Donald Kasdon, founder at T1 Payments

In 2019, Cyber Monday brought in more than $9 billion in sales, according to Adobe Analytics. This year it’s expected to draw even more online shoppers as the COVID-19 pandemic keeps many stores closed and consumers glued to their computers and smartphones.

This influx of shoppers may seem like a blessing for online merchants. However, it could prove costly for those retailers that fail to factor the potential boom in demand into their merchant account business plans.

Below are two questions ecommerce businesses must answer as accurately as possible, or they risk some severe consequences.

Question 1: What is your expected monthly credit card processing volume?

Processing volume is the dollar amount of monthly debit and credit card transactions merchants expect to process via their ecommerce merchant account per month. Payment processors set the limits to prevent fraud, minimize liability. They set limits based on the type of business you have. If a merchant goes over the monthly agreed-upon limit, the payment processor could view this as a higher risk for chargebacks.

While some processors may allow merchants to continue processing even though they exceeded their monthly processing limit, others may not. That could stop an entire business in its tracks. . Therefore, merchants need to carefully think about this question when filling out their merchant account application and factor in any anomalies that could significantly increase transaction volume—i.e., Black Friday and Cyber Monday.

Additionally, once a processor approves a merchant account for a set monthly volume limit, the merchant might have to work hard to get the monthly limit increased. The existing processor might request the following information when a merchant asks for an increase:

• Three months of most recent bank statements.
• Three to five years of previously filed business tax returns.
• A strong and valid reason for why the business needs an increase in monthly processing volume.

Unfortunately, these requests cost merchants another essential resource: time. After a retailer submits the information, it could take as long as two to three weeks for the payment processor to respond. This situation could cause serious issues if the merchant is close to its monthly limit, especially with the holiday shopping season starting earlier than ever before due to the pandemic.

Question 2: What are the average ticket and high-ticket limits placed on your merchant account?

The average ticket is the standard transaction amount the customer pays for a merchant’s goods or services. For example, does the customer usually purchase one item at $99 or do they normally purchase three items at $99 for a total of $297?

The average ticket size is essential because some merchant accounts will place a low transaction dollar limit on your account and a high-ticket dollar limit to assist with risk checks. These limits also ensure prices align with the products and services the processor approved during the underwriting process.

If merchants attempt to process transactions not aligned with their approved average ticket amount, the processor may place a hold on its account, bringing business to a halt. Similarly, if a retailer tries to process transactions that exceed the approved high-ticket limit, the processor will probably decline the transaction. Declining the transaction cause the merchant to miss out on a potentially big sale. Retailers can avoid both scenarios—which become more likely during the high-traffic holiday shopping season—through proper planning and communication with the merchant’s payment processor.

How to avoid surprises 

Online businesses must review their monthly processing limit, average ticket size and high-ticket limit ahead of busy shopping holidays. Doing so will protect retailers from several issues, including suffering  holds on their merchant accounts, causing them to miss out on potential sales. Customers today crave frictionless checkout experiences, so any hiccups will cause them to take their business elsewhere in the future.

However, it’s not all bad news. Some processors only place soft limits on merchant accounts, so it is important to seek a payment partner that offers this kind of flexibility. Such processors come with a flexible and dedicated risk team that will quickly review the merchant account for any anomalies. They also will work collaboratively with merchants to ensure their ecommerce business can continue growing and operating without interruption during the busiest time of year.

T1 Payments offers high-risk merchant processing services.