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Why are the rates and fees lower for a retail merchant account than for an Internet or Mail order merchant account?
Danielle on Dec 03, 2011
Internet or Mail Order/ Telephone Order (MOTO) accounts are considered as high risk accounts due to the fact that they tend to attract more fraud and chargebacks. You can’t always guarantee the customer on the other side of the computer is who they say they are. And the higher risk for chargebacks, the higher the risk is for setting up the merchant account. Should anything happen to the merchant, the Acquirer is held liable for any outstanding transactions.
For example, let’s say a merchant sells widgets online. Once a customer buys a widget, the merchant will need to ship the widget out. But, what if, after a customer makes their purchase, the merchant goes out of business and is bankrupt? The Acquirer must now pay the customer back the funds they paid for that widget.
The higher discount rate acts like insurance for the Acquirers and the Issuing banks behind the transactions.
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