Posted by Sharon Robb on Sat, Feb 27, 2010 @ 09:10 AM
And by chaos you know what I mean - the financial debacle in the US, right now. The Dow's up -but for how long? Lending is non-existent, bankers are still drawing some ah, unusual salaries and bonuses and now Barney Frank of the House Financial Services Committee says the issue of interchange fees is not on the 2010 agenda.
Arggghhhh. That's for my merchant friends. I can tell by the way they hang up when we call them to market our electronic payment services that they are confused about what we do....we don't make money on interchange. We do collect interchange fees for card issuing banks for each credit or debit card transaction run by our merchants. We PROCESS the transaction. Whew! just wanted to clarify... again.
If you're still confused about interchange revisit our blog on the issue -you're certainly not alone.
What is of concern is the rising cost of these fees - set by VISA and MasterCard and paid to the banks that issue their branded cards - for the merchants that pay them. Merchants and advocacy groups have been pushing for years for interchange fee regulation and caps - claiming the fees force them to raise the costs of their goods and services to the consumer. Maybe.
Unfortunately the issue is complex. Will the regulation of fees really mean a cost reduction on the consumer end of things? A November 2009 article in the New York Times examines the outcome of just such an act when the Australian government stepped up in 2003, cutting merchant fees in half. The results have been predictable - tough to sort through.
While merchants are paying less - it would seem sometimes the consumer is paying more - with less available credit, fewer or shrunken rewards programs (no!), higher annual credit card fees, and shorter time periods before the accumulation of interest on balances.
More bizarre is the unexpected surcharges by Australian retailers and merchants to the consumer that uses a credit card (not allowed currently by the card networks but with deregulation....) - and this after their own costs have been lowered. Not only are some merchants covering costs with the surcharges, some are making a profit. Now that's a fine how do you do!
Yes, US banks make billions from interchange fees. They have lobbied hard against government intervention and claim that the consumer will experience rising costs with credit card use and fewer benefits should the fees be capped or regulated. Again, maybe.
Of course last year keep in mind - a new trend developed that will no doubt ooze into 2010, maybe even beyond - record losses. In yet another NY Times article last year, Banks Brace for Credit Card Write Offs, authors Dash and Martin tout estimates of between 82.4 to 186 billion in overall losses for card issuing banks, as the US continues to shed jobs and with that, the ability of Americans to pay their credit card bills.
What to believe? What to do?
Only that at the very least, for 2010 anyway - interchange fees will remain intact - plan on it. Merchants should be aware of costs and educate themselves on how to implement cost saving processing methods. The credit card processing industry seems hell bent on ever increasing complexity.
To do this, you need an electronic payments professional you can count on, not entry level sales staff. That's just the way it is. ASK your provider...how long have you been in this industry? Review your methods and pricing, secure a professional relationship and focus on what you do best - you're own products and services.
Posted by Sharon Robb on Tue, Feb 23, 2010 @ 12:06 PM
All of the December 2009 and January 2010 credit card processing industry rags are touting mobile payments as "the thing" in 2010. Growth, applications, and opportunities are arriving rapid fire - and so we're going to try help our merchants sort it all out (I'm dancing as fast as I can).
So....let's launch with the newest gadgetry that's creating a great deal of buzz...Square.
Jack Dorsey, founder of twitter (very cool we agree) -announced a new venture - development of mobile payment technology compatible with Apple's IPhone called Square. The hardware and service is in "beta" mode (just testing so chill folks) but it sure has raised a ruckus of attention in the online community.
The ruckus is two fold -
One is WOW that's mobility in a small convenient package. The Square, is little, plugs directly into the IPhone, and allows the IPhone user to accept a credit card payment from anyone, anywhere - swiped (lower risk).
Two - it comes with the merchant account with a simple, flat rate transaction fee (no rates on the website so we only have rumors and tweets for info). Excuse me? No application, no underwriting? Fascinating.
Jeff Green, Editor-in-Chief of Payments Source - talks about the device and service in his Editors Letter in the January/February 2010 issue. It's exciting and Dorsey's getting a lot of publicity, but things are all quite vague when it comes to the payments processing and Green notes in his letter that perhaps Square will act as an payments aggregator, such as PayPal, running all of the transactions through their own merchant account. All still up in the air - but a quick gander at the site turns up a few vital points for our small business friends always looking to reduce costs we know -
- Square touts No contracts - I printed 17 pages worth of Square "Service Agreements and Payment Services Agreements" right off the site. Most of us don't need to check with an attorney to know what that means - legal agreement = contract. There might not be a length of service contract but anybody taking money from and delivering to, bank accounts electronically is working on a contract - has to be. In this case apparently there may even be two - one with square and if they deem it so, one directly with the payment processor.
The Square Service Agreement -
- No warranty - this one's pretty clear - at this poing in time Square does not guarantee it's service - for availability, dependability or risk. No mention of PCI DSS.
- Communications - electronic only currently - no matter what your question or issue - no calling'em.
The Payment Services Agreement-
- Reserves - "Reasonably determined" - new accounts have to have one (I'm guessing that's everybody) equal to 14 days of sales activity plus pending disputes. The reserve could be raised or removed based on activity, credit reviews etc. If you don't keep sufficient funds in the reserve it may get funded from your Square Account, i.e. credit card processing sales.
- Transaction limits - Square accounts have transaction limits - no idea what these are yet - stay tuned.
- You need to provide a written receipt to your customers for any transaction over $15 - you can give the customer the option to decline it of course and you can offer an email receipt, but not in lieu of.
- Availability of Funds - doesn't say when you get your money - 2 days? 3? 5? just that Square can limit your access to your Square account funds if they feel they are at financial risk or other agreement parameters are in dispute.
- Fees - doesn't say.
Ok - so remember Square is in Beta - I'm sure they'll work out these kinks but at quick glance we can't help but think these current questions raise some real issues for businesses. The application does seem fun for P2P (person to person) payments - think garage sales, girl scout cookies, PTA fundraisers, etc. or maybe the handyman, lawn guy, tupperware and avon lady, that doesn't do enough processing to warrant their own merchant account but wants to offer the convenience of credit card sales. That's cool.
The term small business is pretty broad though. Most merchants we service need electronic payments professionals to navigate POS equipment, funding and value added services above and beyond the "merchant account".
Today there are a number of overwhelming factors that impact a merchant's ability to process credit cards securely AND profitably. Merchant account agreements are indeed complex and typically include 8-12 types of fees depending on the type of card used in the sale as well as the method and equipment used in the processing. Cash flow, prompt funding, fees and rates, PCI DSS are essentials for processing success and a casual approach isn't recommended.
We'll be hearing more about Square for sure - I'll keep you posted - in the mean time - think payments professional to answer your processing questions about rates, equipment and "going mobile with your business".
Posted by Sharon Robb on Wed, Feb 10, 2010 @ 03:09 PM
I waited to write this post, in hopes that the new year would wreak some sense out of the chaos regarding the "credit crunch" that has besieged US businesses. The information "out there" is ...conflicting at best. But you don't have to be a news junkie to get the gist - US businesses are failing at alarming rates - and cash flow seems to be a predominant issue.
Accordin
g to the American Bankruptcy Institute - an organization that tracks insolvency in this country, business bankruptcies increased by 44% from 2006 to 2007, and 54% from 2007 to 2008. Ouch.
Ironically, a recent article in the December 2009 issue of CFO poses the argument that access to credit is not at issue - and the "contraction in small-business credit is actually due to a lack of demand". Is this possible? The author Alix Stuart goes on to cite a survey by the National Federation of Independent Business (NFIB) in September in which only 10% of 827 small business owners surveyed said they couldn't access financing.
What's with all the bankruptcies then?
The fact remains that SBA lending between September of 2008 and 2009 was down by 35% (remember even with SBA backing - it's your bank's money being loaned). Even private investment in US small business remains markedly low when compared to recent years.
General consensus despite the naysayers remains - access to capital for todays new and veteran business owner remains negligible.
Merchant cash advance for processing merchants remains an option for access to capital. This advance is based on a merchants future credit card processing sales. Unlike a traditional loan there is no set payment amount because payments are based on a percentage of the monthly credit card sales volume and as such fluctuates with the merchants income - a big plus.
Remember some of the other benefits we've touted in our blog post - no personal guaranty, quick approval times, fast cash in the bank, etc. The drawback is typical of fast money - cash advances can be costly....but if the alternative is bankruptcy, is it worth it?
Unlike in years past, even merchant cash advance providers are taking a closer look at the merchants they work with. Merchants must show a processing history of 4 months to even a year as well as a certain monthly volume in sales, may be asked to produce an active property lease, and/or may even have their credit checked (say it ain't so! is there no end to the scrutiny?).
As a merchant account cash advance provider we don't claim to know or provide advice as to whether this option is a good one for each and every one of our very unique merchants...but we can't help but think it's a viable one - if bankruptcy is looming.
Typical merchant use for cash advance use to be things like paying taxes and remodeling, but our industry is touting new uses by their merchants with the money advanced on future sales. Not just in survival mode, merchants are using the money to refine their product lines or tweaking their brands in reaction to the marketplace.
We like this.
Posted by Sharon Robb on Mon, Jan 18, 2010 @ 12:26 PM
I've put this blog off - it can be confusing stuff. But frankly, given the number of merchants involved in online sales or ecommerce - now's the time. You need an SSL certificate if you sell online, supply a site log in, process sensitive data or simply want to instill trust.
SSL was introduced in 1994 - and stands for Secure Socket Layer. SSL is the standard for ecommerce transaction security enabling encryption of all of your customers sensitive data, including credit card and other uniquely identifying information. Todays recommended minimum encryption standard is 128 bit and in order to provide this you'll need a SSL certificate with SGC (server grade cryptography) capability.
SSL Certificates. This digital certificate sits on your secure web server and is used to to perform the actual encryption. Each certificate has what is called a private and public key. The private key encrypts data, the public key deciphers it. When a customers web browser points to a certified domain - the SSL technology authenticates both the domain and the browser. A unique session "key" is established as is an encryption method and a secure transaction can be made.
There are different types of SSL Certificates such as -
- organizational validated (ov)
- domain validated (dv)
- most recent - extended validated (ev)
SSL Certificates trigger the browser to display a closed padlock and the https prefix in the browser window. With an EV certificate, besides a more vigorous application process, the browser bar is color coded green to indicate the top validation in SSL and turns red when an unsecure or untrustworthy site is encountered.
Where do you get an SSL certificate? XBS recommends SSL certificates issued by CA's or certificate authorities. These businesses verify your domain name, your business and your authority to apply for such a certificate amongst other things based on the type of certificate applied for.
Your e-commerce payment gateway can make life a little simpler by providing you, the online merchant, with a customizable payments page hosted on their site. This is the least expensive method, as it uses the gateways SSL certificate (shared) instead of your own. In addition, the gateway's server stores the sensitive data on it's own PCI DSS compliant server leaving the merchant risk free (regarding data storage). There's a few cons though, the biggest one being your customer leaves your site at the time of payment, as well as a loss of control in the order process. This might be a great, cost effective approach for a new online merchant.
If you have a busy site though - you'll probably want your own payments page with your own SSL Certificate. Pricing is all over the place, and providers offer a variety of types of certificates - so due diligence as usual. Your web developer or merchant account provider (XBS) can easily assist you in your purchase. Certificates must be renewed. Some gateways such as authorize.net provide certificates at deeply discounted prices through partnerships with providers.
SSL technology is not an option for ecommerce merchants, it's a must have. This article only touches on the basics of secure socket layer technology. Statistics show that our customers are becoming internet savvy and will increasingly refuse to do business with ecommerce merchants who don't display SSL basics and signage.
So be secure and prosper.
Posted by Sharon Robb on Mon, Jan 11, 2010 @ 10:49 AM
The acceptance of debit cards is a vital requirement for merchant success.
Consider VISA's announcement in May of 2009 that for the first time in the company's history, the volume of debit payments surpassed that of credit cards. Recession news continues to bolster this trend - whether it is due to the diminished availability of credit or a wise consumer approach - all the card networks are reporting healthy growth.
Merchants accept debit cards one of two ways - online - requires a pin pad (PED - pin entry device) or offline (requires a customer signature). Unless the merchants primary sale or average ticket is less than $25 pin debit costs less than signature debit.
So let's talk pin pads which are an indisputable, worthwhile merchant investment given what you've just read.
Pin pads can be stand along devices - connected by cable directly to your credit card processing terminal and set up for easy customer access and interface or integrated within the credit card terminal itself. The debit card is swiped through the pin pad and a 4 digit pin is entered by the customer to authorize the transaction. The transaction is processed through the ACH processing network and the merchant is funded immediately.
Each pin pad has a unique encryption security code. When the pin is entered the pin pad encrypts the number at the point of sale through to the bank, for verification and payment.
Top pin based debit benefits -
- Reduced Processing Fees
- Fast settlement of funds
- Fewer chargebacks - PIN based debits are not subject to chargebacks
- Transactions cannot be downgraded - as they often are with credit card transactions that don't qualify for the best rates
If you already have a pin pad - you should be on alert that in July 2010 new VISA equipment compliance requirements will be in effect. Is your equipment up to date? See the PCI Security Standards website list if you're not sure - your PED must be an exact match with the specs on the site. If you have don't see your device listed, you have the wrong version or you have questions about whether your pin pad is meeting PCI DSS standards - don't wait until July - call XBS @800-347-1090.
PED security is a real issue. It doesn't take much imagination to grasp the value of cardholder data combined with a debit PIN - the information would give thieves the ability to drain a bank account. The technical savvy of today's criminal is mind boggling and apparently encryption cracking services and decoding ability has kept pace with security measures.
NOT ONLY does your POS PED need to be on the list - but VISA is further mandating an update of the PED with what's called TDES (triple data encryption standard)- a stronger, more robust encryption standard that serves to reduce further risk of theft of valuable cardholder data.
Many recently deployed integrated PED's are TDES capable but still must have the TDES keys injected. Older integrated PED's may not support the new standards and will have to be upgraded to more recent equipment, integrated or, possibly an external pin pad, with a TDES key injected prior to use/shipment.
Moral of the story? Secure, pin based debit can increase your revenues and cash flow.
- Start processing pin debit and lower your processing costs
- Ensure your current or new device meets all upcoming July 2010 VISA mandated security requirements and is PCI DSS compliant.
WIN WITH PIN!
(couldn't resist!)
Posted by Sharon Robb on Mon, Dec 14, 2009 @ 03:09 PM
So many numbers!
Remember we've defined interchange - simple. Then we moved on to interchange cost plus pricing - also referred to as "pass through" or even wholesale pricing. This model of pricing credit card transactions remember - passes on the true wholesale cost of the transaction to the merchant - you can see it. It would be like seeing how much that Dell computer cost Best Buy - now you know the markup. Pretty sweet.
Merchants seem to be troubled by the fact though, that Visa and MasterCard have upwards of 150 or more different interchange rates based on how the credit card is processed, risk, type of card, type of business, etc.
We ask you to keep in mind however, that certainly most merchants do not encounter this many different interchange rates on their monthly statement. In fact the average merchant may see only 8-10 different interchange rates on their typical monthly statement from their payment processor. Not all that different from a statement with tiered pricing - just less costly!
Very clear cut really. Very dependable. The most cost effective, transparent pricing model in the industry, recommended by merchant advocates everywhere.
Posted by Sharon Robb on Tue, Dec 08, 2009 @ 02:50 PM
Free equipment, free credit card processing terminals! An online search for merchant accounts, credit card processing or credit card terminals and printers creates a brouhaha of results such as these.
So is this a good thing?
A word or two - about credit card processing "equipment".
A free standard credit card terminal and/or credit card imprinter, software or some lower end free solutions are fine for newly processing or low volume merchants. Understand that free is a relative term however, and accepting these programs ties you to the loaning merchant account provider and payment processor for the length of use. Usually a few additional "conditions" in the paperwork. Might work.
Keep in mind however, that in the overall equation of credit card processing - the free equipment offer is a small component - while the merchant account itself - pricing, fees, how the application is processed and set up - is what largely determines a merchants monthly costs to process sales via credit cards.
Yes XBS has free equipment programs - but free equipment doesn't meet the needs of every business -not by any stretch of the imagination.
Credit card processing equipment has changed radically with technological advances over the past 40 years, - think about it.
When I worked my way through college waitressing and tending bar I used a credit card imprinter for restaurant charges. Walked around with a wad of credit card receipts in my apron (if any went lost there went the merchants sale and money!) to be accounted for, tallied and I suppose - literally mailed out to the payment processor in the morning by the bookkeeper - talk about labor intensive! and secure? ah, not. I'll bet those funds didn't hit the business bank account for a good 7-10 business days - what a drag.
Compare that to todays equipment and security requirements (PCI DSS) by card associations- processing credit card transactions in real time with secure data encryption methods, via the internet, phone lines or cell phone service. Funding in 24-72 hrs depending on your processor. Transaction authorizations in seconds (they used to expect merchants and their employees to pour through outdated books of bad cards - get real!).
There is immeasurable value in these advances - lower costs - processing and labor, increased cash flow, integration with additional POS equipment and accounting systems. Heady stuff! In addition to all the benefits - like most technological advances (think computers) - costs are not as high for these products as they once were. Investing in state-of-the-art credit card processing equipment for a busy, viable, growing business - is a worthwhile endeavor.
Watch out for proprietary equipment! Some equipment and solutions only work with specific processors. Today's equipment should be reprogrammable so that should you need or want to - you can change payment processors.
Again, like computers, credit card processing terminals have operating systems (progressive versions) and a certain amount of memory. Two terminals can appear to be the same when in reality they have different performance, function and memory capability, a factor that can influence some of the wildly varied pricing you may see across the internet - vendor by vendor.
Due diligence please to equipment! Todays equipment costs, like the capital investments we make in computers and other hardwares and their operating systems, typically create tomorrows savings, efficiency's and streamlined processes.
What is important, is that you get the best value for your business. That may or may not be, free credit card processing equipment.
Posted by Sharon Robb on Mon, Nov 30, 2009 @ 04:22 PM
Recent news that a group of restaurants are pushing a class action lawsuit against Radiant Systems - a Georgia POS vendor and it's Louisiana reseller for allegedly installing a non compliant POS payment processing program and POS equipment- brings culpability to the forefront.
The restaurants or merchants were notified by the card associations that their systems had been hacked and credit card information had been stolen. Apparently card data was allegedly being stored by the program - a breach of PCI DSS basics.
The big news is the card associations immediately penalized the merchants for the breach. They were not only fined, but charged for the forensic audits and a number of other costs associated with the fraud. Ouch. Could your business or restaurant sustain the financial drain as well as the reputation damage of such an event? Should it have to? (the essence of the suit is no - that's what the payment processor and POS vendor is for!).
Jury's out still - but either way - it's probably not an issue any size business that is processing credit cards can afford to be lackadaisical about. Restaurants are typically level III or IV merchants when it comes to compliance - a PCI DSS level with it's fair share of inherent risk.
Merchants should ensure all of the integral parts of their payment processes are PCI DSS compliant - today's pain could be tomorrows relief!
Posted by Sharon Robb on Mon, Nov 23, 2009 @ 06:22 AM
Fascinating news in this mornings Observer - Charlotte's Salvation Army is testing credit card acceptance - Visa, MasterCard and American Express - at a number of red kettles this Christmas season throughout the city.
Jim Price - the agency's director, points out that folks appear to be carrying less cash than in years past (pretty observant) and other payment options seem to be called for.
Apparently - the idea has been tested in a Salvation Army chapter in Dallas/Fort Worth and guess what? Credit card donors gave an average of $14 at the Kettle, compared to the average $2 given by cash donors.
What's interesting about this picture?
- It is textbook credit card processing benefits - i.e. using credit cards can increase the amount of your average ticket or sale or in this case donation.
- Using credit cards makes tracking sales easier.
- The salvation army is a smart merchant, combining what we know about trends in credit card use and cash on hand.
- Mobile or wireless credit card processing is easy!
The Salvation Army is not rated by Charities Navigator because of the agency's religious mission and thus a lack of reporting requirements -but sure has been around doing good works for a long time.
Charlotte's Salvation Army Chapter is working to serve more families than ever before, like all of our charitable organizations this year. Check out the agencies mission and give'em a call if you have the faith in their missions and outreach.
We can certainly say this about the organization - their implementation of a program to accept cashless transactions or credit card payments-donations is smart, cost effective and likely to increase cash flow.
I like that in my charities.
Posted by Sharon Robb on Thu, Nov 19, 2009 @ 11:37 AM
Kate Fitzgerald's recent article in Cards & Payments put some umph in recommendations that wholesale or business to business merchants give some serious thought to accepting credit and purchase cards for payments.
It seems some major card issuers are seeing purchasing and T and E (travel and entertainment) card activity on the move...upwards - as more businesses make the shift from spending with paper check to plastic. The benefits are bountiful in tough economic times - primarily - the ability to track and control costs across the board. Benefits go deeper - but substantial cost savings are a great place to start.
But how does this affect the wholesale merchant or business providing services and products to these businesses that now purchase with cards?
Fitzgerald notes that key categories for purchasing card transactions include computers, telecom and printing equipment, media and advertising services, as well as transportation and delivery serivces.
Merhants who sell these products and services to other businesses should take note, processing commercial cards with the wrong equipment or without a specialized B2B merchant account can be costly. B2B credit card processing or wholesale processing is more than just taking cards. Level II processing requires the appropriate input of information with the transaction and Level III processing means the appropriate equipment, programming and merchant account...if you want to process your customers cards at the lowest possible interchange or discount rate.
Besides keeping your customers who now buy products with corporate credit or purchasing cards happy, your business can benefit from reduced paper transactions in the same way your customers have. Consider Fitzgeralds references to the cost of an average paper transaction - $90...up to $150 in large organizations! How about eliminating paper invoices and bulky statements?
It's true, accepting the card vs a check has a cost to it as well - interchange fees and the cost of the service, but quick, guaranteed payment via the card is huge, not to mention those overhead cost savings Fitzgerald touts.
Purchasing cards are being touted as the norm in as little as "five years" ...will you be a B2B processing merchant by then? or more importantly, will you be a profitable, B2B processing merchant?