The Importance of Doing Business As (DBA) Names in Merchant Services

Doing-Business-As (DBA) names seem like a small detail in merchant services, but actually, the DBA name used by a merchant is very important and should not be selected haphazardly.

The DBA name is what is used for authorization and clearing and is considered the most important factor in cardholders recognizing transactions on their accounts. The name should also be consistent with the Merchant Category Code (MCC.)

Typically, the DBA name and customer service number are used as the billing descriptor. This is the way transactions appear on a cardholder’s statement. Billing descriptors are set by the payment processor and are usually 20-25 characters in length.

Types of billing descriptors:

Soft Descriptor:
This appears on the cardholder’s statement immediately at the time the transaction is initiated (based on the authorization.) If you subscribe to notifications from your card company, this, for example, would be the descriptor that appears in the notification when your card is first run at a restaurant or at a gas station for initial authorization.

Hard Descriptor:
This is the permanent descriptor that appears once the transaction is settled (the merchant batches out and the transaction is cleared with the card association.) In our restaurant example, this would be the way the complete transaction with tip appears on your statement.

Static Descriptor:
The same descriptor is used for all transaction types.

Dynamic Descriptor:
This can be used by merchants to customize the descriptor given the type of transaction. This is commonly used for merchants that sell various types of products and services, and want to offer a more specific description based on what was sold.

Why is it important that we get these right?
If a cardholder doesn’t recognize a transaction, they are more likely to charge it back, resulting in unnecessary costs and headaches for the merchant.

It’s common for ISOs and agents to run a test transaction when setting up a new merchant services account. This is a great time for payments professionals to check whether the descriptors assigned by the acquirer/processor are appropriate for the business.

5 Fun Facts About PIN Debit

A PIN debit transaction involves a customer who pays with a debit card and enters their PIN number.  These transactions are different from credit card transactions in the way that they are billed, routed, and more. 

1.      Pin debit sales are settled differently than credit transactions because these transactions are single message (authorization and clearing/settlement data are in one message) vs. credit transactions that are dual message (clearing/settlement comes after the authorization.) The easiest way to explain it is like this: when a merchant runs a credit sale, the authorization is merely a placeholder for funds on the cardholder’s account.  When they batch out credit transactions, the issuer debits the cardholder’s account with the sale capture, and the acquirer processes a sale to fund the merchant.  Whereas with debit, the issuer debits the cardholder’s account at the time of sale (not batch) but the acquiring side does not clear until the merchant batches out. For this reason and a few others that are too detailed to explore in this post, there is always a timing difference for acquirer funding on pin debit transactions.

2.      Everyone loves the low cost of debit cards, but you really need to understand the fee structure to be sure they’re as low as you think they are. Debit fees are complicated, mostly because some are capped with the Durbin Amendment. But also because there are several networks, each with their own switch fees and annual fees, and some transactions are subject to assessments. For this reason, flat rate pricing for merchants who have a small average ticket size and process mostly debit is not a good idea. The math never works. 

3.      Debit cards have stricter dollar and time limits on when they can be disputed by cardholders vs. credit cards. The cardholder liability is capped at $50 if they notify the bank within 2 days of an unauthorized charge. After that, the cap increases to $500, and if it’s after 60 days, the cardholder is liable for 100% of unauthorized charges. This coverage for consumers comes from the Electronic Funds Transfer Act.

4.      Debit cards are regulated by a different set of laws than credit. These laws prevent merchants from requiring a minimum charge or adding a surcharge to debit transactions.

5.      You will hear debit transactions referred to as “online” and “offline.” Online transactions are deducted from the cardholder’s account immediately. Offline transactions (also referred to as signature debit) are settled like credit transactions only when they clear through settlement. When you bypass entering a pin, an online debit transaction becomes an offline one. 

The Bank Identification Number – Everything You Ever Wanted to Know (And More!)

Here’s everything you ever wanted to know about the Bank Identification Number (BIN.)

➡️ The International Organization of Standardization (ISO) oversees the standard that defines Issuer Identification Numbers (IIN,) known as BINs. The American Bankers Association (ABA) manages the pool of numbers available to card issuers.
➡️ As of April 2022, Visa and Mastercard started issuing BINs with 8-digit numbers. This did not have any effect on the length of the Primary Account Number (PAN.) Previously they were 6, sometimes even 4.
➡️ What can BINs tell us about the card that is being accepted for payment?
✔️ The first digit is the Major Industry Identifier (MII)
✔️Information about the bank that issued the card, including whether it’s a domestic or foreign transaction
✔️ The card brand
✔️ Whether it’s a debit, prepaid, or credit card
✔️ Level of the card
➡️ The BIN information is what is used much of the time to identify fraudulent charges. If the issuing bank is in one country, but the cardholder’s shipping address or geographic location is another, this can be a red flag. If there’s a data breach, the BIN can be used to identify affected data.
➡️ The BIN information can also be used to determine whether the type of card presented is acceptable for the use case – for example, if a prepaid card is presented for a recurring subscription.
➡️ BIN Attack Fraud: This is when fraudsters use the first known 6-8 numbers of a credit card and then use software to automatically generate the remaining numbers. They test these combinations, usually with several small-amount authorizations to determine if the numbers are active and valid.
➡️ You may already be familiar with the term BIN as it used on the acquiring side. A BIN commonly refers to a group of merchants that belong to an ISO with an acquiring bank. The first 6 digits of a merchant number identify the acquiring BIN. Visa is renaming this identifier to “Acquiring Identifier” to minimize confusion with issuing BINs. This number will remain 6 digits.

There are a number of BIN lookup sites, which are helpful when investigating transactions.  Check out this BIN lookup tool hosted by Chargebacks911.