Hotel Payment Processing Series: Are You Handling Card-Not-Present Payments Correctly?

Hoteliers are sadly all-too familiar with fraud and chargebacks. That's why 15,500+ hotels use Sertifi's credit card authorization solution, which offers baked-in advanced fraud tools. With a detailed risk analysis on every card submitted, staff are empowered to decide whether or not to proceed with the card.

But there are other ways you're getting credit card information from your guests, right? Consider this scenario...

Your property sales manager is coordinating a wedding for which a signed contract and deposit is required upfront. She emails a contract PDF to the bride and waits for her to print, sign, scan, and email back the signed document. She then calls the bridge for her credit card information, writes down the information, and takes the handwritten note to the front desk to manually key-enter the card into the pin pad.

Much to your security team’s chagrin, you’ve disabled the requirement to enter the CVV for manual transactions, and wouldn’t you know it: the card’s been declined. Your sales manager calls the bride-to-be, and she assures you the funds are there – only it declines again because it wasn’t a funds issue after all.

The bank sees this large, key-entered transaction as a sure sign of fraud, but you know it isn't. After you speak to the bride again, and she calls her card issuer to confirm it isn’t fraud, the transaction finally goes through. At this point, all you can think is, “I really hope this doesn’t happen on the second and third deposits.”

Sound familiar? It’s a story I hear time and time again.

It’s inefficient, insecure, and much more costly to handle card-not-present (CNP) transactions the same way as card-present transactions. Plus, it can keep you from getting paid.

Making CNP Payments Easier and More Secure 

While key-entering credit card information seems simple enough, there’s a lot of pain involved for your staff and bride, not to mention the security risks you’re leaving your property vulnerable to.

Most people don’t want to deal with paper these days and are accustomed to completing tasks online in seconds. It’s far easier for your bride to sign a contract and submit credit card information simultaneously and online from her phone while on the go. And imagine the bride’s reaction if she realized her credit card information was on paper that could easily be misplaced or stolen.

Then consider the risk of fraud and chargebacks, which hotels are highly suspectable to, creating significant losses in revenue and time for your staff. There's also the reputational harm that can come from a data breach. Even the best intentioned properties, like ones who keep paper forms under lock and key, can fall wayside to security issues.

In a recent conversation, our processing partner, Stripe, disclosed that one third of total yearly chargebacks come from hotels. In our recent fraud prevention webinar, one of our customers joined us and shared a pre-Sertifi story in which binders of credit card forms locked in a filing cabinet were stolen from their property.

It’s clear going digital is hugely beneficial to both you and your guests. Guest convenience aside, then you can take advantage of a whole slew of fraud prevention methods and protect your CNP transactions just as much as your card-present transactions.

Making CNP Payments Less Expensive

Whenever a card is processed, you’re charged a percentage of the transaction amount. This amount goes to the card issuer and card network and is known as the interchange fee. The interchange rates are set by the card network, and while most merchants can’t negotiate better rates, you do have some control over it. 

Interchange rates are set based on a number of factors, but at the core the brands/schemes set pricing based on the risk factors of the transaction. For hospitality businesses, two of the primary factors being considered are Merchant Category Codes (MCCs) and the method by which you process the card (chips = safe, keyed = super risky).

For details, see Visa USA Interchange Reimbursement Fees and Mastercard 2022–2023 U.S. Region Interchange Programs and Rates. See below for an easy summary:

Reducing Cost with Better MCCs

Hotels are typically coded in the “travel” category, which automatically raises your fees. That’s because processors consider you the highest risk merchants (and can you blame them considering the chargeback stat we shared above?). Processing transactions through the front desk on the MCC code “Hotels-7011” or an equivalent hotel brand MCC means you’re starting at the highest possible rate.

Hotels often have several lower-cost MCCs that can be used, such as for restaurants, bars, spas, golfing, etc. Similarly, you should have a MID/TID set up specifically for events using MCC “7399-Event Services.” Doing so can reduce rates by .50% or roughly $5,000 for every $1MM in processing volume – plus, the 80% savings if you also activate ACH/eCheck for your corporate payers.

Reducing Cost with Better Habits

“Key-entered” transactions also pose the highest fees. If you process those online with the guest present, you can use AVS and CVV checks, and the guest can deal with the declines directly with their card issuer in real-time. Most importantly, you can take advantage of 3D Secure solutions from the card brands that shift the fraud liability to the card issuer, just like you would processing a chip card at the front desk.

For hotels, accepting card-not-present payments is required by the nature of our business, but key-entering information is the most expensive and problematic answer. Once again, digitizing your credit card authorization process poses a major benefit to your business. A solution like Sertifi takes you from the “travel” to “service” transaction type and from the “key entered” to “e-commerce” processing method, small and easy moves that can significantly lower your processing costs.