Voice over internet protocol (VOIP) and telecommunications are major international sectors. Despite the industry’s growth, it is still classified by banks as high risk due to chargeback rates that exceed the norm.
In 2018, the mobile Voice over International Protocol (VoIP) market was predicted to reach $16.5 billion in Europe and $9 billion in the United States, according to Statista. The market is projected to continue to soar through 2024, when it is to reach $46.5 billion in Europe and $23.5 billion in the U.S.
Voice over International Protocol (VOIP) and other emerging technologies in the telecommunications industry have made it easier and more convenient for people from different countries to talk to each other. VOIP, which is a type of technology that allows people to have long-distance voice communications and multimedia sessions via the internet, is gaining in popularity because it simple to use and cheaper than making telephone calls. Many businesses are shifting from standard phone systems to VoIP to so they can combine their communication platforms, including voicemails, emails, faxes, phones, and web conferencing, and lower their phone bills. VoIP is more affordable because many merchants offer inbound and outbound international and unlimited domestic calls for a flat monthly subscription fee.
Though specialized telecommunications and VoIP services are growing globally at an unprecedented pace, the industry has its problems. Since the sector often is associated with high processing volumes, fraudulent transactions, and excessive chargebacks, banks consider them high-risk merchants. Merchants that want to operate exclusively online, such as many telecommunications and VoIP businesses, must be able to process credit card payments. To securely and efficiently process credit card payments, a business must obtain a VoIP and telecommunications merchant account. When businesses are turned away by traditional lending institutions, they can apply to high-risk merchant account provider, eMerchantBroker.com (EMB), for VoIP and telecommunications merchant accounts.
Backed by the experience needed to serve enterprise-level payment environments and specializing in high-risk merchant accounts, EMB offers high-quality customer service and a reputation for offering transparent pricing for customized payment solutions that meet the needs of businesses of all sizes. EMB approves VoIP and telecommunications merchant accounts for startups and well-established businesses.
Additionally, EMB offers chargeback management tools, payment gateways, and fraud filters, as well as support, tools, and knowledge VoIP and telecommunication service businesses need to successfully process credit card payments. Apply online today and get approved in as little as 24 hours.
What’s needed to get a VoIP and telecommunications merchant account
To begin the VoIP and telecommunications merchant account application process, fill out EMB’s quick online application. Though nothing is guaranteed, EMB promises a streamlined process.
In addition to the application, the below documents must be submitted to processors:
- A valid, government-issued ID, such as a driver’s license or passport
- A bank letter or a pre-printed voided check
- A secure, working website
- Three months of the most recent bank statements
- Three months of the most recent processing statements, if applicable
- A SSN (Social Security Number) or EIN (Employer Identification Number)
- A chargeback ratio below 2%
What occurs during the underwriting process
When underwriters review VoIP and telecommunications merchant account applications, they want to find that businesses are operating with solid business foundations and are complying with all rules and regulations.
Underwriters determine risk by reviewing merchants’:
- Credit scores
- Credit card processing history
- Bank statements
- Websites
When they review these items, they want to ensure that merchants don’t have negative bank account balances, outstanding bills, or a previously terminated merchant account. A history of high chargeback ratios also is an important risk factor. When they look at websites, underwriters want to see that it has a secure (SSL), as well as easy-to-understand, prominently-displayed privacy and refund policies. Having money in the bank and no debts also helps applications. Most importantly, the business stakeholder with the best credit history should apply for the merchant account.
Since VoIP service and related businesses generate higher processing volumes, it is best to give the most accurate transaction volume estimates during the application process. If a VoIP and telecommunications merchant account is approved, knowing the chances for higher volumes may prevent processors from becoming suspicious and suspending or shutting down merchant accounts.
Businesses that prepare for the review by taking these steps are more likely to get approved for merchant accounts without restrictions, such as lower processing volume caps and higher rolling reserves.
Get higher volumes for VoIP and telecommunications merchant accounts
High-risk businesses often are approved for merchant accounts with monthly caps on credit card processing volumes. This means merchants can only handle a specific number of credit card transactions per month. Once a merchant reaches its cap, it can no longer take credit cards as payments during that month. Online businesses that rely on taking payments via credit cards must stop taking sales until they reach the next month.
Telecommunication service merchants that are given caps can get them raised over time. They can request new processing volume caps in as few as three months. To get caps raised, they must prove that they pay their bills, have low chargeback ratios, and have some money saved.
More transactions equal more chargebacks
Much of the risk from VoIP and telecommunications merchants is because they offer recurring payments, which drive up the processing volumes each month. As transaction volumes rise, so does a merchant’s chargeback potential. When the charge shows up on statements, it can take a customer by surprise. It can lead to customers forgetting about the services and then, disputing the transaction because they no longer wanted or needed the services. Excessive chargebacks can lead a business to shut down without pay refunds, chargeback fees, and other debts. When they don’t pay, processors and their sponsor banks are responsible for paying.
Additionally, these types of businesses that require a monthly subscription fee are targets for fraud because they have a large volume of transactions each month. Fraud doesn’t always get the attention of these merchants because so much business is occurring each day. Cybercriminals know this and take advantage of these opportunities.
Friendly fraud, which is when a customer claims they didn’t purchase or no longer want a product or service and then disputes the charges with their credit card companies. Whether a credit card was stolen and used to purchase services or a person is committing friendly fraud, it doesn’t matter. The merchant, processor, and its sponsor bank are responsible for refunding the consumer.
Also, there are many customers who have legitimate service problems but don’t know how to get the issues resolved. They either don’t get the help they need from the merchant’s customer service representative or they don’t know who to contact for help. Failing to send electronic or paper receipts is another problem that can result in chargebacks. When clients don’t have receipts, they don’t have quick access to a retailer’s contact information.
Take actions to avoid chargebacks
Many businesses don’t realize that their chargeback ratios, whether they are won or lost, matter until is too late. contribute to their ability to operate a business until it is too late. Excessive chargebacks can lead to a terminated merchant account and the business’ ability to get another.
Full refunds are a chance to turn unhappy customers into satisfied customers. Merchants should train employees to offer full refunds instead of trying to explain the charge and the terms and conditions of the transaction. A refund may seem like a blow to revenues, but it is less expensive than excessive chargebacks. Too many chargebacks will cost a business its merchant account and its ability to process credit card payments.
To avoid a customer being surprised by a credit card charge, a few days before a monthly fee is charged, the merchant should send electronic notifications to clients. This provides proof of the transaction and, also, reminds customers of the services.
Since credit card charge disputes are due to customers forgetting a purchase or doesn’t recognize the company name as it appears on the bill, VoIP and telecommunications merchants are advised to use clear billing descriptors. The merchant’s name, contact number, and location should be included in the description. This type of information makes customers feel more comfortable because it shows that merchants are running responsible, trusted businesses and they care about customer service.
Use a chargeback mitigation system that works
Chargeback mitigation programs, like the one EMB offers- Chargeback Shield, are good ways to shave down chargeback ratios. By partnering with Verifi and its new Cardholder Dispute Resolution Network (CDRN) and Ethoca’s alert system, EMB developed a system for high-risk merchants to mitigate chargebacks.
CDRN operates with banks and card issuers, enabling merchants to achieve the greatest rate of chargeback resolutions while being directly involved in the process. Up to 25% off a merchant’s chargeback ratio can be trimmed by using an alert system.
By actively working to prevent chargebacks, VoIP and telecommunications companies protect themselves from losing revenue and keep their merchant accounts in good standing.
Calculating chargeback ratios
A VoIP merchant’s chargeback ratio is calculated by the number of chargebacks divided by the number of monthly transactions. For example, a merchant with 300 transactions and 12 chargebacks in a month would have a 4% chargeback. The dollar amount of a chargeback doesn’t matter.
Which VoIP and telecommunications categories to use
Data is collected on all types of businesses, including telecommunications and VoIP service businesses, so they can be analyzed and compared. Federal statistical agencies classify establishments using a list of six-digit numerical codes known as the Northern American Classification System (NAICS). The use the information to publish statistical information about similar types of businesses and determine the way they impact the economy in the U.S.
Telecommunications and Voice over Internet Protocol generally falls into one of these categories:
- 513322: Cellular and Other Wireless Communications
- 517110: Wired Telecommunications Carriers
- 517919: All Other Telecommunications
- 517911: Telecommunications Resellers
- 541519: Other Computer Related Services
Visit the United States Census Bureau’s Northern American Classification System to view the complete NAICS code list.
Another four-digit numerical classification system known as Standard Industrial Classification (SIC) codes are used to identify the main purposes of businesses, which are assigned by the United States and other countries.
VoIP and telecommunications businesses often fall into one of these categories:
- 4812: Cellular and Other Wireless Communications
- 4899: Communications Services, Not Elsewhere Classified
Visit the United States Department of Labor to view a complete SIC list.
VOIP & Telecommunications Merchant Accounts
Voice over internet protocol (VOIP) and telecommunications are a major international sector. Despite the industry’s growth it is still classified by banks as high risk due to chargeback rates that exceed the norm.
These high chargeback rates will make banks reconsider opening a merchant account with your business just due to the nature of the industry itself, without consideration for your track record and history.
Frequently. banks will even require revenue-strapped startups and small businesses to make a sizable deposit in a kind of collateral against chargebacks and disputes. This makes the prospects pretty bleak for small VOIP and telecommunication companies regarding merchant accounts.
We have a simple and straightforward policy of mandating a chargeback rate below 3%, but in terms of prior chargebacks and credit history we offer a clean slate. As long as you have no remaining outstanding sums owed to prior credit processors, eMerchantBroker will facilitate your merchant account application and work towards your approval. Our application process features competitive rates and a quick turnaround giving your business the perfect merchant account in as little as 3 days.
Let us help you find the easiest and cost-effective option today. We can help your VOIP or telecommunications electronic payment processing get launched quickly and easily.
- No Application Fees
- Competitive rates
- No VISA/MasterCard Required
- Secure Payment Gateway