Vantage ViewPoint

Hiding in the Price

Ty Hardison — Sat, 07 Nov 2009 04:07:41 -0600

As you know I follow the debate on the merchant fee called Interchange. Interchange is the largest component of the discount rate paid by merchants when accepting a credit card payment. There are strong lobby efforts by merchant associations and according to House Judiciary Committee Chairman John Conyers Jr. (D-Mich.), for each consumer payment card purchase--at the mall, at the grocery store, at a gas station or on the Internet--the merchant is charged a fee and these fees are ultimately passed on to all consumers in the form of higher prices for goods and services.

The concept that Conyers exposes is that of embedded costs which are hidden but are ultimately borne by the consumer.

What’s crazy to me is that while so many seem to get this concept in the context of Interchange (including the Democrat from Michigan), few understand or even care about the huge problem of embedded and hidden costs created by our current tax system. Harvard economist Dale Jorgenson added up the entire FICA payroll tax cost, as well as business income taxes paid and compliance costs, and found that the production costs of domestic goods and services could decrease by approximately 22 percent on average after embedded tax costs are removed. That’s a 22% embedded hidden cost ultimately passed on to all consumers in the form of higher prices, yet the less than 2% Interchange fee has a strong merchant lobby.

This is not an argument for or against Interchange. It is a statement about hidden tax and the tax compliance costs (on top of all the other taxes Americans pay each year) that garners very little attention. Why? Particularly given the consequences to our economy and our competitiveness in the world.

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Vantage Points adds Reward Partners

Ty Hardison — Mon, 02 Nov 2009 11:58:22 -0600

Vantage Card Services’ seven year old Vantage Points merchant loyalty rewards program is pleased to welcome New Vantage Points Rewards Partners just in time for the Holidays!

Disney
Overstock
Sam's Club
Walmart
Zappos
Nike
Visa
American Express
Avis
Dell Computer
Golf Smith
Jiffy Lube
Pet Smart
Harry & David
and many, many more...

Vantage Card Services was recently recognized in a leading payment industry trade magazine for it’s Vantage Points merchant rewards program as an example of a customer retention focused organization. Merchants earn Vantage Points accepting MasterCard, Visa and Discover and redeem their points for rewards from nearly 200 distinguished program partners.

This one-of-a-kind program is simple to participate in and is specifically designed to thank merchants for their business and keep the lines of communication open. Unlike others who lock you into long-term contracts and early termination fees, Vantage offers incentives to turn to us first. As you payment partner and advocate, we want to hear from you on how we can help, improve and become your vendor of the year, every year. Our goal is to earn your continued business daily and earn your merchant services provider recommendation.

Through the Vantage Points program, Vantage Card Services has raised thousands of dollars in support of the Atlanta Community Food Bank. A portion of the value of each award is donated to charity. The percentage next to each award indicates the amount to be donated.

Offering unique programs you can't find elsewhere, Vantage adds value beyond what's available with your standard merchant account provider. If you are not earning rewards accepting cards, consider a move to Vantage. Get an online rate quote now at http://merchantrates.com.

The Home Depot® is a registered trademark of Homer TLC, Inc. Vantage Card Services, Inc. is not affiliated with The Home Depot®.

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Vantage… Wayback

Ty Hardison — Mon, 02 Nov 2009 09:13:00 -0600

Have you ever used the Wayback Machine?

The Wayback Machine allows users to browse through over 150 billion web pages archived from 1996 to just a few months ago. I used it to craft this brief history of Vantage.

We launched our first web presence as far back as the end of 1997 but the first archive I find is a view from October 1999. That’s a decade ago and just months before the dot-com bubble crash. If I recall, we used Microsoft FrontPage to develop these early versions (we still do all our web development in house today):
http://web.archive.org/web/19991004142744/http://www.vantagecard.com/.

And while our site has grown, our messaging hasn’t really changed. In the first paragraph on the October 2000 home page we begin to push the concept of “Interchange qualification management” (seriously who else was talking with merchants about managing Interchange back in 2000?!):
http://web.archive.org/web/20001023133448/http://www.vantagecard.com/.

We started to board our first Level 3 merchant accounts in 2000 and by October we had Level 3 commercial card processing featured on our web site:
http://web.archive.org/web/20010302100308/www.vantagecard.com/Level3.html

The same things we were warning merchants about in October 2000 are unfortunately still things merchant must watch for in our industry today:
http://web.archive.org/web/20001012233531/www.vantagecard.com/faq.htm.

The mood of the nation was very patriotic right after September 11, 2001 as you can see from this Wayback view: http://web.archive.org/web/20010923125210/http:/vantagecard.com/. On this 2001 home page we warn merchants about long-term contracts and cancellation fees.

By May 2003, the Vantage Points merchant loyalty rewards program had its own landing page:
http://web.archive.org/web/20030601211729/vantagecard.com/html/right_vantagepoints.htm.

In December 2003, over 2 years after September 11, we were still flying the American flag. And we were still working to provide “Merchant Negotiating Tips” and “Important Alerts” of what pitfalls to avoid:
http://web.archive.org/web/20031226085735/http:/www.vantagecard.com/.

Talk about consistency, by February 2004 the format of site began to take shape as what you will recognize today over 5 years later: http://web.archive.org/web/20040208154611/http:/www.vantagecard.com/. Are we getting boring yet, with the same old message about watching contract terms that we are still harping on to this day: http://web.archive.org/web/20040204191618/www.vantagecard.com/terms/default.asp?tl=3&sl=0

In April 2004, on the home page under News Alerts, we feature “April Interchange & Trends” were we encourage readers to learn more about credit card processing Interchange rates:
http://web.archive.org/web/20040525100450/http://www.vantagecard.com/.
We’ve been tracking Interchange changes from this link ever since.

Fast forward 5 years to 2009 and you find a world were a Google search on “merchant services” turns up 21,200,000 results in just 0.19 seconds (that’s over 21 million results!).

Looking at the marketing of many of these companies, you may get a glimpse of the positive influence Vantage has had on the payments industry. As the saying goes we’ve been preaching “Interchange and Month-to-Month contracts” when “Interchange and Month-to-Month contracts” wasn’t cool. And we are still waiting for another provider to copy our Vantage Points merchant rewards program, now in its 7th year.

If you are looking for a solid leader as a payment processing partner, look no further than Vantage. Or take a look back. We’ve been advocating for you the entire time.

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Fed to consider National Data Breach Law

Ty Hardison — Mon, 02 Nov 2009 04:44:31 -0600

According to a Bank Info Security article, House hearings may start later this year or in early 2010 to address the increasing problem of data breaches. According to the Identity Theft Resource Center report, 407 breaches and nearly 220.6 million records have been exposed so far in 2009.

The current environment seems to be more government regulation on things than less. The purpose of hearings is to discuss the way data is retrieved, transmitted, intercepted and stored and to see how government can regulate aspects of IT -- including companies involved in finance, health, welfare and safety.

However, before the federal government tries to regulate how the private sector handles and stores data, Congress should consider updating the 7-year-old Federal Information Security Management Act that regulates how the federal government secures its data and systems.

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Visa moving to chip and PIN in Australia

Ty Hardison — Mon, 02 Nov 2009 03:43:35 -0600

Visa Australia announced it was moving to chip and PIN technology for all of its credit cards, with signature transactions to be banned by April 2013.

Visa's move to kill signature-based mag-stripe transactions by 2013 will require financial institutions and retailers to upgrade over 14 million visa cards, half a million point of sale terminals, and thousands of ATMs.

While fraud in Australia remains low by world standards, this aggressive rollout of new technologies will strengthen security reducing counterfeit, skimming and online card fraud.

Is the U.S. next?

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Keys to a Level 3 Merchant Account

Ty Hardison — Sat, 31 Oct 2009 10:45:00 -0600

Accepting Commercial Cards

Commercial credit cards are being used to replace inefficient and expensive paper purchase order processes by businesses, corporations and government agencies with payments estimated to reach $185 Billion by 2010. Accepting commercial credit cards like Corporate, Business, Purchasing and GSA cards are an important component of a company’s payment policies. Optimize your commercial card acceptance with a Level 3 merchant account.

Keys to a Level 3 Merchant Account

Insist on an Interchange pricing structure
Interchange is the largest cost component of delivering merchant services and for merchants accepting commercial cards, eliminating non-qualified surcharges are especially important. Direct Interchange pass through pricing is the most transparent method and positions you to qualify for all the incentives rates available such as Purchasing Large Ticket, GSA Purchasing and Visa B2B incentive rates for select industry categories.
Use Level 3 Payment Technology
To submit the data needed to get the best rates, Level 3 payment processing technology must be used. Standard credit card terminals and B2Consumer payment software are not capable of supporting Level 3. We recommend the benefits of Software as a Service that can be accessed through a secure web application. With evolving Level 3 requirements, virtual software is always the most updated version and multiple users can access the service on any computer with Internet access without the challenges of traditional software licensing, installation, networking, security and upgrade management issues.
Secure Card Data
Securely storing card holder data is critically important today. The best practice is to avoid having card data stored on local PCs or servers. For greater efficiency and customer service, companies often store card data on repeat customers. Securely storing card data offsite using a secure, Payment Card Industry Data Security Standard (PCI) compliant Level 3 technology can greatly reduce the risk of a data compromise.
Select an experienced Level 3 merchant services partner
Providing Level 3 processing solutions means managing Interchange rates and qualification criteria for commercial MasterCard and Visa card payments. The reality is that most businesses accepting commercial cards from their buyers are NOT qualifying for the BEST available rates because their merchant account is not set up or registered properly.

Find out more at http://vantageB2B.com.

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PIN Debit Punishment Pushed Back

Ty Hardison — Sat, 17 Oct 2009 07:26:13 -0600

Visa and MasterCard set a mandate effective July 1, 2010 to ensure that all installed PIN pads are using the most up to date triple data encryption standard (3DES) for processing PIN debit transactions. In an effort to enforce this mandate, fines were slated to be imposed on those deemed out of compliance. While technically, the July 2010 deadline is still in place, the threat of punishment has been pushed back. The new policy isn’t threatening fines until Aug. 1, 2012, however Vantage will continue working with our clients to ensure compliance by July 2010.

The most interesting part of the article as reported on StorefrontBacktalk was that several of the nation's largest chains were threatening to abruptly cut off PIN debit at the deadline, possibly switching to signature debit to temporarily sidestep the issue. One organization that had been pushing the change, the National Association of Convenience Stores (NACS), said their analysis of card costs has shown that signature debit (check card) is now the same cost as PIN debit but without the cost of having to upgrade PIN pads.

As we discuss back in a June 2008 blog post, PIN Debit Requires Analysis, its not just automatic that a PIN transaction is less expensive that a check card transaction. It really depends on the sale transaction size. The larger the transaction the greater the possible savings from PIN but there is a breakeven and PIN can cost more on low dollar sales, especially when considering PIN pad hardware, encryption, maintenance, staff training and financial statement reconciliation. We also discussed the trend of rising cost of PIN acceptance. Back then when Interlink, the largest PIN debit network, removed the max fee caps, we predicted that it would put further pressure on all networks to follow suit to remain competitive.

Gray Taylor, payments consultant to NACS, said “We are concerned that PIN debit interchange—which has risen an average of 15 percent on a compounded basis since 1996—will price itself out of our market, and shift significant transaction share to Visa and MasterCard while eliminating access to new payment card concepts that bring competition to the card payment market. Of course, if the Maestro PIN debit interchange hike—78 percent—is any indication, EFT networks will price themselves out of our market without the TDES mandate.”

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US Financial Transactions Exceed 100 Billion in 2009

Ty Hardison — Sat, 17 Oct 2009 05:40:17 -0600

As reported by BUSINESS WIRE -- For the first time in US history, the number of consumer and business transactions including checks and electronic transactions for debit cards, credit cards and automatic payments will exceed 100 billion by the end of 2009, according to Moebs Services.

Type of 100B Transactions in 2009:

Debit card transactions, 33 percent
Paper checks, 24 percent
Credit card transactions, 23 percent
Automatic Payments (ACH), 20 percent

Mike Moebs, CEO provides noteworthy analysis:

Based on current transactions, our projections show that debit cards and automatic payments are taking over at an increasingly rapid rate from the traditional checking account for most Americans
Over the past 30 years, paper check usage has dropped from 85 percent of all transactions to less than 25 percent this year
Credit card usage while increasing in an absolute sense is falling as a percentage of total transactions after rising for 25 years
The projected 100 billion transactions do not represent an increase in US consumer spending, which began declining in 2008 and is still not back on track as we approach year-end
This research indicates that consumers are doing significantly more transactions for significantly fewer dollars than in the past. This may be due to easy electronic payment methods replacing cash

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An Inconvenient Tax

Ty Hardison — Mon, 12 Oct 2009 08:33:16 -0600

An Inconvenient Tax - Official Trailer from Life Is My Movie Entertainment on Vimeo.

An Inconvenient Tax sheds light on one of America’s messiest problems — a fundamentally broken tax code that affects every part of people’s lives. With the U.S. Congress making over 16,000 changes to the tax code in the last two decades alone, many Americans want something better, but few know where to start. This feature-length documentary film reveals the many ways Congress uses the tax code to achieve political goals that have nothing to do with raising revenue. It also tackles the controversial issue of tax reform through a non-partisan presentation of U.S. tax history and current proposals to fix the code. In a time when America faces fiscal crisis, An Inconvenient Tax brings a crucial exploration of the tax code to the big screen.

To be competitive in the next century and to renew the American dream, we must change the way we fund our national government. I support the FairTax.

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More Intelligent Merchant Rates

Ty Hardison — Mon, 12 Oct 2009 04:36:49 -0600

As a merchant, do you feel the fees you pay for accepting card payments are too high? I’ve not talked to anyone in business who thinks they aren’t paying enough for merchant services. If you’ve been following the Interchange debate, you realize the Interchange fee paid back to the issuing bank is the target of reform. And while Interchange reform is a healthy debate, for most businesses, it’s beside the point. They don’t get Interchange pricing.

Most small and mid sized businesses don’t pay Interchange pricing, they pay discount rates and service fees set by their service provider, processor or bank. The most common pricing structures are based on formulas, bundles, tiers and definitions invented by their payment processing vendor. Locked into long-term contracts, the savings from reduced Interchange would not be initially realized by this group of merchants. Therefore, the first step before joining the Interchange debate is to acquire Interchange pass through pricing.

Many business owners fall victim to “rates as low as” marketing, only asking “what’s my rate?” and looking for the lowest quoted rate upon which to make a decision. Learning about Interchange seems too complex. For this group of merchants - “buyer beware”. Take for example this trade magazine article on a hot new topic, Enhanced Recover Reduced (ERR), which is a newly invented merchant pricing model. Unbelievably, it calculates how to charge a merchant 2.76% for a swiped rewards card or 4.06% for a keyed transaction. And you thought Interchange was too high. Bottom line here is that while the lawyers, lobbyist and politicians earn their living arguing over Interchange, merchants should take more immediate action on the things they can control today. Shop smart and choose your payment partner wisely.

All merchants, large and small, can get Interchange pass through pricing. More intelligent merchant rates are a click away. Receive a customized merchant rate quote, instantly delivered to your inbox, right now by visiting http://merchantrates.com.

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Establishing Payment Acceptance Policies

Ty Hardison — Wed, 07 Oct 2009 09:55:00 -0600

Does your business have policies in place for each of payment method you accept? Payment policies are critical in protecting the financial health of a business. Small businesses without payment acceptance policies are vulnerable to fraud.

We strongly advise that the best practice before accepting any form of payment is to know your customer. Be mindful, watch for any red flags and take action to delay delivery until you gain a comfort level with the validity of your customer and their payment method.

It is especially important for merchants to understand that card payments are a convenience form of payment, not a guaranteed form of payment. Since the rules and regulations are written in favor of the cardholder, merchants must be diligent in protecting their business against fraud and disputes.

Each year millions of dollars are lost on fraudulent card use. To protect your business from chargebacks and fraud, best practices include...

Cards accepted face to face (electronically read, receiving an approval code and cardholder signature) are the safest card acceptance method. Always obtain a manual imprint of the card on a sales draft whenever you cannot swipe the card. A disputed charge is more likely to result in a chargeback loss if you cannot provide proof that the card was present and you were able to compare signatures. Also consider using security functions such as entering the “last four digits” of the card on swiped-card transactions and match the address verification value and the card verification code (CVV2) to help identify use of counterfeit cards.
For card not present transactions, implement AVS (address verification service) to verify the billing address, not the shipping address. Check CVV2 codes to make sure your customers have their cards in their possession. CVV2 no match transactions are 5 times more risky. The best practice is to ship to the cardholder address that matches a positive AVS response and get your customers to sign for receipt. Be suspicious of customers requesting that merchandise be sent to another state or country that is not their billing address.
Consider implementing Verified by Visa and MasterCard SecureCode. Verified by Visa and MasterCard SecureCode are payment initiatives designed to reduce the risk of unauthorized use of a cardholder account by authenticating the cardholder attempting to make a purchase online. Authentication makes Internet shopping better and safer for both buyers and sellers on the web by reducing the merchant's exposure to fraud and frivolous disputes, while protecting the cardholder from fraudulent use of their credit card. Implementing Verified by Visa shifts liability away from the merchant and on to the card issuer in specific cases.
Use caution when processing International Orders. Fraudulent transactions that originate overseas are on the rise. International transactions have an 8 times higher fraud rate. Properly identify the person with whom you are dealing. Take a second look at what is being ordered and where it is being shipped. Did your customer offer you multiple cards as payment? Is the customer asking for immediate shipment? Does the transaction make sense? If not, you may have just detected a fraudulent transaction and saved yourself from taking a loss. There is a tremendous amount of fraud with international transactions, and it is virtually impossible to win the chargeback case. Banks outside the U.S. may not support additional security features like AVS, CVV2, and Verified by Visa.
Do not split a transaction. If a sale on a card for $1,000 is declined, it means the cardholder does not have the available credit. Do NOT charge the card $250 four times to get the sale to go through. The cardholder’s bank will most likely charge this back to you, and you will lose.
Do not factor transactions. This means that you do not run transactions for another business through your credit card terminal. This will not only cause chargebacks (customers won’t recognize your business name on their statement) but MC/Visa will promptly relinquish your right to accept credit cards if you are caught doing this.
Use Code 10 calls to your voice authorization center when you are suspicious about accepting a credit card. The phrase "Code 10 authorization" is used to avoid alerting the customer to the fact that you are suspicious of their attempted transaction. The operator then asks the merchant a series of YES or NO questions to find out whether the merchant is suspicious of the card or the cardholder.
Be suspicious of customers wanting to use numerous cards, especially when the cards all have the same first six digits. This means that all of the cards were issued by the same bank. The “customer” has most likely obtained a list of cards from that bank and they are fishing to see which ones will get approved. Remember, it is not uncommon for a person to have multiple credit cards – each from a different bank – but it makes no sense that a person would have numerous credit card accounts with the same bank.
Be cautious on phone orders coming from a person using a special phone system designed to assist the hearing impaired and complete thorough due diligence to verify that the transaction is legitimate. Unfortunately this system is abused to commit fraud and merchant’s sympathy may cloud judgment.
Have your customers type their Initials as evidence that they have read and agree to your return policies. However, note that if you maintain a limited refund policy such as "No refunds / All Sales Final" the product or services is still expected to work as advertised and be what was ordered otherwise merchants may still face "Not as Described" chargebacks.
Be cautious of first-time orders with large quantity and overnight delivery request. If you are dealing with a new customer, especially one who is placing a large order, take a few extra steps to try to verify the legitimacy of the person or business. For example, check to see if they are listed in the phone book using a service like www.whitepages.com that offers a “Reverse Search” that allows you to enter a phone number or address to see if that person or business is listed.
When taking cardholder information, ask for card type not just card number. Fraudulent use may result in someone with a card number, not the card and who doesn't know the type of card they have.
Watch for repeat orders in a short period of time. Fraud transactions will send a trial balloon transaction and if accepted will use this card to move in for the kill.
Watch free email accounts. They are commonly used by those who wish to hide their identity. Be suspicious of customers who will only communicate with you via email. Take a minute to contact the customer on the phone and verify the order. This is not a guarantee that the person is not trying to commit fraud but a lot of times perpetrators will not give a merchant a valid phone number to reach them.

Bottom line: establish payment acceptance policies and if you not comfortable accepting a card payment, ask for another form of payment or pass on the sale altogether. Better safe than sorry when it comes to high risk sales.

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Not all Prepaid Debit Cards are alike

Ty Hardison — Tue, 06 Oct 2009 13:48:00 -0600

Recently I’ve seen a few stories like this one in the New York Times: Prepaid, but Not Prepared for Debit Card Fees. In the article, author Andrew Martin explores the numerous fees many card companies are charging their customers. The moral of this story from my perspective is that it pays to shop around. Not all prepaid debit cards are alike.

Avoid buying a prepaid debit card. We advise consumers wanting a prepaid debit card to get a payroll debit card instead. Consumers can get a payroll debit card from their employer or sign up directly with a payroll card provider (for example online at http://vantagecard.com/paycard) and then simply provide the card’s routing number and account number to their employer for direct deposit.

Payroll cards have lower costs than prepaid debit cards sold in a retail environment and consumers can eliminate some and greatly reduce many of the fees outlined in the New York Times article. Choose a payroll card that can be used across multiple employers and one that allows a card reload through the Visa ReadyLink service.

Consumers are also advised to learn how to avoid fees. For instance, getting cash back at the grocery store (selecting a paycard that does not charge for PIN debit transactions) is a strategy that can be used to avoid ATM fees. Or choose free online statements instead of having billing statements mailed (no charge and better for the environment). We publish a “best practices” guide for cardholders to help them learn to eliminate fees while encouraging unlimited free card purchases and recurring bill payments.

Another benefit of a reloadable payroll debit card is that consumers can use the routing and account number to set up auto draft ACH for recurring car payments or rent directly from their paycard account.

Prepaid debit cards appeal to many people for many different reasons, with some 80 million consumers driving a growing demand. But it is important to be an educated consumer. Shop smart and save on unnecessary fees and enjoy all the benefits and conveniences of card payments.

Shopping for a prepaid debit card? Compare costs and read the terms & conditions of our Platinum Pay Visa debit payroll card.

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Go Green With Your Pay

Ty Hardison — Sat, 03 Oct 2009 03:40:00 -0600

The American Payroll Association is part of an initiative to eliminate the use of paper paychecks nationwide. Currently, employers can go paperless in about 20 states. We’re tackling the rest state by state, and we need help from employers! We’re posting sample letters pre-addressed to the state officials in those states that currently keep employers from enjoying a paperless payroll. If you are an employer, please download a copy of the letter, personalize it, and send it on company letterhead.

The focus of the request is to allow employers to mandate direct deposit. Where employees do not provide their bank account information, employers should be able to provide paycards instead of paychecks.

Please join the effort! Sample letters can be downloaded from the “ Green State ” link at: http://www.americanpayroll.org/government/government-021/

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Restaurant Trends: Make your restaurant online order capable

Ty Hardison — Wed, 30 Sep 2009 08:26:00 -0600

According to the September 2009 Technomic American Express Market Brief, consumers of all ages have already embraced online ordering. Their research shows online ordering from a computer has become quite popular.

% of Consumers who have Ordered Online:

54% of 18-20 year olds
46% of 21-24
50% of 25-34
44% of 35-44
23% of 45-54
30% of 55-64
29% of 65-74
7% of 75+

Incentives were found to be effective in luring customers to online ordering. Nearly 58% who have ordered food online note they have done so in response to an offer they saw on a website, while 37% have been influenced by an offer received in an email.

For those who have ordered online from a computer, seven of 10 (70%) report that their most recent order placed was a repeat order.

Bottom Line: If you have a web site and provide pick-up or delivery food service, adding online ordering will produce positive results. With minimal capital outlay needed to launch an online ordering system, what are you waiting for? Many consumers have already embraced alternative methods of ordering food for pick-up and delivery, and the trend is growing. Operators who miss out on the latest trends in ordering technology will miss out on potential business.

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Interchange ruled to be Interest

Ty Hardison — Tue, 22 Sep 2009 13:27:00 -0600

According to Bloomberg, after a decade-long battle, a U.S. Tax Court ruled in favor of Capital One Financial Corp. saying that the bank’s income from Interchange fees that merchants pay on customer purchases should be regarded as interest subject to tax-deferral rules. The Internal Revenue Service argued the fees are taxable upon receipt.

Interchange “compensates lenders for the time value of their money,” Tax Court Judge Harry A. Haines wrote in the decision. “Interchange rates take into account other factors such as credit and fraud risk, processing costs and Visa’s and MasterCard’s efforts to maximize their business.”

This decision affects an estimated $48 billion in fees U.S. credit-card issuers collect each year. The court ruled against Capital One on another issue, denying deductions the company claimed related to the cost of awarding points that cardholders use to buy airline tickets.

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