Zealand dollars into a New Zealand bank account. Some services also allow you to charge differential pricing. This means that you can charge different prices to different markets depending on what that market can bear. For instance you might charge $100 NZ to New Zealand customers, $100 AUD to Australian customers, and $100 USD to US customers. This could obviously be of great benefit to some businesses. 9. Is it available in New Zealand and from where? Multi-currency credit card services are available in New Zealand. They are provided by WebFarm that uses the UK based WorldPay system and BNZ that provides its CurrencySelect system. 10. Are these the only services available to New Zealanders? No. Some overseas based multi-currency credit card services can be purchased by New Zealand companies. Two examples are Pure Global Pay, a service offered by Pure Commerce in Australia, and Planet Payment, a US based company. However, dealing with these overseas companies may have its own set of issues, such as not having local support. At time of writing, to set up the WorldPay system with WebFarm costs an initial fee of NZ$170.00, an annual fee of NZ$435.00 and transaction fees of 4.5% including all charges. That provides you with any of three currencies you select whilst additional currencies can be provided at a one off setup cost of NZ$170.00. Settlement is weekly, after 4 weeks, so in week 5 you get payment from week 1. A fee for weekly settlement is charged, typically £2.50 (approximately NZ$9.00). BNZ’s CurrencySelect requires you to have access to a BNZ Buy-Line interface built to specification 3.0 or higher. High volume mail order merchants can also access CurrencySelect through the Bank’s Credit Card Batch product. To set up with CurrencySelect costs about $600 plus programming fees. There is also the normal BNZ merchant rate, which varies, primarily according to the value of sales. To use this service you need to be a Bank of New Zealand credit card merchant, but you can have your proceeds deposited into any New Zealand bank account. The Bank settles your money the next business day. If you access this service through a CurrencySelect channel provider you will pay the provider fees and charges. These Merchant Aggregator channel providers are businesses who have set up CurrencySelect interfaces to simplify access for other businesses. A list of Merchant Aggregators is on the BNZ website. 12. Technical issues - What do I need to do to my website and what will that cost? The following information has been provided by WebFarm. The WorldPay option is platform independent, i.e. will work with NT or Linux hosts, and is bank independent, i.e. WorldPay can pay your funds to any NZ bank. The WorldPay system is very flexible in terms of integration and operating platforms. Simple integrations can be completed by HTML forms, more complex integration methods use Java servlets or com objects. On the technical side, all that is required is that your shopping system can generate an HTML encoded string that is passed to the WorldPay Select Secure Payment site. This can include information gathered on your own site such as name and address, products ordered etc. The Select Secure Payment system uses this to build an order form with places for your customer to enter their credit card details. It can then either return them to any page on your server or it can remotely call a script on your server when it has finished. 1) The server system is unimportant. You can use Apache (Unix or Windows version), IIS, Netscape Server, or any other common server that conforms to normal HTML standards. 2) The programming interface is also unimportant. Customers have used a number of the common programming forms, from Perl to Active Server Pages. The important thing is that the code must be able to send information by HTML to our secure server. The following information has been provided to us by the Bank of New Zealand. CurrencySelect is a simple text based message that is platform independent. It is adaptable to many different business processes including different ways of receiving the customer payment. These include via an Internet browser page, a telephone call centre, Interactive Voice Response message, flat batch file, mail order data entry or a combination of these through the same gateway (recognising that businesses can have multiple sales channels). There are several ways of enabling CurrencySelect that are detailed on the Bank of New Zealand web site at the address noted below. The Bank of New Zealand’s web site lists more than a dozen merchant aggregators. These can manage a Buy-Line/CurrencySelect connection to the Bank of New Zealand for a business. The benefits of this approach are speed to market, sharing the experience of the particular Aggregator while you are new to the game, and little if any payment system development. Typically you will pay them some monthly fixed and percentage based variable based fees for performing this function. A further option is to use one of the turn-key solutions that have been developed with Buy-Line and CurrencySelect at their core. These allow fast implementation and low development effort while keeping the CurrencySelect interface under the business’s control. These products are also listed on the Bank web site. The commercial offerings are in the order of a $3,000 one time fee that can compare well with a developer’s costs. Another option is to have a developer customise a CurrencySelect interface to the business’s specific needs. Those listed on the BNZ web site have all built Buy-Line interfaces before. These developments can take a little longer but there is the opportunity to have it built just the way you want it. Fees depend on the complexity and effort involved. The final option is to download the interface specification for free from the Bank web site and build it yourself. Chargebacks are when the holder of the card challenges a credit card transaction, and the payment is reversed. Chargebacks are an issue with all credit card transactions, but they more commonly occur with "card not present" transactions. “Card not present” transactions are where a credit card number is given, for instance, over the phone. With “card not present” transactions there is a greater risk of buyers using stolen cards, as it is much more difficult for the vendor to verify identity. When a person buys something on the Web using a credit card, it is classed as a “card not present” transaction. When the credit card number is submitted for authorisation, all the credit card company actually does is check whether there are available funds, and check whether there is a block on the card (for instance, has it been reported as lost or stolen?). If the card passes both these tests, the transaction is authorised, and the money paid into your account in the usual way. With a credit card transaction - both ordinary and “card not present” - the money is not immediately yours, even though it has been paid into your account. There is a long period of time (in some cases as long as 180 days) following completion of the transaction during which the transaction can be challenged. For instance, when the owner of the credit card receives the bill, they may deny having made the purchase. If the credit card company accepts the challenge, then a chargeback applies - they reimburse the customer, and get the money back off you, in which case you have lost both the goods and the money. There are three lessons here. · First of all, make sure you ask your bank about the rules that apply to credit card charge-backs. Most banks have information available as to how you can avoid credit card fraud. · Secondly, with regard to all credit card transactions, don’t regard the money as yours until it really is yours. · Lastly, if you receive an unusually large order, make every effort to check the legitimacy of the person ordering. The bank may be able to do extra checks on the validity of the credit card for you. Be extra careful if you get a large order from an unusual country. Always ensure the name on the card is the name of the receiver of the goods, and if in doubt, call or fax to verify details. In some respects multi-currency systems reduce the potential for chargebacks as the customer is charged the price they accepted. For more information on this and other credit card issues, go to www.merchantworkz.com. Bank of New Zealand also has some fraud prevention tips on its website under Business – Information. Lastly, it is now possible to get fraud protection insurance. If you are shipping high value items it might pay to consider this. 14. What about currency fluctuations? Depending on how you set up your multi-currency credit card system, either you or the customer can bear the risk of currency fluctuations. Generally, however, the system is set up so that the merchant not the customer is exposed to the risk - otherwise much of the point of such a system - which is to create certainty for the customer - is lost. 15. How safe is it to give credit card numbers online? A final issue about getting paid is that some customers are still hesitant to give their credit card details on-line. This issue will decrease as customers get used to dealing online. If you are using a properly implemented secure online credit card payment system, your customers should have no concerns. But reassuring customers that their credit card details are safe is an important aspect of running a successful sales oriented web site. Another possibility is to offer a range of payment options. Some people may be content to fax their credit card numbers, give them over the phone, or send them in two separate e-mails. Others may wish to send a cheque or pay cash at the time of delivery. 16. What about non credit card solutions? Non credit card solutions can include money orders, bank cheques or funds transfer. An example of this is Tour Time NZ Ltd, a company that arranges travel and holidays. They don’t take payment over the Internet because they lose so much in credit card commissions – for large parties, 5 per cent commission on each member of the party amounts to a healthy sum. Instead, they ask for a bank transfer. The funds are moved from the customers’ accounts to the business account and cleared within a couple of days. Payment details are set up via e-mail, by exchanging bank account numbers. 17. What other issues are there? · Some overseas banks will sometimes decline a payment although funds are available in the client’s account. This is because the "card is not present", and the bank has made a negative security risk judgement. The only way to get around this is to do a manual phone authorisation. · If you go direct, you need to install firewalls etc to provide protection for the transactions. This is a steep learning curve for a small business and the cost of buying in the knowledge, equipment and software can be expensive. · Not all credit cards or currencies are supported by all of the multi-currency services. 18. Further reading Card fraud hits merchants with cash clawback Which 'gateway' sells your products to the world?
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