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Credit Cards Online 101

Merchant Accounts or Credit Card processing Information for Small & MIdSize Businesses (Like Mine)> Here's vital info on processing Subscription Revenue Credit Card Processing, Credit Card Merchant Accounts, Third Party Processors, Shopping C

Updated: 2018-04-21T06:24:58.618-07:00


Publix Credit Cards: Slow!!!


I've had a fascinating week with credit card readers. I went to Publix several time. I use an Amex card with a chip.  The Publix experience takes about 25 seconds. I mean once the cashier is finished, I put in my Amex card in the slot and have to wait 25 seconds for it to get processed.

This was really annoying at first since that's a long time to stand there when there's a line. But we got use to the new slower technology.

This week however I started shopping at Fresh Market. It's about half a mile from the Publix. Note that this is in Ft Lauderdale on US1 between Oakland Blvd and Commercial Blvd.

the Fresh Market processing of the same Amex card takes less than a second. Less than a second. That feels fast. It's like using Apple Pay.

What possible reason is there for Publix's processing to be that slow? IS it just lousy lousy lousy IT and programming? Probably.

Could it be that they are doing a financial check that the other stores aren't? I doubt it but possible.

Publix? Care to comment?

Speed of Chip Readers for Credit Cards


I am shocked that when I go to Publix, the credit cards with a chip seem to take about 30-40 seconds to process.  This might not seem like a long time but since it holds the line still, it is a long long time. Basically, after the checkout process, the payment leaves the cashier sitting around idle waiting for the credit card to process.

What's weird is that in other super markets like the Whole Earth Store, it seems to be almost instantaneous, definitely less then 3 seconds.  Why can't Publix, with all their scale and resources, manage to accelerate the process.

Could it be that they are doing a credit check and getting approval in a way that other supermarkets skip?

On another note, I'd like to see whether blogger does trackbacks the way the wordpress sites do.  Seen the post on studying stem with bicycles?

K12 School Purchasing, Credit Cards, School P Cards, Procurement Cards


I run an edtech business, one part of which sells to schools and teachers. Most of that revenue (65%) comes in from credit cards, 35% from purchase orders.

Problem number one. You probably read that last sentence and thought it was the whole story. I wish it were. I use to think it was. It turns that there are lots of schools who purchase through a PO but when it comes time to pay, they pay with a credit card. So in fact, some purchase are purchase order AND credit card.  Sure messed up our accounting until we figured it out and learned to account for it.

Question number one. Q1. Of the 65% of the revenue that comes in from credit cards, is there a way to distinguish on our side between personal credit cards and school Pcards?  It would be really interesting to know.

Second question. Of the teachers paying with their personal credit card, should we start asking them whether they are being reimbursed by their school for it?

Fintech is a hot area as in school fintech with company such as Class Wallet and others looking at possibilities for improvement through technology to help education.

Startup Advice - Merchant Accounts is where you make your money


Here's what I learned over the last decade about setting up credit card merchant account for my online business in which we sell an intangible good with card not present.

1. Like it or not, you are in the credit card business. It's where your revenue actually comes from and it's a few percentage points of your cost structure. It can also go horribly wrong. Learn the basics and pay attention to it.

2. Using Paypal as your merchant account vendor is not the worst thing in the world. Nor is it the best in the world. Their reports sort of suck but their support is reasonable. As far as I know, they are not real good at subscription service processing but I've never really tried it with them.

3. Be careful that any merchant account contract that you sign has a clear way to get out of it. Note,  if you are a subscription site, there are two levels of getting out of it: 1. Switching to a new vendor to start processing new subscription orders. 2. Getting existing subscribers credit card info switched to a new credit card vendor. In my experience, the latter is impossible. You just have to add a new vendor for new subscribers and then over time, as users login, get them to update their credit card info and in doing so, switch it to a new processor.

4. Costs. The pricing for credit card fees to you is weird. As far as I know, there are three systems:
- one where each credit card has its own fee structure and you pay them
- a tired system where your process puts the cards in tiers and charge you by the band. By tiers I mean, debit cards vs credit cards. Credit cards with special benefits (miles, money back, free massages) vs credit cards without benefits.
- a fixed price system which Paypal seems to use.
The fees are a mix of monthly fees (for no reason), start up fees, % of bill fees, and a fixed per item processing fee. There are also fees for credit card verification, refunds, and other chargeback disputes.

5. Security. Keep your website secure. Update your CMS (ie Wordpress) at each update as well as your coding languages (ie php), and your tools. Run your PCI vulnerability scan every month. Screen your employees.  When they talk about security needs, listen!

Credit Card Processing Changing at Retail


I often eat breakfast at a low end very nice diner which I like because of location, food, and they have a nifty high tech looking cash register. It's basically a tablet mounted on a little stand. It integrates credit card processing presumably as an and probably has sorts of other useful apps on it.Square Retail Credit Card ProcessingWhen I take a closer look at it and ask some questions, I hear that it's the Square Credit Card system.  The stand has a magnetic strip reader built into it. The attached little white thing is the chip reader. And it also takes Apply Pay.  I asked about fees, payment schedule, and reports. She's nto entirely sure about the fees today but thinks that they are rising to 2.75%. She loves the daily reports. She's a little vague on when she gets her money into her account. I asked about the tablet for credit cards and she says it's an ordinary iPad and she's thinking of adding the Square app for payroll on it too.Square Credit Card Reader, Chip Reader, ScreenWhat's funny is from this little restaurant, I can also see another recent innovation in credit card processing. There is a retail store peddling credit card processing equipment and presumably processing services.  Notice the retail sign below for Ignite Payments and FirstData?Retail Vendor of Credit Card Processing Services & EquipmentAnd while I don't yet have a picture, there are also parking meters nearby which are the new variety incorporating credit card payments.  In the credit card processing world, the times they are a changing...[...]

Apple Pay on the Rise: Credit Cards Doomed?


I think the use of Apple Pay will quickly and greatly expand at retail, I think the credit card industry will, after its decades of poor management, be totally shaken up.

As a consumer, I just tried using Apply Pay at retail. It was fast and efficient. In contrast, the use of the new chip technology on credit cards in the US is incredibly messed up. It's slow, inconvenient, and does not greatly increase security.  The chip would have been a big step forward if it was implemented with additional security, say a PIN. But instead, the great expense of switching to chip-based technologies does not make sense there are not enough increases in security.

What's wrong with the US credit card system?

The the US credit card system keep relying on signatures. It's an expensive technology (all those touch screens etc) and does not really improve security. A credit card system in which your picture is taken for large pictures would help crack down on fraud.  A credit card system with a PIN would greatly increase security. And while the chip is a step forward over the magnetic stripes, they didn't require (as they do in Europe) a switch to mobile terminals so that customers are never separated from their credit card.

The US credit card system keeps getting more expensive. Of course, the consumer pays these costs but does not see them.  Seen all those ads about credit cards giving you 1%, 2%, even 5% and 10% back? Who do you think pays for this? The credit card companies just charge the increased fees to the merchants who, in turn, have to increase costs to cover the transaction costs of these credit cards.

The use of an Apply Pay-like system greatly increases security and at this point, the costs to merchants are lower and the convenience to consumers is lower.

"Apple Pay is a mobile payment and digital wallet service by AppleInc. that lets users make payments using the iPhone 6, 6 Plus, and later, Apple Watch-compatible devices (iPhone 5 and later models), iPad Air 2, iPad Pro and iPad Mini 3 and later."

New Style Payment Page With Direct Bank Billing


Today I was ordering a book online and I saw a new style online payment page. It suggests as the first type of payment, pick your bank! I guess the idea is to bypass merchant accounts and credit cards and online payment systems and do a direct debit

The online payment page is marked: Powered by PayPal". While the idea really caught by eye, I predict that this will FAIL in the mark place.

Why do I predict this direct bank withdrawal  not take off in the market place as a payment system. Because it  primarily addresses the vendor's issues. For a vendor, it probably reduces the fees from credit card processing. It probably speeds up payment. It might also cut down on chargebacks but all of these issues matter only the vendor.

From a consumer's point of view, I'm less likely to share my bank details than my credit card details. Also, I don't carry my bank details around with me whereas I do have my credit cards in my wallet.

Heh PayPal, do you have any views on this?  Am I missing the point?

Online Pay with Online Bank Account

In contrast, I paid for my lunch today with ApplePay. WOW, that was fast and easy!

Credit Card Chip System in the US: So Messed Up


Whether you got chips in your cards or not in the last few years, I'm sure you are aware of the painfully slow performance of the chip-based card payment system.  If you use the chip, if you're like me, you try to avoid using the chip since it takes an extra 20+ seconds. Even if you don't have a chip, I'm sure you've waited in line behind people who do.We've all wondered why. It turns out, it's poor software.  Visa announced this past week that they will update the software with a faster implmenetion. And I quote:An upgrade from Visa aims to shave a significant amount of time off this process. If Visa’s new “Quick Chip” upgrade — announced this morning — works properly, customers will no longer have to stand there awkwardly for 10-20 seconds with their card sticking out of the reader, waiting for approval. Instead, it would be more akin to the typical ATM experience, where the customer dips the card into the reader for only a second or two.However, it's much worse than a simple question of speed.  Here's what's wrong:1. We all prefer Apple pay. It's faster and more convenient and it's coming on fast.  Bravo to the credit card companies for totally blowing their dominance of automated payments by a slow late awkward implementation.2. The chip system does not really address security very well. While it does move away from the incredibly easy to copy magnetic stripes, it does not fully implement what is known as the "chip and PIN" system used in all the countries in the world except for the US.  In all the other countries, there is both a chip and then the user must enter their PIN to maintain security. Most of the world implemented this.  However, the US  did not implement the PIn system since we felt it might be too hard on consumers so we remain with a sytem which is not so secure or advanced.Why is the US doing it this way? It might be a problem of our economic system which is dogmatically private sector-oriented so the government cannot dictate a move to a higher security system.  So instead, the market is left to figure out how to move forward which means since nobody wants to show leadership, the low security system remains in place with the costs of fraud remaining incredibly high which of course, ultimately gets stuck back onto the consumer.[...]

Card Not Present, Recurring Bills, and All the Business Questions


Dear Readers,
I'm going to totally update the content on this site with a set of new posts, or maybe pages, summarizing our knowledge on these key topics.

It will be a summary of the key business issues related to the credit card processing of a card not present intangible subscription business model. It'll be a course unto itself.

I have written on all these topics before but for my own purposes, I will update and review my thinking on these topics and write out a top level summary.

You lucky readers will benefit from all this wisdom. In return, I ask for not for cash. If you think it is useful, just comment on the site saying so,  link to this site, tweet or post about it (directly to the articles that you find most useful) and also, if you see an ad that is of interest to you, don't hesitate to click on it and patronize the advertiser.  At $0.20 a click to me, after a few years, I might find that given the time that I will investing in this site, that I might be making all of a dollar an hour. Woo hoo!

Topics (subject to change, feedback desired).

Credit card transaction cost systems: Interchange versus
Interchange rate details
Key Metrics on an online subscription business: Recruiting and Retaining
Shopping Card Declines
Subscription Member Services
Credit Card Declines: Interpreting the codes
Credit Card Processing:  Storing Cards, Cards in a Vault with tokens,
Changing Credit Card Vendors
Credit Card Processing Contracts
Visa, Mastercharge, Diners Club, Discover, and American Express
Shopping Cart Software

Card Not Present Credit Card Fees


I would like to thank the Card Fellow people who have a great guide to credit card processing. Worth reading....

One of the ways that credit card processing figure costs is with the interchange rates.  The interchange fees f  change twice a year in April and October. Here are the current interchange fee schedules:
Historically, interchange has been imposed upon merchants to reimburse issuing banks for lost interest resulting from a cardholder's grace period for repaying their debt. This is why Visa still refers to interchange fees as "interchange reimbursement fees." Today, Visa states that "the primary role of interchange is to create an equitable balance of incentives between a cardholder's financial institution — which issues Visa cards to consumers — and a retailer's financial institution that enrolls retailers and processes Visa transactions for them." (Source)
When a credit card transaction takes place the issuing bank (cardholder's bank) pays the acquiring bank (merchant bank) for their cardholder's purchase less the interchange fee for the transaction. The acquiring bank then pays their merchant from the remaining balance minus a markup for processing the transaction.

Mastercharge To Reduce Unnecessary Credit Card Declines


MasterCard is introducing behavioral and contextual analytics tools to help card issuers navigate fraud risks. Called Authorization IQ and Assurance IQ, the tools are part of a new product line called, of course, MasterCard IQ.
Mastercharge recently announced a mobile alert system for Mastercard holders to notify them of out-of-locale or large spending.  They are following this with announcements related to reducing credit card declines which they are calling Mastecharge IQ.  
Authorization IQ offers issuers insights on the behavioral patterns related to user accounts, analyzing them to determine the risk level of a current transaction. Assurance IQ, meanwhile, extracts information from a merchant concerning a transaction’s circumstances and analyzes it to produce a risk score with respect to potential fraud.
The problem being addressed is false declines.  These false declines create several problems.  One is that it results in lost business. The value of false declines per year is estimated now as $118 billion. By any measure, hat is a huge amount of lost business.  
But it gets worse since once a person finds that their card is unreliable, they start to lose confidence in their card and to use other cards instead.  So this is a very competitive area for people to improve on. I saw a number of sites today that rehashed the Mastercard announcement about reducing credit cards declines.  What I didn't see is any analysis of whether this brings Mastercard up to par with Visa and Amex declines or whether it puts them ahead.

P-Cards or Procurement Cards for Schools


Pcard procurement card for schoolsProcurement by schools can be complicated and bureaucratic.  Enter the idea of streamlining purchasing for purchases under $5,000 with a purchasing card also known as a School PCard , School Procurement cards, or P-Card.The Educational PCard allows schools to purchase  goods and services  as part of a traditional purchase order system or through a streamlined system. In England,  purchasing cards are known as procurement cards. And trucks are lorries, cops are bobbies, and elevators are lifts but that's another story. Click to know more about UK vs US language and words.  I learned about school pcards from a leading educational vendor known as VocabularySpellingCity.  They are one of the national leaders with sales directly to teachers which is now being broadly adopted by schools and districts based on some adapting they made to the more advanced needs of principals and districts.  VocabularySpellingCity leads as an Supplementary ELA product for elementary schoolsAn alternative approach to giving money directly to schools is to use an advanced teacher level funds distribution and purchasing system such as ClassWallet. Another vendor that helped educate me on purchasing for schools is MyPrepWorks, a leading educational company specialized in test preparation systems for algebra EOC tests, high stakes standardized tests (SAT, ACT), and so on.[...]

EMV Cards | October 1, 2015 | Merchants Now Responsible for Fraud


I think we just crossed over a big change in the credit card world which I wish I more fully understood.  We're moving finally away from the weak security of credit cards with magnetic stripes and towards a pin and chip system.Traditionally, if someone buys something at a retailer with a fraudulent credit card,  the merchant  was in no way responsible for the loss. I guess the issuing bank was responsible for the losses.Also traditionally, in the US, our credit cards are based on a simple magnetic stripe on the back.  Even though the rest of the world has switched decades ago to a chip with pin system, the US has not.  It's one of the weird things about the US over the last 50 years.  While other countries have gone shooting ahead with innovations that improve the economy for everyone but require investment and some adjustment and some collective planning, the US seems a little too....something... to move forward. Lazy? Complacent? Disorganized? Examples... Time to go metric which is better for industry and education? England and India and Brazil and China can do it.  But not the US.Time to teach kids to read properly which means starting with the sounds (not the names) of letters? The UK and France have switched but we, being far more traditional, have not (yes, our rate of illiteracy is much higher than those two countries combined).Time to move to an all digital cellular phone system?  Most of the world made the switch about 10-15 years ahead of the US.Time to move from a ridiculously insecure system of credit cards where no pin is required and a fake card can easily be made since it's just a magnetic band on the back?  The rest of world did it decades ago but the US is only switching now and we're not really bothering with the pin part since it's a little inconvenient and it's hard for our highly competitive (with each other) credit card players to make the switch so we're only going to try adding a chip at this time.OK, I've had my rant, now back to a description of the new system.  Going forward, if a retailer only uses the magnetic stripe reader and hasn't upgraded to or started using the chip system, the retailer will take responsibility for the losses if the card is fraudulent.For merchants and financial institutions, the switch to EMV means adding new in-store technology and internal processing systems, and complying with new liability rules. For consumers, it means activating new cards and learning new payment processes.Most of all, it means greater protection against fraud. Quoted from which has a great article on the topic.  It continues to explain liability....Today, if an in-store transaction is conducted using a counterfeit, stolen or otherwise compromised card, consumer losses from that transaction fall back on the payment processor or issuing bank, depending on the card's terms and conditions.After an Oct. 1, 2015, deadline created by major U.S. credit card issuers MasterCard, Visa, Discover and American Express, the liability for card-present fraud will shift to whichever party is the least EMV-compliant in a fraudulent transaction.Consider the example of a financial institution that issues a chip card used at a merchant that has not changed its system to accept chip technology. This allows a counterfeit card to be successfully used."The cost of the fraud will fall back on the merchant," Ferenczi says.However, what the article does not cover and what I'm seeking to understand is what has changed for us Card Not Present merchants? In a separate article, says the problem of fraud for online transactions is going to get worse.  More quoting....Sophisticated online fraud ri[...]

American Express Replacing Card


Amex sent me an email today which had a "FRAUD MAYBE, click to get called" message. I clicked, checked that the link was a https one that ended with, then clicked. My phone rang. The lady said my name and asked if that was me. I affirmed it was. Then she ran through a list of charges, most of which were fraudulent. Then, and this is where it gets weird, she said that she wanted me to verify an address. I said OK. She asked what it was and I said that I wasn't going to give out my address or any other info over the phone.

Amex email fraud alert

I then realized that she was in a very loud space, not what I think of as an Amex teleservice center. I asked what office she was in and she said that she could not say. Any number that I can use to call you back?  No, what about the caller ID number. She said that might not work. I asked if there was any way to identify her and she said that I could have her agent ID:  CVGA18.  The caller ID was 800 924-9289.

At this point, I asked her to stay on hold and I pulled out another phone and called the number on the back. After several minutes of automated and eventually human efforts to identify me, they finally asked what I wanted.  "I'm trying to see if I'm being spoofed."

As it turns out, I was not. Amex has a policy of requiring the individual to give his address to the agent. They want it verified. Sound weird, they've billed me at that address a hundred times or so but their policy requires them to get me to give them my address, even when they called me, before they'll ship me a new card which is what they want to do.

I hate it when Amex and these other companies just have stupid policies. Doesn't this seem stupid?

Comcast are SOBs


I thought I'd share some of my frustration with Comcast with the world. I'm trying to drop some of the services on my Comcast bill. It cannot be done online. There's no way to do it. There are dozens of ways with a single click to increase the services but there is no way in the world that you can drop a service online. You have to call.

Here's the problem that I face. My Mom has passed on and the condo is in probate. Comcast bills us $250 each month, $150 for cable, $50 for internet, and $50 for stuff. Since we often stay in the condo, we want to keep the Internet but not the cable. They will not allow us to make the change.  They will not even allow us to cancel the bill without:
- proof of death. This I have, a death certificate
- lots of other paperwork
- a copy of a court-ordered document proving that the correspondent is the executor of the estate

I've now spent hours on the phone with Comcast with people who think it's absolutely reasonable that they bill us for another 6-12 months while we get our hands on "a copy of a court-ordered document proving that the correspondent is the executor of the estate"

Does anyone know what to do?

Recuring Monthly Billing Subscription Business Model


My business is a monthly subscription model known as recurring billing with the card not present and for an intangible good.

The core of my business is built on the idea that I have subscribers that I bill monthly, specifically, I hit their credit card. In exchange, they have the right to use my online educational service.  My rate is low, $20 per month.

The metrics on this business:

Bringing in Traffic to my site
SEO success which is SERP and traffic across many keywords and engines
PPC for paid search
Banner Advertising
Email advertising

Conversion Rates and PreSales Engagement
Total Traffic into the site
Traffic into my sales funnel
Traffic that gives an email, that confirms the subscription
Shopping cart abandons
Double or triple subscriptions, Annual Prepayment

Customers with no level of use or engagement - sleepers
Customers with a modest level of use and engagement
High levels of use and engagement
Add a child
Customers that evangelize and recruit: referrers
Credit card declines from expiration, funds not available, cancelled card

Customer Recovery at Quit

Customer Recovery post Quit

Credit Cards at Retail: Why not take pictures?


Credit Card Terminal
At Super Market
It's amazing that the credit card industry hasn't been totally wiped out of business by a more efficient approach. Everyone knows that credit cards are used for fraud all the time. Yes, somehow, the retail terminals still have us signing onto a screen.

How stupid is that?

Why don't they just require us to look into the screen and take our picture.  Then, if it turns out someone disputes the bill, they have photographic record of us staring into the amount.

Or, like my gym, when they slide the card, my picture comes up on their screen. If my face doesn't match the picture, they call the gym goons to come reshape my face.

Surely it's time for a better idea company, an Apple pay or Square or someone to come up with a card or system that has zero fraud and doesn't waste everyone's time with meaningless signatures?

Recurring Billing Business Models. And Who the heck is Recurly?


Click for a Summary of Subscription Recurring Business Model Metrics

I just followed some link to the recurly website. It's the first credit card processing company website that I've seen that looked like it belonged in this century!

And, check out this content marketing!  Want proper metrics for measuring customer churn?  Why, yes I do.  In fact, I'm delighted that somebody else out there even understands the question!!!

They seem to be backed by some slick first rate VCs.

 Board of Directors 

  • Dave Barrett Polaris Partners 
  • Shervin Ghaemmaghami Devonshire Partners
  •  Irfan Salim Independent 
  • Isaac Hall Recurly Co-Founder, 
  • Chairman Dan Burkhart Recurly CEO & Co-Founder 
 I wonder how much they know about credit card recycling?

How did we miss them when we were exploring all the credit card companies out there?

 But I'm not sure that I agree with their focus on doing the detailed curn rate based on man days. Is it the right place to start?

 I think the first metric to understand is the general pattern of quits. For instance, for January, with a company, there might be a 100 sign-ups. I'd first measure:- how any asked for their money back either directly or thru a charge-back. - how many paid a 2nd time - how many paid a 3rd time etc. Then I'd compare that with where the customers came from, other segmentation of the customer base, and what month they signed up in.

 This feels like it produces more actionable datat than the Recurly point of departure on analysis.

 Click for a Summary of Subscription Recurring Business Model Metrics

Merchant Account Contracts


OMG, the credit card processing industry is so messed up.  I'm tempted to go start my own and cut through the industry like a knife through butter.First, a little background, I run a ~$10M online business based on recurring monthly billing.  It's all about efficiency, effective handling of credit card data, and cost control. Also reliability. After a decade with one vendor that we have totally outgrown, we are finally switching vendors. After a few months of talking to vendors, we finally found one with great technology and prices for the handling of recurring card not present data.I'm ready to sign and they send over the contract. OMG!  So poorly written and one-sided that instead of signing, we are now going back to our candidates two through five to see what's going on.Our third favorite candidate immediately flew in (I'm going to see them this morning) and said: "You are a great merchant, we'll do whatever you want contractually."Meanwhile, the first choice company just sent me a revised version of the contract which still has:- a three year initial term during which there's no way out unless the processor messes up, gets notified in writing formally, and fails to address it within 60 days.  So they could stop answering the phone and  go down weekly and my business would be legally stuck with them for two months.  I don't think I'm going to sign that.- no clarity (despite my request) that the customer's credit card data is ours and is available upon request to move- not a single obligation by the processor to us that they'll remain compliant with all laws, stay solvent, safeguard data, do their best for us, etc etc But there's probably 1-2 pages of such certifications requested of us. Here's a for instance. They claim the right to see all of our financial statements upon request. Fair enough since they are underwriting. I told them in the conference call that this sort of thing needs to be clarified. For what purposes do they get to pull our data? Who gets to see it?  This will be confidential data etc etc.  Oops, it's not there!  Does this mean that other vendors agree to provide their financials but they do so with no if, ands or buts about it?- they did in the latest draft agree to freeze prices during the initial 3 years but they didn't agree after that to any prior notice period before changing prices.  They did say that in the long term if they change prices, we can complain in writing and if they fail to address or reprice within 60- days, we would be allowed to change vendors.- the agreement includes five specific references to processors "standard operating procedures."  Remember, this is a contract, not a conversation. I asked about getting a copy of the standard operating procedures. It turns out that these are not written down. I asked about the transparency of these procedures to an outsider and if there was any way that the Merchant could verify them or was it just: "whatever the Processor says it is."  Of course, it's a totally nebulous opaque concept. Yet they left it in the contract.  Who does that?Of course, I understand that mostly, contract don't matter. People and companies do what they want to and the contract is one of many pieces of the process and relationship so focusing on the contract too much is not smart business.  But still, my minimum requirements;- freedom to move if it's in our business interest- clarity on the cost and mechanism for us getting our credit card data- nothing weird in the rules that will come back to haunt us.[...]

Chips on the Cards, EMV, Shifting Liability


I'd like to thank Wikipedia for this info.What is EMV? EMV stands for Europay, MasterCard and Visa, a global standard for inter-operation of integrated circuit cards (IC cards or "chip cards") and IC card capable point of sale (POS) terminals and automated teller machines (ATMs), for authenticating credit and debit card transactions.What about EMV in Card Not Present Situations?  Visa and MasterCard have developed standards for using EMV cards in devices to support card-not-present transactions over the telephone and Internet. MasterCard has the Chip Authentication Program (CAP) for secure e-commerce. Its implementation is known as EMV-CAP and supports a number of modes. Visa has the Dynamic Password Authentication (DPA) scheme, which is their implementation of CAP using different default values.Why should I, an online merchant, care about EMV?  The supposed increased protection from fraud from EMV has allowed banks and credit card issuers to push through a 'liability shift' such that merchants are now liable  for any fraud that results from transactions on systems that are not EMV capable. This is true as 1 January 2005 in the EU region and it is supposedly coming to the US in "two years", ie 2016. (Note,  I don't have a source for this.)[...]

Credit Card Processing for Monthly Recurring Billing


We have used the same vendor for ten years and we are sick of him. He has never really helped us understand the industry,  how things work, or helped us with improving operations. Service is intermittent. Problems are frequent. There are three areas that we ought to be able to really improve our situation.1. Declines processing.  On any day, X% of our monthly subscribers are declined.  They are declined conceptually for a few reasons:A.  insufficient fundsB.  expired credit cardC.  updated credit card due to securityD.  credit card account closedOur vendors returns a few different pieces of information on the credit card declines:1.  Call a 1 800 number to get the sale approved. The number is our own credit card processor who then gives us a phone number and the credit card number so that we can get a voice authorization. This is time consuming and results nine times out of ten in a failure.2.  Invalid account number. Does this cover B, C, & D?3.  Expired.4.  Declined. This is the vast majority but they do come with a code: 0700540009  (BTW, if you google that code you get a fair number of people asking about what that decline code means).Our traditional system of handling declines is to try again every ten days:D1 - The first decline. We ignore it.D2 - Second decline. If they are an active user, we send them an emailD3 - Third decline. If they are an active user, we send them an email and turn off their account with a messageD4 - If they are an active user, we send them an email and turn off their account with a message.Also, we notify those with credit cards that are going to decline in the next 60 days that they need to update their credit card.Recently, we've tried some robocalling to notify our users about declines and that has been surprisingly successful.  No numbers yet. We used to try to call ourselves and never found a way for it to be effective.Questions - Ideally by A, B, C, & D above...1.  Overall percent of D1s of billings?2.  Overall number of D1s that become D2s?3.  Overall number of D2s that become D3s?4.  Overall number of D3s that become D4s?5.   Credit card updates by users because we notify them that their credit card is expiring?6.  Percent of each type of decline that our vendor returns to us?7.  Updates between D2/D3, D3/D4?Overall, our real questions are:- What's the best method for avoiding declines with updaters and submission of AVS data and whatever.- Once declined, how best to proceed in terms of trying again, contacting user, using technology to update?BTW, all of this is focused on recurring billing cancellation, what about initial cancellations?2. Costs. We are still in a system of tiered pricing which is confusing. There are costs and credits. Overall, we are paying ~4% to the gateway, processor, and credit card vendors. A lot!  Just getting this down by a percent will save us a lot of money per year.3.  Reliability and reports. Compliance too.[...]

Card Not Present Expo


The Card Not Present Expo is coming up and is conveniently located for us. Also, it's a hot topic. Nevertheless, the agenda seems a little too deep for me, the part that I'm interested in is the three hour bootcamp which is 2-5pm,  Monday, May 19th, $648 for the whole four day expo. It's in Orlando.  I wonder if there is a price just for the Boot Camp?Intro: What Every CNP Merchant Should Know: Navigating Today's Challenging Payments Eco-SystemThe State of The Payments Union; 2014 Threats UpdateEffective Payment Processing; Getting Set Up For SuccessProtecting Your Sales Process From Fraud; Pre-Sales Trends and ToolsPost-Sale Challenges/Considerations; Effective Chargeback ManagementMaximizing Your Billing and Customer Retention EffortsMobile and Emerging PaymentsThe CNP Boot Camp has been specially programmed for attendees to learn as much as possible—as quickly as possible—about accepting card-not-present transactions and the complex issues surrounding them. The Boot Camp was developed in response to feedback from merchants and industry executives and will provide campers a knowledge base enabling them to optimize their timeand get the most they can out of the rest of the Expo.The Next Step: Profit from New Markets and New RealitiesEvolving business models: ISO to PSPExpanding from the US to global marketsLanding in Europe: a regulatory approachFraud challenges for international expansionMobile Payments: business models around the worldNavigating Alternative Payments in three dimensionsBased on the phenomenal success last year of our Boot Camp workshop, this year we are serving the other end of the spectrum. We will be offering a Grad School program, designed for veteran payments professionals, that will offer a more sophisticated look at the issues under debate in CNP payments and what challenges and opportunities lie ahead. This session will be will be offered free of charge to all registered attendees, and will run simultaneously with the Boot Camp Workshop.[...]

Merchant Account Credit Card Consulting


We have searched around for a number of years to improve our credit card processing and so far, haven't been able to make a decision. Our problems:

  • Our current processor works, we have ten people trained on using it, it's integrated with us technically and in our accounting system. As a small company, it seems like an overwhelming project to change processors
  • The costs are bad but whose to say how bad? Overall, Visa/MC/ processing add up to around 3.9% of revenue with the average transaction at ~$24 on over $5M of business.  Will they definitely go down if we switch?
  • Sometimes, our current processor does something good about fixing a problem or providing us info so we like him.
  • Other vendors sound like they are full of it saying all sorts of silly things about reduced costs (which they won't guarantee) and pooh pooing how difficult it will be to switch.
So we've finally made a decision. We've decided to hire a consultant to help us figure out what to do. Enter Paul Larsen consulting. We might work with Mr. John Sullivan. Stay tuned....

TRUNCATION and other Merchant Account Info you should know


Here's some terms related to merchant accounts and credit card processing that I should know about:

TRUNCATION - When only some digits of a customer's card number appear on a sales draft or receipt to  provide better security while still enabling  identification (for the cardholder) of the card used;  it’s required by federal law (since 2006) that no more than the last five digits of a card may be shown on a receipt.

TOKENIZATION - Replacement of sensitive data with a unique identifier that cannot be reversed mathematically;  commonly used in payments to replace card data.

ADDRESS VERIFICATION SERVICE (AVS)  - The process of validating a cardholder’s given  address against the issuer’s records to determine accuracy and deter fraud; a code is returned with the authorization result that indicates the accuracy of the address match 

These are samples from Litle & Co's Payment Dictionary which is available as a free download. Very cool. Thanks Litle!

Paypal as a Merchant Account Vendor: PCI Compliance & Chargebacks


I received an email from Paypal, who we use as a merchant account vendor, about how to avoid Chargebacks. It's a pretty good resource. I've excerpted a bit below.In contrast, they've never contacted me about PCI compliance which I think is amazing. I've always believed that PCI compliance is required for everyone who takes credit cards.  I would count as a tier 3 vendor since I don't store any credit cards and my only obligation to be PCI compliant is to:- ensure my merchant account is PCI compliant- have my site checked by an authorized reviewer annually that it is clean and strong so that when we pass the credit card numbers, there's not problem. But I think they, as my merchant account vendor, are obliged to make sure that I am aware of these issues and in compliance.What's a Chargeback?Fighting ChargebacksAvoiding ChargebacksChargeback FraudA chargeback, also known as a reversal, is when a buyer asks their credit card issuer to reverse a transaction after it has been completed. It is available only to users who make a payment funded by their credit or debit card.There are three main reasons a buyer will do this:The purchased item never arrived.The item was significantly different than advertised.Their credit card was used without their permission to purchase the item fraudulently.Chargebacks are initiated and handled by the buyer's credit card issuer - not by PayPal - and therefore will follow that company's regulations and timeframes. That said, PayPal often plays a role in resolving chargeback disputes.[...]