Credit Card Processing Consultant

Spectrum Merchant Services Credit/Depit Processing

2010-10-25T13:57:00.029-05:00

Welcome to Spectrum Merchant Services, a division of Spectrum Business Solutions, Inc.

At Spectrum Merchant Services, we are dedicated to providing the most innovative and cost-effective electronic payment processing solutions. Whether business is conducted face to face, over the phone, through the mail or on the Internet, Spectrum has the solution. It is better to have a good consultant that could guide the whole method of credit card processing and the best merchant account service providers that have fair rates.

Processing with Spectrum Merchant Services gives you a business advantage:

Preapproved merchant accounts for over 100 merchant types
24/7 customer support
Guaranteed low pricing
Free Consultation
Transaction industry education
Custom designed processing program
Free analysis and price comparison of current processing fees (if applicable)
Online debit transactions (cut your rates in half by using PIN pads)
Transactions processed with the world's largest electronic transaction processor

For more information, Call: 262-269-8048 or email: CreditCard@core.com

Payliance Check Guaranty and Recovery

2010-07-20T15:43:00.057-05:00

Payment Solutions to Empower your Business Growth

From delivering payment solutions to minimizing your risk to getting your money back — we have you covered.

Payment Solutions 
Payliance offers cost effective payment solutions as an alternative to the high cost of accepting credit and debit cards. Our flexible solutions enable you to customize components to meet your needs or select a total packaged solution. Either way, Payliance creates the fastest return on your investment, with a focused emphasis on client support. Payliance is proud to have one of the highest client retention rates in our industry. Learn more about payment solutions...

Risk Management Solutions 
Payliance offers a comprehensive set of point-of-purchase risk tools backed by an industry-leading guarantee package. Our point-of-purchase decision-making tools target fraudulent and uncollectable checks and our guarantee products provide peace-of-mind. Learn more about our risk management solutions...

Recovery Solutions 
When it comes to getting your money back, our years of experience and proven track record ensure the maximum dollars recovered for your business. Our Recovery Solutions are compliant in all 50 states with thousands of clients already enjoying the benefits of our expertise. Payliance clients save money on bank bounce fees and enjoy improved cash flow. Our recovery solutions can be customized to your business’s needs.

Learn more about our recovery solutions...
Call us at 262-269-8048
email: CreditCard@core.com

Repeat Returns Gift/Loyalty Promotional Program

2010-03-06T09:53:00.009-06:00

It's Shocking! After taking enormous risk, piling up smothering debt, and working like a dog for decades... far too many business owners discover that their reward has been nothing more than...

WORKING HARD & GETTING OLDER...

That's because... after juggling the demands of running a business... trying to keep customers and clients happy... employees on track... inventory stocked... books balanced... it's almost impossible to get around to the most important task of all...
Driving a Consistent Stream of "Spend Ready" Customers Through Your Doors...
Imagine for a moment though, that you could fast-track...
A steady increase in your personal income starting today - with a safe, reliable, realistic sales-building program...

Best of all, there's no extra work for you, and it's so affordable you can cover it out of "petty cash..."
Plus, it's guaranteed in writing to increase your sales within the next 90 days... or it costs you nothing...
Sound to good to be true? Consider this...
Repeat Returns was developed by a real business owner who increased his own sales from $12,000 a month - to over $149,000 a month - more than a 1,000% increase in just three years... this system is based on that success.

This unique promotional program combines Gift/Loyalty Card offering points on every perches and marketing tools such as emails, texting and direct mail to keep your business on your customers mind. Advertising may increase business by 2% but if you can bring an existing customer in one more time per month, that's in increase of almost 50%. This is an easy and fun way to increase your business.
For more information,
Call: 262-269-8048
Email: CreditCard@core.com

Restaurnat Manager by Cash Register Specialties

2010-02-20T07:19:00.038-06:00

Cash Register Specialties is your premier retail systems dealer, serving the Milwaukee Metropolitan area (since 1983) with Thousands of restaurant and retail businesses like yours. Our expertise in POS, Retail Management and video surveillance systems uniquely qualifies us to help you and your business succeed. We pride ourselves on great service and providing our customers with custom solutions to fit specific business demands.

Mobilize Your Wait Staff and Empower Management with the Write-On Handheld POS System

The Write-On Handheld is an app that runs on a variety of wireless handheld devices, including the iPod Touch. The Write-On app works seamlessly with the Restaurant Manager POS System so servers can take orders and process payments right at tableside, using intuitive abbreviations and other common text messaging techniques.

The Write-On app is already proven to enhance customer service, boost check averages and speed table turns. Most restaurants see their bottom line increase by 4% to 11% within weeks of installing a Write-On Handheld POS System.

For a demonstration, click on the link below:

http://youtu.be/wVnvuKG5EbI

VeriFone Goes Outside Usual Channels to Sell Its New iPhone Product

2010-02-16T09:15:00.003-06:00

Digital Transactions News

VeriFone Holdings Inc.’s PAYware Mobile mobile-payments initiative includes not just the previously announced card swipe for Apple Inc.’s iPhone and an iPhone app, but also a marketing campaign that aims to make the payment terminal maker’s brand name more familiar with consumers, especially consumers that run small businesses.

San Jose, Calif.-based VeriFone announced on Monday that the iPhone payment system disclosed nearly two months ago (Digital Transactions News, Dec. 8, 2009), is now up and running—and that it will be accompanied by an Internet-based campaign that will reach beyond the terminal maker’s core customers and channel partners, which are merchant acquirers and independent sales organizations. “It’s targeting online users, specifically trying to reach out to small-business owners,” Paul Rasori, senior vice president of marketing, tells Digital Transactions News. “The target audience we believe is going to be somewhat outside the reach of channel partners that we have worked with so long.”

In fact, the campaign will reflect the fact that the personal and business lives of small-business owners who need a mobile terminal are hard to separate. “It’s more of a consumer message,” says Rasori. “The profile of the customer we’re going after with this product doesn’t really have a merchant storefront.”

Accordingly, VeriFone will be running banner advertisements and other Internet-based messages through various marketing outlets that can reach not only consumers, but also sole proprietors and other small-business owners who might be interested in turning their iPhones into portable payment terminals. Such media outlets include Yahoo! Inc.’s small-business network and mobile-advertising specialty companies such as Millennial Media and AdMob Inc. The campaign also will include other venues such as MyBusiness.com and the online versions of various mainstream media, including CBS and BusinessWeek magazine.

VeriFone plans to spend between $750,000 and $1 million on the campaign between now and April, according to Rasori. That’s a small amount for a national broadcast television network, but it buys a lot of impressions on the Web. VeriFone has already started promoting PAYware Mobile on its own Web sites and in New York City taxicabs, where thousands of specialized, media-enabled backseat VeriFone payment terminals are being installed (Digital Transactions News, Dec. 15, 2009). “It’s been a pretty good response,” Rasori says. “We’ve gotten thousands of hits to our PAYware Mobile site.”

Rasori admits VeriFone’s is not exactly a top-of-mind consumer brand, but he adds that consumers have at least a vague awareness of VeriFone because they see the its name on point-of-sale terminals in stores, restaurants, and other card-accepting locations. “A lot of consumers recognize our brand; I would say probably not as much as we would hope, but I would say this is one of the first opportunities we have to expand on it,” he says. The goal, he says is to develop new merchant business for VeriFone’s traditional partners.

VeriFone had aimed for a Jan. 15 launch date, but Apple insisted on inspecting the hardware before approving the app as an offering on its App Store, which resulted in a two-week delay, according to Rasori. PAYware Mobile uses the end-to-end encryption VeriFone has developed for its other product lines to mask card data and protect transaction security. The card reader, or sleeve, which slides onto the iPhone from the back and features a card slot on the right side, encrypts card information at the moment of the swipe, using technology VeriFone calls VeriShield Protect. VeriFone is developing similar systems for other smart phones and operating systems, including the BlackBerry.

PAYware Mobile’s app on App’s huge App Store (100,000-plus third-party software applications for the iPhone and iPod touch) joins at least 30 other applications that turn the devices into card-accepting terminals. Plus, startups such as the Square service from the cofounder of Twitter are seeking to make hay from the booming interest in turning smart phones into payment terminals (Digital Transactions News, Dec. 3, 2009). VeriFone’s iPhone app is free, but merchants must sign up for the VeriFone PAYware Connect gateway service, which has a $49 enrollment fee and monthly fees of $15 and 17 cents per transaction. Would-be merchants must also get a merchant account. VeriFone will refer such applicants to its channel partners.

VeriFone is seeking to stand out in this increasingly crowded field through its experience in the payments industry, its end-to-end encryption, and its extensive ties to acquirers and ISOs, according to Rasori. “I think we’ve got a major advantage in leveraging our relationships,” he says.

George Peabody, director of merchant-technologies research at Maynard, Mass.-based Mercator Advisory Group Inc., says hardware makers such as VeriFone are competing against small, third-party software developers for the attention of small-business iPhone users, and no winner can be called yet. “The hardware guys like VeriFone—they’re shifting their model toward transaction-oriented revenues,” he says. “We’ll see how successful they are with that.”

Could Visa’s New No-Signature Rule Hurt Contactless Payments?

2010-02-12T15:55:00.003-06:00

Digital Transactions News

Visa Inc.’s announcement this week that starting this summer it will no longer require signatures for transactions of $25 or less at most U.S. merchants heralds a policy that will result in faster and smoother transactions but could also undermine the payments industry’s move toward contactless technology. “The merchant proposition [for contactless] is pretty much negated at this point,” says Nick Holland, a senior analyst at Boston-based Aite Group LLC who has closely followed contactless payments.

Under Visa’s new policy, which takes effect in July, about 98% of more than 800 U.S. merchant categories logged in Visa’s system will be eligible to accept Visa cards issued by U.S. banks without a signature for tickets at or under $25, up from about 3% currently. That will open the signature waiver to hundreds of thousands of additional merchants, including such categories as discount stores, according to Visa. The move extends Visa’s current no-signature rule, which covers some 26 merchant categories. These range from parking lots to bakeries to car washes, fast-food restaurants, newsstands, gas stations, and video-rental stores.

Visa says the new policy will mean faster and more convenient payments for cardholders. It cites a survey indicating that 69% of respondents cite either speed or convenience as the chief reason to use a credit or debit card. The card network also says the policy will help issuers penetrate cash-dependent markets. Indeed, some 75% “of cash transactions in the U.S. are less than $25, offering additional growth opportunities for electronic payments,” says a Visa spokesman in an e-mail message to Digital Transactions News.

But observers like Holland argue the move will hobble contactless payments, a technology that has been embraced by some merchants but has struggled to win mainstream acceptance among either retailers or consumers. Visa, with its payWave program, and MasterCard Inc., with its PayPass platform, have both promoted contactless payments over the past five years as a way to speed up card transactions and pave the way for mobile payments at the point of sale.

With contactless technology, radio waves transmitted by a specially equipped chip card communicate with POS readers, eliminating the need for a card swipe and speeding up tender time. Faster transactions can allow cash-heavy, high-throughput merchants to accept cards in place of cash. But card swipes without signatures are just as fast as contactless waves or taps, Holland argues. “Why would any merchant want to invest in a contactless reader when they get 99.9% of the benefits with a signature waiver?” he asks.

For its part, Visa argues the extension of its no-signature rule and its payWave program are complementary, with the former acting as a leg up toward the latter. “Many merchants who have implemented No Signature Required have also implemented Visa payWave,” says the spokesman. “For merchants who want to improve throughput of magnetic-stripe transactions, the No Signature Program is often an initial first step, while an upgrade to contactless acceptance offers merchants the ability to accept a new generation of chip-enabled payment products…that also offer speed and convenience at the POS.”

Visa’s payWave program was already dealt a black eye last month when news emerged that Best Buy Co. Inc. had shut down the program in its 1,000-plus stores late last year (Digital Transactions News, Jan. 11). The giant electronics chain was unhappy with Visa’s stance against allowing PIN debit transactions on its contactless platform. Like many merchants, Best Buy prefers PIN debit because it usually carries lower interchange costs than either signature debit or credit card transactions.

If Visa’s extension of its no-signature policy to cover virtually all merchant categories further undercuts contactless, the technology may never enter mainstream payments, warns Holland. “Contactless is becoming like the Tasmanian tiger—in danger of extinction,” he says.

On the Back Burner in Congress, Interchange Heats up in California

2010-02-02T10:58:00.007-06:00

Digital Transaction News

Proposed regulation of interchange is stalled in Congress, but California lawmakers are investigating the controversial revenue generator for credit and debit card issuers that merchants ultimately pay. It’s not clear yet, however, whether the informational hearing held this week by the California Assembly’s Banking and Finance Committee ultimately will result in a law.
At the very least, the hearing shows that states are trying to play a role in shaping the interchange debate. And as the biggest state, California can’t be ignored. “The fact that they are looking into this is a big deal in and of itself,” says Liz Garner, director of government relations for the Arlington, Va.-based Food Marketing Institute, a trade group for grocery stores. Garner was one of a dozen witnesses on the hearing agenda.
The committee’s chairman, Assembly member Pedro Nava, D-Santa Barbara, said in a statement after the Jan. 25 hearing that “Interchange fees inflate the cost of nearly everything consumers buy, even when they pay cash. American families pay an average of $427 a year on interchange fees. My goal is to walk away from the hearing today with a better understanding as to why credit card companies and banks think this is fair and, in addition, find a way to pass cost savings on to California consumers.” A spokesperson for Nava, who is running for California attorney general, did not respond to a Digital Transactions News query about whether Nava planned to file a bill.
Witnesses included both defenders and opponents of the system under which the bank card networks set the transaction fee that merchant acquirers pay to card issuers, with acquirers usually passing the full cost on to their merchant clients. Some of them, such as Mallory Duncan, senior vice president and general counsel of the National Retail Federation, have testified on Capitol Hill about the pending federal bills. Duncan said interchange deprives the state of California of sales-tax revenue because the card networks calculate interchange based on the final sale price, including sales tax. “Members of the committee, the sales tax is not our money,” he said. “It’s not the credit card companies’ money. It’s the people’s money. Californians are hurting, so why should businesses have to pay credit card companies a fee to collect money for the state?
Consultant and former Visa International executive Eric Grover, who was not a witness, says the California Legislature has better things to do than tinker with interchange. “This state is barreling toward a fiscal and economic abyss,” Grover tells Digital Transactions News, noting the state’s huge budget deficit. (The Los Angeles Times this week said the deficit amounted to $20 billion.) Grover, principal of Menlo Park, Calif.-based Intrepid Ventures, says any interchange regulation California would try to impose might be challenged by out-of-state companies as a burden on interstate commerce, and could drive California-based acquirers out of the state.
A number of other states have considered interchange bills in recent years, but few if any have passed. A few proposals have sought to regulate pricing, but most have involved non-monetary issues such as disclosures.
Meanwhile, there has been no action recently on the two bills in the U.S. House of Representatives and one in the Senate that would regulate interchange or nullify some of the longstanding network policies regarding card acceptance (Digital Transactions News, Oct. 8, 2009). Political observers say Congress is preoccupied with bigger issuers. A spokesperson for the NRF says by e-mail that it’s possible a hearing could be held in the spring, but nothing is official yet. “Just about everything in Congress has been put on hold by health care,” he says. “[It’s] really hard to get anybody to focus on anything else until that is resolved.”

Heartland and VeriFone Q&A With VeriFone CEO, Doug Bergeron

2009-11-12T15:13:00.003-06:00

What is VeriFone doing with regard to Heartland Payment Systems and its merchants?

VeriFone will no longer support Heartland users through Heartland, effective EOD 12/31/09. However, VeriFone support desk resources will efficiently provide the same level of service and shield them from the impact of litigation.

Heartland says VeriFone support is not required.

False. In fact, in a very recent legal filing Heartland declared, “VeriFone is critical in serving existing customers and troubleshooting for problems with the POS terminals and credit card processing. Heartland provides troubleshooting and systems integration support for its merchants, which requires assistance from VeriFone. If Heartland were to be cut from any support, its customers would be forced to reach out directly to VeriFone.”

What support does VeriFone provide that customers won’t be able to get from Heartland?

After 12/31/09, Heartland will lose access to VeriFone support, including updates to platforms and software. The majority of Heartland’s customers using VeriFone systems are using the VeriFone SoftPay application for transactions. This leaves Heartland severely handicapped in providing timely resolution to issues that may arise.

Why did VeriFone take this action?

Heartland is infringing on a VeriFone patent. As a result, VeriFone is terminating its support relationship with Heartland.

VeriFone to Offer Continuous Support to Heartland Merchants

2009-11-03T19:59:00.003-06:00

Takes Action to Ensure Pending Litigation over Heartland Infringement of VeriFone Patent Does Not Impact Merchant Service Levels

SAN JOSE, CA - November 3, 2009 – VeriFone Holdings, Inc. (NYSE: PAY) today announced that it will offer complete alternative support to merchants who are currently utilizing VeriFone payment solutions on Heartland Payment Systems’ (NYSE: HPY) network.
VeriFone is taking action to prevent any disruption to merchants after determining that the pending litigation over Heartland’s continual infringement of a VeriFone patent is likely to impact Heartland’s ability to maintain service levels with its customers. VeriFone has informed Heartland that it will terminate its support relationships with Heartland, effective end of day December 31, 2009.
“It is imperative that VeriFone merchants continue to receive support to accept card payments without any disruption. VeriFone has a fiduciary duty to protect its intellectual property, but we have a thirty year reputation of quality that demands we protect our merchants first and foremost,” said VeriFone CEO Douglas Bergeron. “Our extensive support desk resources will allow VeriFone to efficiently provide customers with a high level of service and shield them from the impact of litigation. We are making a special offer to provide this support free to all Heartland customers throughout the balance of their current Heartland processing agreement.”
VeriFone estimates that 75 percent of Heartland customers in the retail, restaurant and petroleum markets rely upon VeriFone systems. VeriFone is encouraging merchants currently supported by Heartland to immediately begin making arrangements to receive technical support from VeriFone.
Heartland merchants need to register for this free support before December 15, 2009 to ensure uninterrupted continuation of support. This offer is absolutely free and is made only to ensure that any future technical support issues can be resolved expeditiously by VeriFone.
If you are a Heartland customer with a VeriFone product, please register today.
To register online, go to http://heartland.verifone.com.
To register by phone, call 1-888-887-8199.

Industry Giants First Data And RSA Give Tokenization a Boost

2009-09-28T10:02:00.004-05:00

Digital Transaction News

(September 22, 2009) A new data-security service announced on Tuesday by heavyweight players in payment processing and data security—First Data Corp. and EMC Corp.'s RSA unit, known as The Security Division of EMC—is expected to boost a technology called tokenization, the replacement of cardholder account numbers with surrogate numbers or “tokens.”

Since the massive data breach at processor Heartland Payment Systems Inc. in December 2007, the PCI Security Standard Council and other industry groups have felt increased urgency to find better ways to protect confidential cardholder information from the point of sale through the authorization process. Two key technologies they are looking at are tokenization and end-to-end encryption. Heartland is in the process of launching an end-to-end encryption technology called E3, but, until today, no major player had announced a data-security technology focusing on tokenization.

“It legitimizes the tokenization business,” says David Taylor, founder of the PCI Knowledge Base. He notes that First Data, which processed 1.4 trillion transactions in 2008, and RSA are “the biggest players in their respective spaces.”

Although the PCI Security Standard Council has authorized a study on tokenization, results have yet to be released, Taylor says. “This really does make it impossible for the council to ignore,” he says.

The First Data/RSA service, called First Data Secure Transaction Management, integrates both tokenization and encryption. It is designed to reduce merchants’ cost and complexity of complying with the Payment Card Industry Data Security Standard by removing confidential card data from their systems.

The service, which uses RSA’s SafeProxy architecture, encrypts payment card data using public encryption key technology at the merchant’s existing point-of-sale application. The data remain encrypted until they flow into the First Data authorization switch, where decryption occurs. Once a transaction is authorized at the switch, the card number is replaced by a token value that cannot be linked back to the original card data but otherwise behaves liked a card number.

Merchants can access the original card number through a secure vault that First Data maintains for controlled authorized look-ups for chargeback resolution or similar business activities.

By using the First Data service, merchants can eliminate card numbers from various business applications without costly application or point-of-sale hardware modifications, a First Data spokesperson says. The service will work with most PCI-compliant terminals and is hardware agnostic, she says.

First Data will provide larger merchants and merchants using value-added reseller applications with encryption software libraries and the public encryption keys for integration into their POS systems. The private key used to decrypt the card information at the authorization switch is tightly controlled within First Data and will not be available to anyone outside the company.

“Payment card data protection and PCI compliance are some of the most significant challenges that our merchant customers face today,” First Data chairman and chief executive Michael Capellas said at a press conference on Tuesday morning. “The simplicity of integrating encryption with tokenization through the First Data Secure Transaction Management service dramatically redefines how merchants of all kinds manage and protect their customer payment data.”

Development of the service is expected to be completed by year end, with merchant pilots scheduled for January 2010 and a product launch by the end of the first quarter, the First Data spokesperson says. Pricing has not yet been worked out.

But while tokenization can protect data, no one system has yet proved effective for all types of payment platforms or POS systems, Taylor says. “The hard part about it is when you have large companies offering a solution and they target the small, medium, and large business sizes and multiple platforms, you can’t really offer a consistent product right out of the box,” he says.

In addition, many merchants operate in multiple channels, including retail POS, online, and call centers, Taylor says.

“Tokenization is going to be brought around and introduced to a lot of people as a result of this,” he says. “It becomes incumbent upon the merchants to start asking some really difficult questions of some vendors in the space in terms of how their solution works in a multiplatform, multichannel environment. Those are big issues."

Banks Start To Lose Their Appetite for Juicy Overdraft Fees

2009-09-25T13:15:00.003-05:00

Digital Transaction News

(September 23, 2009) Having lost one brawl with Congress this year over credit cards, big banks apparently are in no mood to fight about another increasingly political issue, overdraft fees. Leading debit card issuers Bank of America Corp. on Tuesday and JPMorgan Chase & Co. on Wednesday announced major changes to their overdraft-fee policies.

Press releases from neither bank linked their new, more consumer-friendly policies to bills filed or pending in Congress that would regulate overdraft and non-sufficient funds (NSF) fees. When asked by Digital Transactions News if political pressure had anything to do with Chase’s changes, a spokesperson said, “We know that people have legitimate concerns about these fees, especially around debit cards, and we want to address them.” Small transactions were the main focus in revising the policies, he added.

In BofA’s release, Brian T. Moynihan, president of consumer and small-business banking, said, “We want customers to have clarity and simplicity in everything they do with us. We started with the Clarity Commitment in home loans. Last week, we announced a simplified credit card offering that includes an easy-to-understand Basic credit card. Today, we are announcing changes to the way customers can manage their day-to-day finances that will help those who need it most right now.”

On Sept. 18, U.S. Sen. Christopher J. Dodd, D-Conn., the powerful chairman of the Senate Banking Committee, said he planned to introduce legislation that would require banks to get customers’ permission for overdraft programs. Two overdraft regulation bills already have been introduced in the House of Representatives. And the Federal Reserve in January mandated better overdraft disclosures starting Jan. 1, 2010, and is considering further regulations.

Big money is at stake. In a research report earlier this year, Boston-based Oliver Wyman cited Federal Deposit Insurance Corp. data that estimated banks’ service charges on deposit accounts had risen from $16 billion in 1994 to $39 billion in 2007. Some $29 billion of 2007’s total was NSF-related. Add credit unions’ NSF and overdraft fees and the total comes to $34 billion, Oliver Wyman said. Overdrafts have been providing a steady income for debit card issuers for some time as the popularity of the cards has exploded. An electronic-payments consultant estimated nearly four years ago that NSF fees on signature debit cards accounted then for anywhere from 30% to 50% of all the revenue issuers earn on these cards (Digital Transactions News, Dec. 1, 2005).

Under current practice, many banks offer overdraft protection automatically on demand-deposit accounts and let customers take their balances below zero without warning, with the bank covering the check or debit card transaction. This, of course, generates fees, especially with the huge growth in consumers’ use of debit cards for purchases in recent years. Plus, the fees themselves have risen, with many banks now charging over $30 per transaction. Dodd also noted that some banks process their check and debit card transactions in such a way that the biggest transactions clear first on a given day, making overdrafts more likely on smaller transactions. A $5 debit card purchase on an overdrawn account thus can easily cost the cardholder $35 to $40.

The two banks’ releases indicate that they’re trying to address the criticisms. Under revisions to take effect in 2010’s first quarter, Chase will: eliminate overdrafts for debit cards unless the customer opts into such services; modify posting to recognize debit card transactions and ATM withdrawals as they occur; eliminate overdraft fees if a customer’s account is overdrawn by $5 or less; and reduce the maximum number of overdraft fees per day to three from six.

BofA is making its changes in two phases. Beginning Oct. 19, the bank will not charge overdraft fees when a customer’s account is overdrawn by less than $10 for one day; not charge overdraft fees on more than four items per day; improve the process for customers to opt out of overdraft service; and issue improved disclosures. Effective next June, BofA says it will introduce an annual limit on the number of times customers can overdraw their accounts at the point of sale when they do not have sufficient funds; contact customers who are nearing the annual limit “to provide education and tools to help them better manage their finances,” and limit overdraft capability—and fees—for customers who reach the annual limit; and provide new customers the choice to opt into the overdraft service when they open accounts.

A 2008 FDIC study of bank overdraft programs found that 74% of DDA accounts incur no NSF/overdraft fees, but that 5% of accounts incurred 20 or more NSF transactions annually and accounted for 68% of fee revenue, according to Oliver Wyman. “Our immediate priority is those customers who excessively overdraw their accounts,” Susan Faulkner, customer segments and deposits executive, said in BofA’s release.

Robert Meara, a banking analyst with an Oliver Wyman subsidiary, Boston-based Celent LLC, tells Digital Transactions News that NSF/overdraft fees are “increasingly viewed as untenable,” both politically and in the marketplace. He notes that besides the pressure from Washington, competitors such as USAA and ING Direct are offering free overdraft protection on some accounts, and others are bundling accounts to raise balances, thereby reducing the chance of incurring an overdraft fee. “These changes [by BofA and Chase] represent a step in the right direction,” he says. “I would expect more banks to follow suit.”

That said, NSF and overdraft fee revenues are now so large that banks will “need to be creative” in finding replacements, he adds.

Merchants Urge That U.S. Follow Overseas Example on Interchange

2009-09-19T07:50:00.003-05:00

Digital Transactions

(September 17, 2009) Merchants turned up the heat on banks and the bank card networks on Thursday by releasing a report showing that interchange fees in the U.S are much higher than in other countries, and arguing that policymakers in the U.S. should regulate interchange as have their counterparts overseas. “We want to make sure the public and polcymakers understand what is going on around the rest of the world,” said Mallory Duncan, senior vice president of the National Retail Federation, a Washington, D.C.-based trade group that has led the charge against interchange, or “swipe fees,” as merchant groups have started calling the fees merchant acquirers pay issuers on each card transaction.

Duncan spoke during a press conference held by the Merchants Payments Coalition to release its 14-page report, entitled, “’Swipe Fee’ Reform--International Lessons.” The MPC, also based in Washington, was formed by retail trade groups in 2005 to lobby in favor of interchange regulation. In the report, the MPC shows the U.S. with the highest interchange among 15 countries or regions compared, at 2%. New Zealand, Australia, and the European Union, all of which have acted to regulate interchange in one way or another, are shown at 0.95%, 0.50%, and 0.30%, respectively.

Arguing that interchange fees are ultimately borne by consumers and thus drain the economy, the MPC says that consumers in the U.S. would have saved $125 billion over the past four years had the same regulation been imposed here as was imposed in Australia. In 2003, the Reserve Bank of Australia capped interchange at an average of 0.55%, about half what it had been. “The result is consumers [in Australia] have saved money in the billions of dollars, there’s more competition, consumers pay lower fees for credit cards, and the economy has benefited, all while credit card transactions have gone up,” said Douglas Kantor, counsel to the MPC, during the press conference.

The argument that current interchange rates harm the economy comes at a time when legislators may be especially willing to listen, with the economy still struggling to recover from its deepest recession since the 1970s. Already, three pieces of legislation have been introduced, two in the House of Representatives and one in the Senate, that would rein in interchange either through beefing up merchants’ bargaining power with the banks and the card networks or by allowing merchants to surcharge for them.

But a spokesperson for the Electronic Payments Coalition, a D.C.-based group formed by banks and the card networks to lobby against interchange regulation, charges that the MPC’s report is misleading. “The premise of the study is fundamentally flawed,” she tells Digital Transactions News.

The rates shown in the report for various countries and regions represent interchange only, she says, not the total rate, or discount rate, that merchants pay on each transaction. In the U.S., interchange accounts for 80% to 85% of the discount rate, which also includes fees to acquirers and processors, but a much lower percentage overseas, where acquirers assume more risk responsibility, she says, and hence collect a higher proportion of the overall rate. Looking at discount rates rather than interchange alone, the U.S. is in the middle of the pack rather than at the top, she argues. “In reality, what merchants pay in Europe is about the same as in the U.S.,” she says.

Indeed, the 0.30% rate shown for the EU is an interim rate imposed by the European Commission on MasterCard Inc. only, and only for cross-border transactions, which account for between 3% and 5% of all MasterCard transactions in the region, the EPC spokesperson estimates.

As for Australia, while the interchange cap did slash rates dramatically, it’s debatable whether consumers benefited and if so, by how much. The MPC report cites a 2005 study from the Payment Systems Board, part of the RBA, that indicates merchants were passing interchange savings on to customers. But a 2004 report from the Australian Competition Tribunal found no evidence that merchant savings were flowing to consumers. Some 83% of U.S. consumers believe merchants would pocket any savings from reduced interchange rather than pass them on, according to a Visa Inc. survey released on Thursday. Visa canvassed 1,000 consumers in July.

After the RBA imposed the cap, banks in Australia hiked annual fees and cut back on rewards to help recoup lost interchange income. “This is what merchants want to do in the U.S.” says the EPC spokesperson. “They want consumers to pay.”

Citing Debt Load, Cynergy Data Declares Bankruptcy And Seeks Sale

2009-09-05T16:20:00.001-05:00

Digital Transactions News

(September 1, 2009) Citing the weak economy and “an unsustainable debt load,” the big independent sales organization Cynergy Data filed for Chapter 11 protection Tuesday in U.S. Bankruptcy Court in Delaware. The Long Island City, N.Y.-based processor also said it planned to sell its assets to The ComVest Group, a private-equity firm with holdings in several other merchant processors.

In a press release, Cynergy Data chief executive Marcelo Paladini said the Chapter 11 process would allow the company to continue providing its merchant credit card processing services while completing a structured asset sale. And in a separate letter to “our friends and colleagues in the payment processing industry,” Paladini said, “As you may know, like so many companies in the electronic payment industry, Cynergy Data has faced its share of challenging circumstances recently. From the difficult economic conditions to an unsustainable debt load, our employees, management team, and industry partners have striven to overcome these challenges and continue delivering world-class payment-processing services.”

The announcements did not go into detail about Cynergy Data’s financial problems, and spokespersons were unavailable for comment late Tuesday. Three corporate entities filed for Chapter 11: Cynergy Data Holdings Inc., of which Paladini owns 92%, and its wholly-owned affiliates, Cynergy Data LLC, the main operating company, and Cynergy Prosperity Plus LLC. Cynergy Data LLC listed assets of $109.5 million and total debts of $186.2 million.

The bankruptcy petitions list Cynergy Data’s 25 largest unsecured creditors. The top five and the amount they are owed are: Process America, $2.81 million; Chase Paymentech Solutions, $2.63 million; TSYS (Total System Services Inc.), $1.46 million; MyGrantSite.Net, $1.38 million; and Second Source, $1.06 million.

Founded in 1995, Cynergy Data has a portfolio of nearly 80,000 merchants that generate more than $10 billion in annualized charge volume. The company’s Web site lists its sponsoring banks as Wells Fargo & Co. and Harris N.A.

The bankruptcy court would supervise the proposed “stalking horse” auction of Cynergy Data’s assets under Section 363 of the U.S. Bankruptcy Code. In such a sale, a prearranged buyer, in this case ComVest, comes in with a bid that establishes a floor price for the debtor’s assets. But other interested parties could win if they submit better bids. Cynergy Data hopes to complete the sale in 90 days. The processor says it has sufficient cash to continue operating during the sale process, and it also has a commitment letter for debtor-in-possession financing.

West Palm Beach, Fla.-based ComVest has controlling interests in such payments firms as Pipeline Data Inc., Cardaccept Inc., AirCharge.com, SecurePay.com, and Northern Merchant Services Inc. In a statement, ComVest managing partner Pete Kight said, “We believe that Cynergy has a significant competitive advantage in its processing business, offering superior service and technology to its many merchants and ISO partners. As a firm that has a great deal of experience in payments processing, we are committed to Cynergy’s success in the future and look forward to partnering with Cynergy’s management team in serving the industry for many years to come.” Kight founded CheckFree Corp., the big bill-payment and payments software firm now owned by Fiserv Inc.

Cynergy Data has appointed a chief restructuring officer, Charles M. Moore. A hearing is expected Wednesday at the bankruptcy court in Wilmington, Del.

Cybr eGuarantee

2009-08-30T16:48:00.000-05:00

Cybre eGuarantee employs a simple process that mirrors credit card transactions and allows you to wipe out bad checks and their associated fees. The electronic conversion component eliminates paper check handling, resulting in faster availability of funds and detailed online reports. This program will allow you to accept all forms of checks while enjoying the benefits and peace of mind found only in a guarantee product.

Price Tag for End-to-End Encryption: $4.8 Billion, Mercator Says

2009-07-08T17:18:00.000-05:00

Digital Transactions News

(June 29, 2009) Demand is booming for better payment card security as a result of the many data breaches of recent years, and the solution being touted more than any other is “end-to-end encryption.” But a new report from Mercator Advisory Group Inc. asserts that the term is imprecise and implementing the technology will take incentives, collaboration, and a lot of salesmanship.

Meanwhile, the final tab for the solution is no small matter. A point-of-sale terminal with end-to-end encryption starts at $500 for a mom-and-pop merchant and goes up for multi-lane retailers, the report notes. Author George Peabody, director of the emerging technologies advisory service at Maynard, Mass.-based Mercator, estimates the total cost to upgrade all U.S. terminals at $4.8 billion.

While the card industry’s techies have discussed end-to-end encryption of track data on credit and debit cards’ magnetic stripes for years, the term came to the forefront this year in the wake of the big data breach at merchant acquirer Heartland Payment Systems Inc. In an effort to restore its reputation and enhance its own as well as the entire card industry’s security, Heartland announced a major commitment to end-to-end encryption (Digital Transactions News, Jan. 26). That effort is now well along, Mercator notes in its report, “End to End Encryption: The Acquiring Side Responds to Data Loss and PCI Compliance”. In addition to hiring a new senior security executive and pushing the industry for more sharing of data-breach information, Heartland has even commissioned a third-party manufacturer to build point-of-sale terminals that meet its new requirements. Many other industry players, including specialty-software providers and the major POS terminal vendors, also are working their own variants of end-to-end encryption.

End-to-end encryption typically refers to the scrambling of the primary account number (PAN) and track data as soon as the card is swiped and decrypting the data when they are safely at an endpoint and supposedly out of reach of hackers. “End-to end encryption is kind of a misnomer; you’ve got to define your endpoints,” Peabody tells Digital Transactions News. For example, if the endpoint is at a gateway operator that then hands off “clear-text” data to an upstream acquirer over a point-to-point telecommunications link, the merchant’s security may be improved but not necessarily the gateway’s or the upstream processor’s, according to the report. “Given the range of technical approaches and the operational context of the customer—risk tolerance, brand protection, technical priorities, and financial condition—each organization deploying [end-to-end encryption] will have to locate those ‘ends’ for itself,” the report says.

Apart from the considerable technology issues, advocates will face big hurdles in persuading merchants to adopt end-to-end encryption, according to Peabody. Large Level 1 retailers, so-called because of their high payment card transaction volume, have the technological and financial resources to invest in better security technology as well as national reputations to protect, and thus might be easier sells than small merchants. Large merchants also are especially keen on lowering their costs and time devoted to the Payment Card Industry data-security standard, or PCI, the controversial common set of rules for securing transactions on the major card networks. Small, so-called Level 4, merchants, meanwhile, are the source of most data breaches but often have little awareness of card-related security problems and balk at spending money to fix them.

One way to spur the technology: interchange incentives for merchants. In the past two decades, Visa Inc. and MasterCard Inc. have offered price breaks to encourage merchants to use electronic terminals and to bring entire check- and cash-oriented merchant segments, including grocery stores and recurring billers, into the card-acceptor tent. “There’s no evidence that that’s in the offing, but there’s precedence for it,” says Peabody.

Besides possible financial incentives, better cyber-security “takes aggressive collaboration,” according to the report. Losses might have been mitigated had an entity such as The Financial Services Information Sharing and Analysis Center’s new Payments Processing Information Sharing Council been in place before the breach at Heartland and another at RBS WorldPay Inc., which came to light around the same time, the report says. Another benefit of collaboration: less pressure for government-mandated solutions.

Mercator also says the industry needs to agree on encryption standards. But “a standardized approach is unlikely to emerge soon” because of “too many competing agendas,” the report says.

MasterCard Puts the 13-Year-Old Wal-Mart Case in the Rear-View Mirror

2009-07-06T09:24:00.000-05:00

Digital Transactions News

MasterCard Inc. plans to pay off its remaining $400 million settlement obligation to retailers over debit card acceptance early for a discounted $335 million, according to a filing the card network made on Thursday with the Securities and Exchange Commission. Attorneys for the retailer plaintiffs have signed on to the proposed deal, which would happen Sept. 30 if it gets the required court approval.

The case started in 1996 when retailers, upset about what they said was the high cost of accepting Visa- and MasterCard-branded signature debit cards, filed lawsuits challenging what were then the bank-owned card associations over their so-called honor-all-cards rules. The rules required merchants that accepted Visa and MasterCard credit cards to also accept the associations’ debit cards. The cases were consolidated as a class action with more than 8 million plaintiffs and became known as the “Wal-Mart case” because of the participation of Wal-Mart Stores Inc., the nation’s largest retailer.

The card associations settled in 2003 for just over $3 billion—reportedly a record—as the case was headed to trial in U.S. District Court in Brooklyn, N.Y. MasterCard’s portion called for payments into a settlement fund of $125 million by the end of 2003, followed by nine annual payments of $100 million. Visa’s initial payments of $225 million were to be followed by annual payments of $200 million ending in December 2012. The card associations also agreed to drop their honor-all-cards rules and temporarily lowered signature-debit interchange.

The deal is a clear example of the time value of money—more later, or a little less now. “This will allow us to pay the merchants early, and this is a time when stores need some money,” says New York attorney Lloyd Constantine of Constantine Cannon LLP, co-lead counsel for the merchants. “A lot of stores are closing, a lot of stores are laying off employees. For a lot of stores, this will be a very significant infusion of cash at a time when they really need it. The settlement in this case is the gift that keeps on giving.”

Constantine says the merchants had court approval to securitize their payouts from Visa and MasterCard, though the card networks “had the right to beat what we got in the market.” He says he wouldn’t be surprised if Visa makes an early payout. Visa had no comment Thursday.

MasterCard says it is pleased to be paying off its obligations early. “We believe this is a good use of our cash and offers good returns,” a spokesperson tells Digital Transactions News by e-mail. “In addition, it allows us to put the remaining financial piece of this legacy litigation behind us.”

A bigger question is whether the Wal-Mart case, which loomed large over the payments industry for seven years, did anything more than generate lawyers’ fees and dollars for retailers, especially large ones. One long-time payments industry consultant doesn’t think so. “Time has proven that the card brands cut a pretty good deal on this settlement,” says C. Marc Abbey, managing partner at First Annapolis Consulting Inc. in Linthicum, Md. “I would say the lasting effects are almost nothing.”

Wal-Mart, in a show of force, briefly stopped accepting signature debit cards from MasterCard, which has a much smaller debit market share than Visa, but resumed. Abbey says very few, if any, other retailers have ever taken advantage of the rule changes that now permit them to reject the bank card networks’ debit cards while still accepting their credit cards. He also notes that after their settlement-induced cuts, interchange rates on signature debit cards resumed a “normal market course” and edged upward. “The Wal-Mart case was being perceived as a win for the plaintiffs at the time, but if you look at the outcomes it’s hard to view it that way in retrospect,” Abbey says.

In fact, some of the major questions that arose out of the Wal-Mart case are being debated today as at least three interchange-related bills await action in Congress. The honor-all-cards debate now includes premium credit cards, which cost merchants more to accept that plain-vanilla cards. One bill would ban the higher premium differentials (Digital Transactions News, June 12).

Skinning is a Scam

2009-07-01T06:51:00.000-05:00

Visa

It's a crime and you can stop it!

It's your job to keep your customers' credit card information secure. Skimming is just one trick criminals use to illegally obtain credit card information.

Be on the lookout for skimming activity. If, in your workplace...

You see anyone using a device that is not part of your day-to-day activities
Anyone offers you money to record account information
Anyone asks for customer account information over the telephone

Call your merchant processing center or company security and let them know immediately!

What does a skimming device look like?

Skimming devices record and store credit card account information. Most skimming devices are small and portable-and may resemble a pager.

What is skimming?

Skimming is an illegal act the helps criminals obtain credit card account information to produce counterfeit cards.

How does skimming work?

Typically, someone in a workplace uses a small device to steal information from a credit card's magnetic stripe. That information is put onto a counterfeit card and used to make fraudulent purchases.

Say NO to criminal activity and you could earn a reward!

Visa will pay a reward of up to $1,000 for information leading to the arrest and conviction of anyone involved to the manufacture or use of counterfeit cards.

5 Simple Steps to Safer Key-Entered Transactions

2009-06-30T18:50:00.000-05:00

Visa

Can't swipe the stripe? It could just be a de-magnetized card or maybe not. It's up to you to put more action into your key-entered transaction to avoid the possibility of counterfeit fraud.

When the Stripe won't swipe

Check the terminal to make sure it is working properly. If the terminal is okay and the problem appears to be with the magnetic stripe, follow your company procedures for key-entered transactions. Be sure to check the card security features and match signatures.
Check the card's "good thru" (or "valid thru") date to be sure the card hasn't expired. If the transaction date is after the "good thru" date, the card has expired.
Get a manual imprint of the card.
Ask the customer to sign the imprinted sales draft.
Compare the signature on the card with the signature on the sales draft to be sure they match. Do not accept an unsigned card*!

* If the card is unsigned, ask the cardholder to sign it in your presence, and to provide government I.D. (driver's license or passport). Compare the signatures on the transaction receipt, the card, and the additional identification.

If you suspect fraud, make a code 10 call. Call your voice authorization center and say "I have a Code 10 Authorization request." Follow the operator's instructions if you can do so safely.

Heads Up to the Warning Signs of Fraud

2009-06-29T14:58:00.000-05:00

Visa

Certain customer behavior could point to bankcard fraud. But remember, it doesn't necessarily indicate criminal activity-you know your customers, so let your instincts steer you in the right direction.

Watch our for customers who:

Purchase a lot of merchandise without regard to size, style, color or price.
Ask no questions on major purchases.
Try to distract or rush you during the sale.
Make purchases, leave the store, and return to make more purchases.
Make large purchases right at opening or at the last minute when the store is closing.
Refuse free delivery for large items.

If you see signs that make you suspicious:

Hold on to the customer's card if you think you can do so safely.
Follow your company's procedures and notify your supervisor.
call your voice authorization center and request a "Code 10" authorization, using a normal tone of voice. An operator will tell you what to do.

Never risk your own safety or the safety of others in the vicinity.

With a New PIN Pad, First Data Promotes Contactless to Merchants

2009-06-26T20:03:00.000-05:00

From Digital Transactions News (June 26, 2006

(June 22, 2009) PIN-debit cards and contactless acceptance seem like two unlikely electronic-payment services to promote in one point-of-sale device, but that’s exactly what First Data Corp. is doing with the latest addition to its FD line of POS hardware. The big processor’s goal with the new FD-30 PIN pad: build future demand for contactless payments through a competitively priced device for merchants looking to accept PIN-based debit.

Many industry executives and analysts see contactless as a technology that eventually could replace the decades-old magnetic stripe. But, apart from a few retailers that want to convert small cash transactions to electronics and highly value transaction speed, few merchants have bought into that idea. MasterCard Inc. says there are about 146,000 locations worldwide that accept its PayPass contactless card. Yet contactless is building momentum, according to First Data. The company’s news release announcing the FD-30 cites recent research from Yankee Group estimating that contactless transactions will total 23.6 billion in 2012 and 31.8 billion in 2013.

Steve Mathison, vice president of product and business development at First Data, agrees that the time a customer needs to enter a PIN would reduce one of the chief advantages of contactless cards should an issuer ever come out with a contactless, PIN-based card: transaction speed. “I’m not so sure that the road maps of the two products have converged yet,” Mathison tells Digital Transactions News. “I think of this as another bridging technology.” Mathison points to First Data’s GoTag sticker for cell phones as another product in the company’s effort to nudge the payments industry in increments toward wider acceptance of contactless technology (Digital Transactions News, March 31).

There is confirmed demand for acceptance of PIN-debit cards, which cost merchants less to accept than credit or signature-debit cards and are becoming ever more popular with consumers (Digital Transactions News, June 4). Thus, First Data’s strategy of jump-starting contactless demand with a contactless device that also enables mag-strip-based PIN-debit acceptance could indeed work as long as the price is right, says Nick Holland, senior analyst for Boston-based Aite Group LLC. “I’d agree it’s not a bad idea,” he says. “If they want merchants to have an incentive, then the price differential between contactless and non-contactless should be a price point that they don’t have to think about.”

That is what First Data is shooting for, according to Mathison, though he refuses to disclose pricing. By sharing circuitry and other components, First Data can offer merchants one attractively priced device rather than two separate ones, he says. “The cost to manufacture is less than a PIN pad by itself and a contactless reader by itself.”

Greenwood Village, Colo.-based First Data this month began distributing the FD-30 through its many merchant-acquiring channels that include bank alliances and relationships with independent sales organizations. “We’re trying to distribute this as widely as possible,” Mathison says. First Data services 5.3 million merchant locations worldwide, including 3.1 million in the U.S. The FD-30’s main markets are grocery and convenience stores, and quick-service restaurants.

The FD-30 is not the first device that pairs PIN debit with contactless payments, a point First Data acknowledges in its release that says it is “one of the only” such devices. Hypercom Corp.’s Wymix B3 and Ingenico’s i3070 devices accept mag-stripe PIN-debit cards and contactless cards. A spokesperson for VeriFone Holdings Inc., the largest U.S.-based terminal manufacturer, adds that VeriFone has several products targeted at that niche.

Gift and Loyalty Cards

2009-06-25T09:53:00.000-05:00

Few people have not had the experience of receiving a gift card. In the past, loyalty and gift card programs have been reserved for large retailers with big budgets and large staffs. Such retailers have developed sophisticated programs that generate huge profits and unshakable customer loyalty. However, the tide has now shifted to include small business’, enabling them to compete head-to-head with the big box retailers in the gift and loyalty space.

Most small businesses only think about gift cards when the major holidays are coming. They scramble to implement this idea about the same time everyone else is and usually scrub the idea because their cards won’t be ready in time. January is a good time to start. If you’re going to design your card, you’ll need time to check the proofs and figure out what verbiage you want on the back of the card. There are many small holidays that gift cards will come in handy and an increase in sales is a good thing.

Gift and loyalty cards are also great advertising. They are like a billboard in people’s wallets and purses. Every time they see the card, they’re reminded of the merchant and will most likely tell their friends about the gift they received

Discover’s Transaction Volumes Hold Up in a Turbulent Quarter

2009-06-22T17:13:00.000-05:00

Digital Transactions News (June 18, 2009)

With the credit crisis still blowing at gale force, Discover Financial Services managed to grow its second-quarter transaction and dollar volume thanks mostly to its Pulse PIN-debit network and Diners Club International more than offsetting weak credit card volume.

Riverwoods, Ill.-based Discover reported Thursday that it handled a total of 1.13 billion transactions in the quarter ended May 31, up 5.1% from 1.07 billion transactions in fiscal 2008’s second quarter. But transactions on the Discover Network fell 1.2% to 366.3 million from 370.6 million a year earlier. In contrast, volume on the Discover-owned Pulse network grew 8.4% to 762.2 million transactions from 703.4 million in the 2008 period.

Dollar volumes brought out even more dramatic differences within the Discover family. Total volume grew 10.6% to $58.7 billion from $53.1 billion in fiscal 2008’s second quarter. But volume on Discover-branded cards issued by third-party financial institutions plunged 16.4% to $1.34 billion from $1.60 billion a year earlier. And proprietary Discover Network credit card volume dipped 7% to $22.0 billion from $23.6 billion in the year-earlier period. Sales volume on the Discover Card fell 4% to $21 billion. Pulse’s dollar-volume increase of 4.7% to $29.1 billion from $27.8 billion was less than Pulse’s transaction increase, but nonetheless positive. And Diners Club, which Discover bought in June 2008, brought in $6.24 billion in new volume.

Discover chairman and chief executive David W. Nelms noted at a conference call for analysts that dollar volume on Discover-branded cards fell in part because of lower gas prices this year and also because Discover hasn’t been running a gasoline-targeted promotion as it did earlier. Gasoline purchases account for about 10% of Discover volume. But he told analysts that he expects total volumes to pick up in the second half. “Our Pulse volumes were at an all-time record this quarter, so I felt good about that,” he said in response to a question. “The 5% year-over-year [total network] volume increase is lower than we’d like, and I’m hopeful that the full year, including all four quarters compared to last year, gets into that double-digit volume increase.”

Nelms also said Discover continues to add merchants thanks to its program of enlisting bank card merchant acquirers to sign and service new Discover acceptors. “We are thick and heavy on increasing our acceptance of our card,” he said. While most of the nation’s acquirers are now participating, it will still take time for many of the merchants they’re bringing on board to turn on Discover acceptance, he said.

One analyst asked Nelms about the bills pending in Congress that would regulate interchange (Digital Transactions News, June 12). Nelms noted that the card industry “is going through a lot of change” and he would prefer things to “settle out” a bit before Congress steps in. “I’m not crazy about some of the suggestions, and I’m not sure I see a need,” he said.

Higher reserves and losses took a toll of Discover’s earnings, which came in at $225.8 million, down 3.6% from a year earlier. Discover’s antitrust settlement with Visa Inc. and MasterCard Inc. (Digital Transactions News, Oct. 28, 2008) brought in $295 million after taxes.

Rising Fees May Cause Fewer Doctors to Accept Credit Cards

2009-06-19T09:49:00.000-05:00

Digital Transaction News, June 10, 2009

While credit card acceptance is making inroads in a slew of new markets like transit and parking, it turns out the plastic is losing ground among physicians. Some 32.7%of doctors' offices do not accept credit cards, up almost 4.5 percentage points from a year ago, according to a survey from SJK&A Information Services Inc., a research firm specializing in health care.

Rising interchange rates may be to blame, according to Jack Schember, director of marketing for the Irvine, Calif.-based company, which surveyed physicians in April following its firs survey in April of last year. While SK&A's surveyors did not ask respondents for reasons, Schember says the firm's familiarity with business trends in the medical market leads it to believe higher acceptance costs are playing a role in doctors' offices dropping cards. Another reason, he says, is that a troubled economy is leading more patients to dispute transactions, causing hassles for medical staff. More doctors may be concluding that "cash and checks are an easier way to get your money," Schember says.

Among the roughly two-thirds of offices accepting credit cards, specialists offering high-ticket procedures often not covered by insurance are, unsurprisingly, the most prolific acceptors. Plastic surgeons lead in this category, with a 91.1% acceptance rate, followed by ophthalmologists (84.1%) and otolaryngologists (82.5%). The least likely specialties to accept cards are pathologists, at 20.6%, dialysis (26.9%), and geriatric medicine (31.9%).

Among brands, Visa or MasterCard are accepted by nearly two-thirds of offices, while Discover (31.2%) comes in ahead of American Express (27.7%). All the brands took a beating over the 12 months since the last survey, when 71.3% accepted Visa or MasterCard, 35.2% took Discover, and 31% accepted AmEx.

Schember says SK&A undertook the surveys at the behest of a card brand, which he will not name. He says the brand wanted to know the extent of its acceptance in medical offices. The firm canvassed some 202,650 practices, nearly all of the 226,000 offices in its data base. The firm's data base represents more than 650,000 physicians.

Service you can trust versus price

2009-06-18T09:16:00.000-05:00

Isn't it great when you find someone you can trust to work on your car, a contractor that will not go over their price quote and will finish on time, an appliance repair person that doesn't replace a part that doesn't need replacing? Merchants tell me that they get between 5 to 10 sales reps per week offering to save them money on their credit card processing. Let's face it; service takes a back seat to price in the processing business. A company that moves your money from your place of business to your bank should be some one you trust. When a sales rep comes to call, ask for a list of merchants they are working with in your area and call some of the business owners on the list to see if they like the service. Ask the sales rep a lot of questions such as: how long is the contract? Is there a charge if I cancel the service? How long does it take for my money to reach the Bank? And get all your questions answered in writing and have the rep sign it.

Pricing quotes should be interchange plus pricing. This means that you want to know what the processor is changing over Visa and MasterCard pricing. Visa and MasterCard charge the same to every processor so everyone has to pay this fixed amount. The processor will add a percentage, communication or per transaction charge, monthly service fee (statement, online statement), there may be a start up fee, annual fee, charge back fee, and if your credit card terminal is not compliant, you'll have to buy one that is.

If you're not happy with the processor you have. Ask some of your neighbors and friends in business if they like the company they're working with and if they will share information about the rates they are paying. Most profit margins are shrinking because of competition and the economy. Keeping your overhead low is more important then ever. But don't give up good service for price. Peace of mind from working with some one you trust is also important.

Transaction Security, Evolved part 4

2009-06-17T06:25:00.000-05:00

This is the fourth and last of a four part article form Transaction Trend written by Mimi Hart, president and chairman of MagTek in Seal Beach, California.

Getting the industry on board

The real challenge for the payment card industry is getting merchants and consumers to recognize transaction authentication as the true "end-game" in payment security. If the public is to have the same level of confidence in plastic cash as it has in paper currency, then similar machine-readable, anti-counterfeit measures are required for the card and the other system components.

The payment system must be able to validate the card itself, the encoded data, the reader, the cardholder, the data recipient, and the details of the transaction. (These same security elements are necessary whether the payment mechanism is a card, a fob, a wristwatch, cell phone, a sticker, or a yet-to-be-invented device.) When we know with a high degree of certainty that each of these elements is genuine and hasn't been altered, the system can be considered trustworthy and will inspire confidence. More importantly, this level of transaction security will alleviate the need for industry police, fines, lawsuits, and acrimony among the parties. Compliance will not be considered burdensome and PCI can restore the payment card's best feature-convenience-which was the hallmark of card programs introduced decades ago.

Transaction Security, Evolved, part 3

2009-06-16T06:50:00.000-05:00

This is the third of a four part article form Transaction Trend written by Mimi Hart, president and chairman of MagTek in Seal Beach, California.

Multiple authentication methods

Access to cardholder databases allows criminals to create counterfeit cards that can be used for fraudulent transactions at ATMs or the point of sale. These cards are virtually undetectable because the current payment infrastructure does not require authentication of the device cardholders use to identify their accounts. If issuers or stand-in processors were in a position to authenticate the physical card itself, not just the data carried thereon, data breaches would all but disappear.

Card authentication allows the issuer, acquirer, or another authorized party to affirm the physical card is genuine and has not been cloned or altered. A strong authentication method also introduces an element of disorder because the authentication data itself changes with each swipe, yet can be reliably verified during each use. When this dynamic authentication value generated at the point of swipe is used, the actual cardholder data, by itself, becomes useless.

The use of physical card authentication renders stored cardholder data worthless to criminals. To perpetrate fraud, they must reproduce an identical copy of the physical token on which to place the stolen data. A strong card authentication method would make this task practically impossible. A substitute card could not be used at ATMs or POS devices without raising a giant red flag.

In addition, security techniques, such as challenge-response "mutual authentication" of the card reader/terminal and the host, can further prevent data theft. When implemented properly, the reader will not turn on until it has been authenticated with a legitimate host. Therefore, the cardholder data from the swipe is never captured or broadcast anonymously "into the cloud." Moreover, a pass word or PIN combined with a nonclonable unique card can further verify the cardholder via strong, two-factor authentication, while a MAC of digital signature can be used to confirm the transaction details have not been altered en route to authorization or later. Combined, these additional security measures can ensure authenticity of the card, the card data, the cardholder, the host, the card reader terminal, and the data message itself.

Transaction Security, Evolved, part 2

2009-06-15T06:45:00.000-05:00

This is the second of a four part article form Transaction Trend written by Mimi Hart, president and chairman of MagTek in Seal Beach, California.

Multiple points of compromise

Today's criminals have skills, tolls, bravado, and a level of innovation that is maddeningly daunting. Just a few years ago, massive breaches were unheard of. Although thieves could rewrite the magnetic strip to alter account numbers and expiration dates, then melt down and re-emboss the cardholder information, the introduction of CVV and CVC soon prevented this swindle.

Unfortunately, the industry has added few other security measures since then to thwart the use of tampered, cloned or counterfeit cards. Recently, the PCI DiSS mandated cardholder data be protected, but only in a few places, namely when the date is "at rest." This was a logical first step since thieves are attracted to large repositories of data "at rest" because the effort provides the likelihood of greater reward and a lesser chance of apprehension.

With the recent data breaches of organizations audited by PCI QSAs, it is likely the PCI will soon require the protection of cardholder data in other areas as well, namely data "in transit." As a result, merchants will invest in POS devices that encrypt cardholder data at the point of swipe. This will add expense to merchants' POS systems, but offer savings in the compliance process and add an effective layer of security that consumers may value. It will definitely make theft of cardholder data from within the payment processing network more difficult, but encryption at the POS will not stop fraud.

While encryption will be a valuable tool for the industry, it won't deter the more enterprising fraudsters because cardholder data can still be obtained in other places. The most well-known techniques for doing so are via pocket skimmers, tampered rogue POS terminals, fake ATMs, Internet phishing sites, front-end skimmers on legitimate kiosks and ATMs, altered gas pumps, and "card cleaning" swipe stations. Even data encrypted at point of swipe is still vulnerable if it is decrypted at any point before reaching the authorizing party. But the problem is larger still.

Considering 10 billion payment cards are in use, it is safe to say that at least 10 billion possible points of compromise exist. Many industry professionals mistakenly believed that cardholder data on the magnetic stripe is encrypted, and hence secure. The cardholder data is encoded, but it is not encrypted. Perhaps because the word "encode" is often used as a synonym of "encrypt," it is often presumed the magnetic encoding is secure. The truth, however, is that cardholder data recorded on the mag-stripe contains only zeros and ones. which can re read by anyone familiar with binary code.

Transaction Security, Evolved

2009-06-12T10:24:00.000-05:00

Authentication makes transactions as easy as they once were and safer than they are now

This article taken from Transaction Trends is written by Mimi Hart, president and chairman of MagTek in Seal Beach, California. Because of the length of the article, it will be offered over a four business day run.

For a payment system to be effective, merchants and consumers must find it convenient and easy to use. But as fraud becomes more sophisticated, inspiring confidence without overly complex processes becomes a greater challenge. Authentication may provide the answer.

Industry professionals who worked with POS transactions in the early 1980s can remember the paper "Warning Bulletins" bank card associations mailed bi-weekly to merchants. When a customer presented a bankcard, the merchant would look through the bulletins to ensure the card wasn't listed as lost or stolen. If it was, the merchant was supposed to take the card, cut it in half, and send it to their bank for a reward.

Now in 2009, we continue to find significant challenges with the current POS infrastructure, which presents a major burden for retailers, processors, gateways, ISO's and others involved in the industry. Large retailers and processors seem to be getting compromised on a regular basis, even though they follow the rules and regulations put into place by PCI.

Credit Card Use Drops

2009-06-11T05:14:00.000-05:00

Transaction Trends, June 2009

Borrowing on credit cards in February fell at an annual rate of $7.8 Billion or 9.7 percent-the steepest percentage decrease since 1978, and the sharpest drop in dollar terms since federal records began in 1968, according to the Associated Press.

There are several reasons for the decline, says Bill Hardekopf, CEO of LowCards.com. Some consumers are cutting back on credit card usage and paying off more of their balance; more accounts are falling into default; and issuers are reducing available credit limits and raising interest rates.

"This drop in borrowing is certainly a reflection of consumers cutting back their spending. But I think it is also a result of changes that credit card issuers are making," says Hardekopf. "The credit card industry is undergoing a very turbulent time and in the past six months, issuers have actively tried to find ways to cut losses. They seem to be working very quickly to make these changes before the new credit card reforms take place in July of 2010."

Hardekopf notes recent changes that could affect credit card borrowing:

Chase added a $10 monthly fee and increased the minimum payment from 2 percent to 5 percent for customers who carry a large balance. However, in response to pressure from cardholders and consumer groups, chase cancelled the monthly fee.
Capital One increased the rates for new customers on 15 cards. It increased the rate for the platinum Prestige card from 7.15 percent to 11.9 percent and the rate for the No Hassle Points card (offered to customers with excellent credit) from 8.15 percent to 13.9 percent.
Citi Changed its introductory zero-percent interest rate for balance transfers from 12 months to six months. It increased the rate for cash advances from 19.99 percent to 21.99 percent and increased the default rate from 28.99 percent to 29.99 percent.

Tech Support

2009-06-10T10:24:00.000-05:00

Trouble shooting your processing device whether it be a credit card terminal or a POS system may be easier then you think. Most merchants call their tech support help line soon after they find out that something is wrong. If you take the time to understand what’s not working, you may save yourself the time waiting for a human being to pick up.

The best way to handle the problem is to have an employee call terminal support while you look at a few things.

First of all, is there power going to the terminal? Make sure the phone line is clear by taking the phone line and plugging it into a phone. If you hear a lot of static, you may have found your problem, Also, cleaning the card reader on a regular basis is a good idea. A card reader cleaner is a credit card shaped, alcohol soaked pad that does a great job of keeping the reader in your terminal clean. A clean dollar bill wrapped around a credit card will work in a pinch.

If you need tech support, be ready with information that will be asked of you. You may be asked your Merchant ID Number, Terminal ID Number, and Error Message on terminal, to name just a few. One thing I have noticed over the years is support has improved a great deal. The hardest thing to do is work through the beginning menu, asking you to choose from five categories of what your needs may be. If you have the patience, you will reach that human being to help you.

Is your credit card terminal compliant?

2009-06-09T09:34:00.000-05:00

This industry is under attack from hackers constantly. At least three large processing companies have been breached within the last 6 months. You may have had to have your credit cards replaced by your bank because of this.

It does not seem that long ago that I was working with 25 year old technology. Now credit card terminals are being replaced much more often because the hackers are finding ways to get your customers information from your equipment.

A merchant may be fined if they are breached and be held accountable for any losses their customers may have. Your credit card processor will be able to let you know if your equipment is compliant or contact me for more information.

Check Card, Signature or Pin Based

2009-06-08T07:28:00.000-05:00

Most people know what a check card or what some people call a debit card is. They are similar to a credit card in how they’re used but instead of the customer increasing their dept, they are using the money they have in their checking account, taking the place of checks.

Most merchants accept them this way. Signature based is the most common use but some merchants are persuaded to use a pin pad. This is called pin based in the industry and can save the merchant money because the percentage is low or non existent depending on the card. The transaction charge is a bit higher so the larger the average ticket, the more the merchant saves. Of course the customer has something to say about how they want to use their check card and most are not used to entering their pin number.

If you have a high average ticket, you may want to set up your processing to include a pin pad. Most new credit card terminals have the pin pad built in so there is no need for additional equipment but this means you will have to turn the terminal around so the customer can enter the pin number.

The merchant could ask their customer if there is an interest for this service before going forward. Also contact your processor for quotes on adding the service and charges on transaction.

Visa's debit card are more popular then credit cards

2009-06-05T08:48:00.000-05:00

The economy is encouraging more thrifty behavior, consumers are using their debit cards instead of their credit cards at a record pace. According to an April 29th report from the credit card network, the total dollar volume of purchases made with Visa debit cards at the end of 2008 was larger than the amount spent on credit card purchases, the first time debit purchases surpassed credit. Visa's 2008 fourth-quarter debit card transactions make up more than 50 percent of the company's volume, compared to 40 percent during the same period in 2003

Visa's debit card growth far exceeded analyst's predictions. At U.S. Cancorp, debit card transactions in the first quarter rose more than 2 percent from the same period in 2008, credit card purchases declined more than 4 percent.

MasterCard's debit card transactions rose 13 percent last year. Credit card purchases dropped more than 2 percent. Credit and debit card purchases for retail goods and services surpassed cash and check payments since 2003. Debit cards slowly approache the levels of credit card use.

This is a win-win situation. The consumer is lowering their debt and the merchant is paying less for processing the debit card. About 1/3 of 1% less. This is great news and makes accepting payment cards more desirable.

Visa & MasterCard raise rates

2009-06-04T10:00:00.000-05:00

MasterCard has already increased their transaction charge in April with an additional $0.0185. They call it "Network Access and Brand Usage Fee"and Visa will follow with a $0.0195 next month. This doesn't seem like much but in this economy, it's a step in the wrong direction. Both companies have gone plublic and may be increasing their profits for their stock holders. Businesses with small average tickets will be hit the hardest.