What is Zero-Floor Limit?
640 reads · Last updated: December 5, 2024
The term "zero-floor limit" refers to a policy whereby merchants are required to obtain authorization for every transaction processed at their store, regardless of its size. By contrast, some stores only require authorization for transactions that are above a certain size, with that size threshold being known as the store's floor limit.
Definition
The zero floor limit refers to a policy where merchants require authorization for every transaction processed in their store, regardless of the transaction amount. This means that each transaction must be verified and approved to ensure its legality and security.
Origin
The concept of a zero floor limit developed with the rise of electronic payments and credit card transactions. As online transactions increased, merchants needed stricter security measures to prevent fraud and unauthorized transactions, making the zero floor limit a common practice.
Categories and Features
The zero floor limit is primarily applied in high-risk industries or environments requiring high security. Its feature is that every transaction requires authorization, effectively preventing fraud but potentially increasing transaction processing time. In contrast, merchants with a floor limit only require authorization for transactions exceeding a certain amount, improving efficiency but potentially increasing risk.
Case Studies
Case Study 1: A large online retailer uses a zero floor limit to process all transactions, ensuring the security and legality of each transaction. This practice has helped them reduce the incidence of fraudulent transactions. Case Study 2: A high-end luxury store also employs a zero floor limit to ensure that every high-value transaction undergoes strict verification and authorization, protecting its brand reputation and customers' financial security.
Common Issues
Common issues include extended transaction processing times and decreased customer experience. Merchants need to balance security and efficiency. Additionally, the zero floor limit may inconvenience customers during small transactions, so merchants should consider optimizing the authorization process.
