Your E*Commerce needs versus Paypal - By Avi Jorisch

Considering taking payments online through your website? One of the most popular questions we get when a merchant starts thinking about going down this path is whether to use Paypal, or partner with an e*commerce provider and an integrated merchant account. While Paypal is a good choice for a certain class of merchants - e.g. those who do extremely small monthly volume, or who will not authorize credit cards for many months - it is not always the best choice for most businesses. By choosing a different provider, you will likely experience better pricing, fewer issues and perhaps even receive more online payments than you would otherwise.

Here are five reasons to choose a different e*commerce provider other than Paypal:

1.     Quicker Money Transfers

When you use an e*commerce provider integrated with your merchant processor, money will be deposited into your bank account much faster, often the next business day. When you use Paypal, money is transferred to your Paypal account and ultimately needs to be moved to your bank. This naturally slows down the process of getting your money. There are numerous reported incidents of Paypal freezing accounts and ultimately not allowing merchants to access their funds, to say nothing of them making a few extra bucks because of your float.

2.     Branding

Maintaining a strong brand is critical for most businesses. Paypal does not allow you to have control over how your payment page looks. Clients are directed to Paypal’s site in order to remit payment, giving their brand the biggest exposure. When you use a merchant account from an e*commerce company you can design the payment page to match your website and brand.

3. Customer Comfort

Some consumers are still leery of entering in their credit card information online. As described in the previous bullet, because clients are directed to a web page other than your own to make payment, certain clients may not choose to pay immediately or call you for a different option. When a payment page matches your website, clients will have an added level of comfort that your company is handling their transactions. If there are any issues, don’t you want to be the first to know? Ultimately, the buck stops with your business and you want to make sure you are in control.

4. Better Customer Service

While Payal is a great company, a quick Google search demonstrates that they get mixed reviews for their customer service. By choosing an e*commerce provider integrated to your merchant processor they are incentivized to help you every step along the way. Ultimately you know you are well serviced if you have your merchant provider’s cell number, as opposed to an 800 number.

5. Additional Services

If you have chosen your merchant provider wisely, they should also be able to help you with adding other services as your company grows – including effective mobile and email marketing strategies, web content management and fraud prevention.

Paypal may be among the first options that come up when you consider taking online payments – they definitely did a tremendous job when it came to branding – but it is not necessarily the best choice for your business. Take the time to do your homework and request proposals from companies other than Paypal. You will likely be nicely surprised at the differences when it comes to pricing and customer support. 

Ready or Not here comes EMV Technology - By Avi Jorisch

The credit industry is about to undergo a sea change when it comes to credit card acceptance – in the not too distant future, credit card terminals of all kinds will need to significantly increase their security functionality. Terminals, mobile devices, pin pads and short-wave wireless devices are preparing to integrate EMV chip technology. Every merchant that accepts credit cards will ultimately need to upgrade their hardware and software to meet these changes or face a significant increase in the rates they are charged for credit card acceptance.

EMV technology is a joint effort by Europay, Mastercard and Visa to standardize the way in which payment processing is conducted around globe. While most countries have already made the migration, the United States has been a slow moving giant. EMV will ultimately replace the magnetic stripes on all credit and debit cards, by inserting an electronic chip to ensure transactions are conducted using cryptography and digital signatures.

The migration to EMV technology in the United States is taking place primarily for two reasons: First, the use of magnetic stripe cards has traditionally engendered significant fraud. The more merchants move towards contactless or mobile processing, the increased need for security. And secondly, US credit cards are increasingly not accepted abroad – devices that accept EMV technology do not have the ability to read magnetic stripe cards – necessitating a change in the way we do business.

The industry has been making significant strides in regards to EMV since 2012. In October of that year, there was PCI audit relief given to merchants that processed at least 75% of their transaction on an EMV device. In April of 2013, all credit card processors were required to support merchants that accept EMV transactions. Additionally, Visa and Mastercard have informed the industry that merchants that do not adopt EMV terminals by October 2015 will face increased rates to penalize those hindering the implementation of EMV technology.  Ofcourse, as we get closer to this date, like all deadlines it might get pushed further back.

Exactly how the implementation will look and the exact timing remains unclear. But one thing is certain, EMV bank card processing is on its way and will impact every merchant accepting credit cards.

Alleged Deceptive Practices by one of the Industry’s largest Credit Card Processor - By Avi Jorisch

In January 2014, two of the industry’s largest credit card processors, Heartland Payment Systems and Mercury, began a heated battle in federal court. The issue at hand is the underlying problem most people who accept credit cards know in their gut; there are processors who engage in deceptive practices and regularly up-mark their fees. Merchants who process their cards through one of these two companies, or even through a different provider, might consider paying close attention to the case and check with a trusted source whether they are victims of what industry calls “grey charges”.

Heartland contends that Mercury is engaging in false advertising, unfair competition, deceptive trade practices and taking straight interchange fees and adding a couple of pennies to each authorization. Who cares about a few pennies? A few pennies multiplied over millions of transactions have a way of adding up.  In particular, the issue at hand is that there are unethical processors in the industry who deceptively hide its excess profits in the interchange fees charged by the credit card associations and the issuing banks.

Most merchants accepting credit cards have no idea of the type of plan they have, or whether their processor.  If a merchant is on a straight interchange pass-through plus plan (the most competitive plan in the industry), they should check certain fees on their statement to make sure they are legitimate. For example, Visa’s acquirer processor (APF) and MasterCard’s access and brand usage (NABU) fees are both less than two (2) cents per transaction – Heartland is contending that Mercury sometimes charges customers up to nearly six (6) cents per transaction without informing them of the markup. These types of activities are why the credit card industry and its processors often have a bad reputation.

As a first step, merchants should check with a trusted source whether they are in fact on an interchange pass through pricing plan – the only transparent plan of the five available on the market – and if so, whether the standard fees are not being marked up. The answer to either question might yield some surprises that if dealt with correctly can yield tremendous results towards the fiscal bottom line. 

Do You have your Processors Personal Cellphone or are you still calling an 800 number? By Avi Jorisch

While merchant processing fees are generally at the top of the list of why one processor is chosen over another, there is another factor businesses should consider when deciding who their provider ought to be. If you have taken credit cards for any length of time, you know that eventually one issue or another will arise and you will need your processor to deal with it as quickly as possible. This might include a chargeback, a sale that doesn’t go through, an issue batching out, funds don’t deposit correctly in your account, etc. This is where the rubber meets the road for merchant processing.

Naturally, most processors only have toll-free 800 numbers for their clients to call in the event they need to reach them. But isn’t there a better way to get a higher level of service?

It is critical that when a merchant is processing credit cards, they be able to reach a live human being immediately – you never know when problems arise. That shouldn’t mean calling an 800 number with options galore, and only after waiting on hold for an indeterminate amount of time can you actually speak to a representative that may or may not be in a position to be of service.

How many of you have your processor’s personal cellphone number to contact in the event things go awry?  Probably very few. The next time you call customer support, consider asking the person on the other end of the line to give you their cellphone number. If they don’t provide it, you may wish to reconsider who you process your credit cards with. By knowing who your personal representative is, and having their personal digits, not only can they help you solve problems in a flash, you have the ability to check your rates and ultimately be afforded with the highest level of service.

Credit Card Surcharging – Ramifications of Passing on Fees to Consumers - By Avi Jorisch

Beginning in January 2014, merchants are now allowed to add an extra surcharge to their credit card transactions and pass on additional fees to their clients. While appealing in theory, merchants should be fully aware of all the rules and regulations – and the potential downsides - before they pass on added fees. 

The process to allow merchants to pass on what has been called the ‘checkout fee’ began in November 2012, when the US District Court for the Eastern District of New York approved a settlement with MasterCard and Visa. The settlement has now allowed merchant to charge up to 4% of their fees in order to cover processing costs.

But the downside of passing on this type of surcharge, while not entirely obvious at first becomes clear after reading the rules and considering the ramifications. Above all, customers may decide to go elsewhere if they feel they are paying more to use a credit card.  Additionally, industry studies show that when consumers use a credit card they actually spend more money, not less. And finally, if your business operates in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma or Texas, these states have imposed surcharging restrictions.

** For a complete list of rules and regulations visit Visa and MasterCard’s webpages.

For those merchants who do not wish to slog through the rules, below is a summary of what you should know:

1)    As a first step, you must inform both Visa and MasterCard that you intend to surcharge your clients 30 days before you commence. This is done on the card association’s websites;

2)    Surcharges may not exceed 4% of the total charge;

3)    Brick and Mortar locations must disclose that they engage in surcharging both at the entry of their location and at the point of sale. In addition, the final surcharge must be broken out and identified separately on the receipt;

4)    Ecommerce merchants have an obligation to let their consumers know that they are surcharging on pages that references credit card brands (e.g. Visa, MasterCard, American Express, Discover, etc.);

5)    Surcharges may not be added to any debit or prepaid cards.

Ultimately a merchant should use their best judgment if they chose to surcharge. There is naturally an upside and a downside. The good: merchants can recapture a good chunk of their processing fees. The bad: clients may chose to do their business elsewhere. And perhaps more importantly, if you merchants don’t follow the rules perfectly they could face a world of pain with the associations.

For those who choose to surcharge, they will in all likelihood wish to engage legal counsel to walk them through all the necessary steps. 

A Smarter way for Merchants to use Quickbooks AND Merchant Processing

This past August, I wrote about the merchant services program offered by Quickbooks – many merchants are currently utilizing the Intuit/Quickbooks merchant services module to process their credit cards. As I pointed out at the time, Quickbooks is (somewhat) convenient but you end up paying through the nose for their service. With that said, there are a few products on the market that allows you to both store all the credit card information on Quickbooks BUT use an outside gateway that allows you to use any processor you choose.

Quickbooks exclusively utilizes the tiered pricing program - as outlined in May’s blog, any merchant on a tiered pricing plan is simply paying WAY too much for credit and debit card acceptance – period!

Quickbook’s & Plugins

There are a number of plugins on the market that allow merchants to Quickbooks, but chose a merchant processor of your choice (other than the Intuit/Quickbooks program). Plugins integrate with Quickbooks desktop and their POS version – the only version thus far that doesn’t allow for integration with anything but Quickbooks is their online version.

·      Positives of using a plugin: works nicely with existing accounting software; no additional entry needed in to Quickbooks register; chose processor of your choice, and (hopefully) secure an interchange pass-through program that allows you to take advantage of all the legislative changes to take place over the last few years

o   Interchange plus is the term used to describe the wholesale rates charged by the credit card associations (Visa®, MasterCard® and Discover®). With over 150 credit cards in the market today, each of them correlates to a slightly different interchange rate.  As the name implies, Interchange plus pricing works by applying a fixed markup fee to the wholesale interchange rates from Visa, MasterCard or Discover cards. This includes two basic fees: one is often expressed in basis points (i.e. bps) and the other is an authorization fee (i.e. every time a business authorizes a credit card).

·      Negatives: None

Bottom line, for those merchants that are utilizing Quickbooks, a transition to more cost effective pricing is easier than ever. Just remember to chose your merchant provider with care.

Devising a Strategy for Chargebacks! - By Avi Jorisch

We all know that as consumers we have the right to dispute a charge on our credit card bills. This is one of the biggest risks in the industry to the issuing banks and subsequently to those authorizing credit cards. Each business authorizing cards should adopt a strategy to deal with this issue so that they reduce their risk exposure.

Here are some helpful hints to help you avoid and fight chargebacks.

1.     Maintain an easy to use database of all your credit card transactions. When it comes time to fight a chargeback, the quicker and easier you can access the information the more likely you will be to better fight the dispute and win. At the same time, you need to take a variety of measures to secure this information as described in the Security section.

2.     The more information that is on the receipt-specific items purchased, signature, return policy and address and phone number for location the better your chances of defeating the chargeback inquiry.

3.      When you receive a chargeback against your account you will receive a description and explanation for the reason you lost the charge. Examine the reason given, learn from it, find out what was done wrong or missing that caused you to lose the charge and use this to prevent losing another charge for the same reason in the future.

The process begins with a retrieval request to the Merchant. If you receive a retrieval request, it is in your best interest to respond to it as quickly as possible. While a cardholder has 60 days from the day it receives its statement, the Issuing Bank has 120 days or more after the transaction date to file a dispute with the Merchant.

Failing to respond to a retrieval request will result in the transaction being “charged back” and you will not only lose the funds from that transaction, but also have to worry about the status of your Merchant Account. Each card brand has its own guidelines regarding the Merchant’s dispute process for a chargeback. The typical process is rather involved and may be escalated to a point of arbitration.

Chargebacks place an additional burden on the Merchant Bank and Issuing Bank, and since the Banks make a very low profit on each individual transaction, any deviation from the normal processing cycle digs into the profit margin substantially.

Chargebacks are also a burden to the Merchant receiving the complaint. Merchant’s must take time away from their normal business day to research records and pull together information to substantiate a transaction and keep the money they earned for a good or service they have already provided.

Disputes can cause a Merchant to have their Discount Rate increased, be subject to additional fees or even lose their Merchant Account. If the amount of chargeback(s) for a Merchant exceeds 1% of one month’s sales volume, the Merchant may be considered as having excessive chargebacks. Excessive cardholder disputes, just a person filing a complaint whether upheld or not, count as a negative against a Merchant Account.

The Merchant Services Provider may then deem the Merchant to be a high-risk and increase the fees that it charges the Merchant. There may even be a required deposit made to “guarantee” funds, as well as a hold placed on transactions prior to them being funded to the Merchant’s Account. Merchants with excessive chargebacks may have their Merchant Account terminated and placed on the MATCH (Member Alert to Control High-Risk) listing.

Issuing a credit works in much the same manner as a chargeback, only it is initiated by the Merchant. When a Merchant returns money from a prior purchase transaction to the cardholder, this is considered a credit. Because of the involvement of moving funds in the opposite direction of a regular transaction, this creates a burden on the involved financial institutions.

Dealing with chargebacks is not only difficult but can significantly hamper a business’ ability to secure competitive merchant processing rates. Treating your clients in a fair and transparent manner will solve most issues, but from time to time you will encounter clients where nothing can satisfy them. In such instances, the business will need to decide whether to “take the hit” and issue a credit or deal with the consequences of a chargeback. Unfortunately, this is just part of the cost of doing business. 

Don’t be that Merchant: Get your Merchant Discount - By Avi Jorisch

In 2010 the merchant services industry experienced a watershed. In an effort to help consumers pay less for merchant services, U.S. congress sent a proverbial shot across the bow when it issued the Durbin Amendment of the Dodd Frank Wall Street Reform and Consumer Act. Above all, this piece of legislation lowered the interchange rates charged for specific categories of credit cards. For example, debit cards, starting 1 October 2011, were now to have an interchange rate of .05% and $0.22/authorization.

What most Member of Congress and merchants fail to understand, however, is that the Durban amendment does not actually guarantee lower rates. A merchant only benefits from the legislation if they are on the right type of plan. Unfortunately, processors in general tend to pocket the lower interchange rates for themselves and fail to pass on the savings to their clients.

The Merchant Services Industry

The credit card business is very similar to the auto industry. Car manufacturers like Ford/Honda/BMW all build their cars and promote their brand – but ultimately, it is a dealership that actually sells the vehicles for whatever they can sell the car for. Prices, therefore, tend to fluctuate significantly from dealership to dealership because some are more honest than others. When you go onto the lot, the car manufacturer has already been paid and the dealership now makes anything above their cost. The merchant services business is similar. But if a merchant is savvy, they peg their processing costs to the wholesale rates charged by the associations and add a fixed rate (generally in basis points) that goes to the processer.

Know What to Ask For

Merchants that do a quick search will quickly find themselves overloaded with information on the Durbin amendment. Some processors will give their clients the discount due to them, others will proceed in a less than honest fashion. Sadly, many processors will promise their clients interchange pass through pricing (the most competitive plan on the market) but the actual contract doesn’t deliver on their promises. If you see anywhere on your contract – or if are already processing credit cards, review your statements - the word “qualified” beware! It means that all cards will be charged at that rate PLUS additional downgrades on each additional cards that are not qualified. What most merchants don’t understand is that 80% of cards on the market do not fall into the “qualified” category! Merchants on this plan are on tiered pricing and will not reap the savings of the Durbin Amendment.

So for example, as stated above a debit card transaction has an interchange rate of 05% and $0.22/authorization. On a qualified pricing plan where the rate is 1.65%  the processor has actually walked way 1.6% in processing margin – which is huge!

In order to ensure you are on the right type of plan, merchants should do an analysis. Doing so guarantees you are on the most transparent plan on the market and reaping the discount.