Presentment for PaymentTranslating & Explaining the Presentment Process for Merchants

How Does Payment Presentment Work? What’s the Presentment Process, & How Can You Correct Errors?

How do you get paid after a transaction is finalized? It’s a question that a lot of merchants don’t really think about. At least, not until a problem comes up.

You might be aware of the highlights. But, as they say,  the devil’s in the details when it comes to payment presentment. For instance, here’s how the US Uniform Commercial Code (UCC) defines presentment:

Sounds like a bunch of gibberish, right? Well, to translate all that into simple English, a payment presentment occurs when one party requests or demands payment from another. Now, let’s delve into how that actually works.

What is Payment Presentment?

Presentment

[noun]/pre • z(ə)nt • mənt/

Presentment is the act of formally presenting a request for payment to a bank. After presentment, the funds can then be withdrawn from the account held by the drawee — typically a credit or debit cardholder — and transferred to the merchant.

A third party (i.e. your acquiring bank) acts as a guarantor in charge of a payment process. That party accepts presentments on your behalf.

Presentment rules dictate how, when, and why merchants may process a payment request. They also outline how that process will be communicated to the acquirer for approval and finalization.

UCC rules govern all commercial processes in the US. This is true whether accepting checks or making an online payment agreement, and includes cash sales, credit card transactions, and acceptable payment presentment methods. This extremely dense codex of rules and regulations also lays out payment presentment rules for individuals, banks, and merchants involved in a given transaction.

I understand this can be confusing. So, I’m going to start by giving you a breakdown of these complex banking terms, explaining them in a more digestible form. Then, throughout the article, I’ll also drop some selections from the UCC, and explain what they mean as it pertains to presentment.

Payment Presentment Terminology

Looking at the Uniform Commercial Code, we see a lot of unfamiliar terms with hard-to-interpret meanings. These include:

There are other specific terms involved, as defined by the UCC. However, we’re going to try keeping this as simple as possible. So, let’s skip those details for now.

What Qualifies as Presentment?

Now that we have a general understanding of the terms involved in presentment for payments, let’s look at them in action.

What does that mean? Well, the first thing to note is that payment presentment is, at its core, a legal agreement. The process of presentment for payments is typically conducted between four primary parties:

• The buyer
• The merchant
• The acquirer
• The issuer

Other parties may be involved as well, like a gateway or a processor, but they’re not necessarily party to every payment.

To qualify, a transaction must be initiated in the United States through any commercial means. It could be written (i.e. traditional mail order), oral (brick-and-mortar), or electronic (eCommerce). It becomes effective when a transaction is initiated and the receiving party requests payment.

To illustrate, suppose a customer purchased clothing from a brick-and-mortar retailer and paid with a debit card. In that case, presentment rules apply when the merchant begins the process of trying to receive the funds from that sale.

How Does Presentment Work?

In the context of a credit card transaction, “presentment” describes the process of a merchant seeking funds for a sales agreement or payment transaction from their acquiring bank. In other words, the merchant “presents“ a transaction record to their bank to gain access to the funds exchanged during the original transaction. Once the presentment has been approved, the bank may render payment back to the merchant within 1-3 business days from the original transaction date.

For most merchants, presentment happens through a process called batching. Throughout the day, authorized transactions accumulate in your payment terminal or gateway. At the end of each business day — or at another regularly scheduled time — these transactions get grouped together and submitted to your acquirer for settlement. This batch submission is the presentment.

Many modern payment systems batch automatically, either at a set time (often midnight or end of business) or when a transaction threshold is reached. However, some systems still require manual batch closure, which is where timing problems can arise (more on this in a minute).

Rejecting Presentment for Payment

A payment receiver (bank or processor) may reject a payment if any of the following appears to be true:

• The check/receipt/etc. is damaged or missing
• The payment lacks a necessary signature
• The buyer can’t be verified
• Merchant credentials are missing
• The account in question has been flagged for fraud
• The presentment attempt doesn’t comply with card network terms and conditions
• An agreement has been breached by either party, or other applicable rules or laws have been violated

If the receiver rejects a presentment for payment, it could be because the transaction details were incorrectly entered, or another form of merchant error occurred. In these cases, the acquirer may have predetermined rules for submitting the presentment a second time. However, you should approach this with caution.

Many acts of fraud depend on you failing to identify red flags. It’s in your best interest to implement necessary fraud detection and prevention tools to ensure a smooth transaction and presentment process.

Is Presentment Final?

Not necessarily. Receivers can reverse charges presented to them resulting from credit or debit purchases. This is a process known as a chargeback.

If a chargeback happens, you can try to present the payment again, along with additional information and documents. This second presentment is commonly referred to as representment, because you’re literally trying to “re-present” the transaction details to the bank for final determination.

During representment, you have to provide documentation from the original transaction, including any compelling evidence you have that shows the transaction was legitimate and should be upheld. Regardless, chargebacks are costly and time-consuming, and there’s no guarantee that you’ll win. In fact, the odds are generally against you; the reasons for this are complicated, but they essentially boil down to two significant factors:

• Banks tend to err on the side of their cardholders in a dispute
• Merchants fail to engage in active and effective chargeback management

What is Late Presentment?

Presentment occurs when you submit transactions to the bank for finalization. You only have a limited time frame to do this, though. Visa allows up to 8 days for presentment of most card transactions; Mastercard allows 7 days, with extensions offered under special circumstances.

Common causes of late presentment include:

• Forgetting to close batches manually on weekends or holidays
• Technical issues that prevent automatic batch transmission
• Deliberately holding transactions until fulfillment (common with backordered items or custom orders)
• System outages that go unnoticed for several days
• Incorrect transaction dates entered during manual processing

Presentment needs to happen quick so that processing and customer account billing can happen. Remember that the bank authorized the transaction based on the account’s status when authorization was requested. If you wait too long, then the buyer may no longer have the funds on hand by the time the merchant finally submits the transaction. There’s also a good chance the cardholder won’t remember the transaction at all. Either of these problems could lead to a customer dispute.

Late presentment chargebacks are a consequence of waiting too long to batch transactions. In this case, the chargeback is filed directly by the cardholder’s issuing bank to reclaim the missing batch amount. You can avoid these chargebacks by simply submitting presentment for payment in a timely manner.

Learn more about late presentment

Get the Most out of Presentment

You’re probably reading this article because you’re experiencing hiccups during the presentment stage of a transaction. Or, maybe your business is on the receiving end of a few too many chargebacks, and you’re trying to figure out why. Whatever the case may be, help is just around the corner.

As an industry leader for over a decade, Chargebacks911® is uniquely placed to walk  merchants through the presentment process, from the initial transaction stage through dispute resolution. We provide advanced analytics and KPIs that help you craft a winning chargeback prevention and remediation strategy and also help you determine which practices that could be complicating your presentment processes. Contact us today for a free ROI analysis.