Merchant Services – An Overview for the Intimate Apparel Industry – part 1
“…selecting the right payment provider is crucial to your success,” – Steve Kimberling.
Electronic payment acceptance is critical to most businesses. Nearly one in every three consumer purchases in the United States is made with a payment card, including credit, debit and prepaid products. Given that fact, selecting the right payment provider is crucial to your success.
This article will provide you with insight into a payment processor’s decisioning process and tips when applying for a payment processing account.
Merchants are classified by payment processor into two main categories: “keyed” and “swiped”
The reason for this distinction is the associated risk of each business type. Swiped or card present, merchants are considered to be low risk. When a cardholder makes a purchase the card is physically swiped through an electronic device which provides verification that the card was present allowing the merchant to lessen the risk of fraudulent use. Keyed, or card-not-present, merchants such as mail-order and Internet companies are considered higher risk because of the inability to identify the cardholder.
Regardless of the method of processing, some payment processors simply will not accept merchants in the intimate apparel industry. Although this has been common in the adult toy market, we have seen recent decisions by some processor to apply this exclusion to intimate apparel as well in part because some processors have difficulty separating the adult products from intimate apparel.
Once you have found a processor who is comfortable with your product type you will need to complete an application and provide supporting documentation. The amount of supporting documentation will be based on several factors including POS Entry Mode (keyed vs. swiped), amount of Visa / MasterCard volume expected to be processed on a monthly basis, average size of each sale, percentage of credit returns, chargebacks, credit of the business guarantor, financial condition of the business, age of the business, previous processing history, advertising method along with the cash position of the business.
Swiped vs. Keyed: Pros and Cons
Swiped merchants will require less documentation and can usually be approved in a very short period. Although underwriting guidelines vary from processor to processor, common items that would be required along with an application include voided check and driver’s license copy.
Keyed merchants typically require more documentation and stronger credit of the guarantor. Common documentation requirements include voided check, driver’s license copy, active website or current marketing material, and current bank statements for existing businesses.
For merchants of either type that have substantial monthly volume of electronic payments,(typically in excess of $100,000 per month), additional financial information will likely be required. This can include tax returns, business financial statements, and/or additional months bank statements.
Merchants looking to begin accepting credit cards in the intimate apparel space need to be sure to explain their business in detail prior to applying with any bank or processor. We have worked with clients who were closed by their bank after learning they sold adult toys in addition to the lingerie that was on the application.
Being suddenly shut down by your processor is an extreme business disruption that can be avoided.
To avoid this, follow these steps:
- Be sure you have ample time to set up your payment services. Do not try to rush this process or you will likely pay too much or find yourself with an incompatible partner,
- Select a payment gateway that is appropriate for your business type,
- Become PCI compliant (get help if you need it),
- Gather all your financial material and business plans together. Organize them in a way that would be easy for someone not familiar with your filing system to understand,
- Work with an industry professional that represents more than just one payment processor and is familiar with the intimate apparel industry,
- Know in advance how you wll process transactions (remotely, over the Internet, in store, etc) and be prepared to evaluate options.
The merchant services industry is complex and can be difficult to navigate. I hope that this gave some insight as to what you may anticipate when applying for a merchant account. Check out the next issue of the Lingerie Journal when we discuss the vast variety of pricing models and what you can do to get the best pricing possible.
Steve Kimberling is the EVP of Sales & Marketing for Intimate Payments, a merchant services provider focused on the intimate apparel and product industry. He can be reach at email@example.com or 877-476-0570