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.

Upgrade to EMV or Face Liability Shift - By Avi Jorisch

Starting October 1, 2015, merchants accepting credit cards will need to seriously consider whether they wish to upgrade their existing technology to become EMV compliant or face a liability shift. EMV technology is a joint effort by Europay, Mastercard and Visa to standardize the way in which payment processing is conducted around globe. 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.

Below, I thought it would be beneficial to post a First Data Q/A for merchants wanting to learn a bit more: 

What is EMV?

EMV, also known as a chip card, is a globally accepted smart chip technology payment standard established by EuroCard, MasterCard® and VISA® in the early 1990s. EMV cards come with an embedded microprocessor that provides better transaction security, card authentication and additional application capabilities not possible with traditional magnetic stripe cards. The chip on an EMV card interacts with the merchant’s point-of-sale device and is very difficult to duplicate.

How does EMV technology benefit merchants?

EMV increases security and fraud protection against counterfeit, lost or stolen payment cards.

How does EMV help prevent fraud?

Each EMV card comes with an embedded smart chip that is programmed by the card issuer to create a unique cryptogram (a secret code) for every transaction. The code represents a randomly generated numeral provided by the point-of-sale (POS) terminal at the time that the purchase amount is keyed in by the cashier. Use of an EMV chip triggers cardholder verification required for authentication: Chip & PIN; Chip & signature; or nothing. If connectivity with the card issuer is unavailable during the transaction, the chip determines whether the transaction may be processed offline.

What is the timing for EMV in the U.S.?

The U.S. is one of the last industrial countries to migrate to EMV chip card technology as a payment standard. October 1, 2015 marks the date on which fraud liability shifts for all non-EMV enabled point-of-sale devices (except for automated fuel dispensers at gas stations). U.S. Banks have already started issuing EMV cards and it is expected that by the end of 2015 there will be 166 million EMV credit cards and 105 million EMV debit and pre-paid cards in circulation in the US.

What exactly does the liability shift mean?

Starting October 1, 2015, the party that provides the most EMV options will be protected from financial liability originating from counterfeit, lost or stolen card-present transactions. For example, if a chip card is presented to a merchant who has not adopted an EMV-enabled terminal, liability for counterfeit fraud will shift to the merchant’s acquirer who will likely charge the fee back to the non-EMV compliant merchant. If a counterfeit magnetic stripe card (non-EMV chip card) is presented at an EMV-enabled terminal, liability will remain with the card issuer.

Am I required to support EMV?

You are not required by law to support EMV at this time. However, you may be putting yourself and your customers at risk, as fraud liability migrates to non-EMV enabled parties. Ensuring that your POS terminal(s) are chip capable and that your payment processing application can accept EMV chip card is good business.

Who is enforcing EMV?

There is no government entity or authority that is overseeing or enforcing migration to EMV in the US. However, the Payment Card Industry Security Standards Council (PCI SSC) and EMVCo, the official EMV standard governing body, are collaborating with major card issuers on EMV chip technology adoption and implementation in the US. As such, all merchants who are accepting electronic card payments will be required to continue meeting PCI security compliance processes and be subject to the liability shift set forth by card issuers.

What happens if don’t upgrade their POS system to EMV?

Starting October 1, 2015, the merchant whose POS system is not EMV-enabled will assume full liability risk for fraudulent card-present transactions when processing chip cards on a non EMV-enabled terminal. Also, migration to EMV is a perfect opportunity for merchants to enhance their electronic payment acceptance by adding additional payment forms including PIN debit, NFC (e.g. ApplePayTM), and introducing other value-added programs to engage with their customers.

How are EMV transactions different?

With EMV, customers will no longer hand over their payment card to a store associate/cashier for processing. Rather, a customer will keep the card in his/her possession and control at all times. Instead of swiping the card, as is the case with magnetic stripe cards, the customer will insert or “dip” the card into the EMV card reader and leave the card in the terminal until prompted to remove it. Because the customer will be required to insert (or tap, in case of an NFC card) the card, follow the prompts, enter a PIN and/or sign and remove the card at the appropriate time, an EMV-enabled payment device will have to be available.

When is a signature required with a chip transaction?

Although chip cards that require a PIN will be the norm, some may be configured to allow for a signature. From the merchant’s and cardholder’s perspectives, nothing changes. The card must remain inserted in the terminal during the entire transaction. If a chip card is removed prematurely, the transaction will be canceled. The terminal determines whether a PIN or signature is required, and the employee simply follows the prompts. When a signature is required, a signature line is printed on the receipt for the customer.

What can merchants do now to prepare for EMV?

To migrate and successfully adopt EMV chip card technology, merchants must first clearly understand EMV’s requirements, timelines, and potential impacts on their business operations. Merchants should engage a POS provider to assess their options and develop a roadmap for migrating to an EMV-enabled payment system.

To Swipe or Not to Physically Swipe? By Avi Jorisch

The vast majority of merchants who accept credits rarely, if ever, give serious though to the best ways lower their merchant services fees. One of the most effective ways of reducing fees is to physically swipe credit cards. There are a number of ways to accept credit cards – e.g. online terminals, stand alone terminals, phone authorizations, swipers, point of sale systems, etc. Which is the best method will depend on each individual merchant and their pattern of acceptance.

To begin with, there are five merchant plans on the market today. If a merchant is savvy enough to be on the interchange plus plan – the pricing model where a fixed markup is applied directly to interchange fees published by Visa®, MasterCard® and Discover® - the difference in cost is generally .30% per transaction. If a merchant is on one of the four other plans – e.g. tiered, qualified, flat or billback – the difference can be as 1-2%!

As a first steps, it is important that merchants ensure they are on the interchange plus pricing plan. Following that, business owners should do a cost benefit calculation to see if the cost of equipment and/or the physical rate of acceptance outweighs the cost of buying a physical terminal or phone swiper. Many processors like to upcharge significantly the cost of equipment.  If your merchant processor is offering you equipment for free you may wish to consider why they are doing so – are you doing such a big volume that the cost of equipment is relatively minute? Or are processors submidizing the equipment because the rates they are charging are exorbitantly high. No ones gives away things for free.

Merchants should do the math carefully and ensure they know how to calculate the best deal possible.

Understanding the Importance of Debit Cards - By Avi Jorisch

People talk about Debit Cards more today than ever before. The move by our banking institutions to provide checking account customers with a check card branded by a Card Association, as well as backed by a debit network, has given consumers more flexibility in their payment options.

In 2010, US Congress issued the Durbin Amendment of the Dodd Frank Wall Street Reform and Consumer Act, which in theory gave merchants the ability to reduce the fees they pay for debit card acceptance, if they were processing on an interchange pass through plan. But many merchants are still on antiquated pricing plans, which do not allow them the ability to derive the benefits due to them.

There are two types of debit when talking about Debit Cards. They can both be represented on the same physical plastic card.

Online Debit

Online Debit is sometimes referred to as PIN debit. This is similar to performing a transaction at the ATM. The card is swiped or inserted and the consumer is asked to enter their secret Personal Identification Number (PIN). The transaction is processed over the banking ATM network and the transaction is approved or declined. As a Merchant, you must be specifically setup to accept these types of transactions through your Merchant Account, and you must have special hardware to accept the PIN entry from the customer.

Offline Debit

Offline Debit is sometimes referred to as Signature Debit. This is similar to a credit card transaction. If the card has a branded logo on the front, such as Visa or MasterCard, the card may be processed by simply swiping it through a credit card terminal that supports that card’s brand. The transaction is processed over the Merchant’s regular credit card network and the transaction will come back as either approved or declined. The customer must then provide their signature as approval of the transaction.

Merchants can reduce their processing and interchange fees by determining what level of debit card acceptance they have AND ensuring they are on interchange plus pricing. It would benefit greatly to check with their processor to optimize their level of fees.

Auditing Transactions - By Avi Jorisch

Merchants ask me all the time what is the best way to reduce the fees they pay for credit card acceptance. One of the most powerful but simple ways to reduce your rates is to audit transactions before settlement.

I strongly advise that if errors are discovered after settlement, merchants may end up paying discount rates for a transaction for which they will ultimately not receive funding.  Timely adjustments made before settlement cost nothing. Auditing transactions is the practice of balancing your daily batches with your Point-of-Sale (POS) Property Management System (PMS). Most POS/PMS systems provide a daily totals report (X or Z Out) that will provide a sum of all credit card transactions run through the system. In some cases, they may even provide a list of the individual transactions that are included in that sum. This total should be compared to your credit card totals to ensure that what you are submitting for funding exactly matches what your sales for the day were in your point-of-sale. If for some reason these reports do not balance, you should have sufficient abilities in your credit card solution to find the problem causing you to be out of balance and to correct the problem prior to submitting your batch to the processor for funding.

Last but not least, settle your batches daily!  This will help ensure that you are getting the best rate possible on all of your transactions for each day. Transactions not closing within 24 hours are considered higher risk as there is a greater chance of the cardholder disputing the charge and thus the processing fees are slightly higher.

Not all cards are created equal – Verifying Address and Card Codes - By Avi Jorisch

Certain credit cards cost more to process than others. It's up to you to choose what works best for your business. To help offset the cost of processing more expensive card types, ensure that your transactions meet as many of the qualifying requirements as possible.

While it is not always possible, encourage your clients to give you the card that carries the lowest interchange rate. The following rules of thumb apply:

·       Actually swiping a card through a magnetic reader offers the lowest interchange rate possible

·       Of all cards, debit cards carry the lowest interchange rate

Whenever you can not get a magnetic stripe read, be it a problem with the reader at the store or because it is a transaction on the internet, you should run AVS and CVV checks on the transaction. Address Verification Service (AVS) is a simple check that compares information presented by the cardholder with information on the billing account for the card. The Card Verification Value code, is the three or four digit code on the back of the card. Carrying out an AVS or CVV check is important both for getting the lowest interchange rate, but also to ensure the credit card you are taking is good.

Each issuing bank supports different levels of verification. The most widely accepted and supported level of verification is the zip code. If the person presenting the card to you can not identify the zip code for that card, you need to further scrutinize the transaction. When you send an authorization request with AVS verification the Issuing Bank will return two separate responses back. One response will be whether the dollar value of the transaction is approved and the other is whether the AVS information supplied for verification matched with the information the Issuing Bank has on file for that cardholder.

The Card Verification Value check is a 3 or 4 digit number that is printed on the physical card and stored nowhere else except at the Issuing Bank for that card. Cardholder verification processes are similar to Address Verification. The CVV value is passed to the Issuing Bank along with the regular authorization.

The Issuing Bank will respond with two responses:

One possible response is for the dollar amount to be authorized.  The second response might be to identify whether the CVV provided matches the card. You should ask the customer for the number on the card. If you do not get a match on the number during the authorization, you may not want to accept that card for payment. This “security” number exists on the card and in the computer system of the Issuing Bank for that card. This number is never to be recorded anywhere for any reason by anyone, doing so would break down the security of the number.

Proper procedures and checks allow you as the merchant to get the lowest possible interchange rate, in addition to reducing instances fraud and chargebacks.

System Unavailable: What to do when the Credit Card Network Goes Down - By Avi Jorisch

No matter how much you plan and prepare, the world of computers and networks it is not a perfect environment. A Merchant must be ready for an occasional outage in credit card processing. While every merchant accepts their credit card slightly differently, the power source for each could go out – for example, the physical terminal could break; no internet connection for the virtual terminal; no phone signal; software virus for the point of sale.

Every location that accepts credit cards as a normal means of payment should have the phone number and other specific information that the Merchant needs to place a voice authorization call on a transaction. Voice authorizations are needed when the Merchant can’t send it though their normal processing channels because the communication method is down (i.e. Internet), if the transaction amount is too high to be approved or when a transaction is being declined without a specific reason. The voice authorization obtained from the call center should be recorded and notated on this slip.

A “knuckle buster” should be present, as well as the authorization slips, to take an imprint of the card and retain the customer’s signature with the transaction.

But above all, you should keep the phone number for your merchant provider in your contact list, and ideally on your speed dial. In the best of circumstances, you develop a personal relationship with your provider and have the representative’s personal cellphone number. If you do not have that type of connection, at the very least you should have the toll free number for the customer support line at your disposal.

Reducing your American Express Processing Fee - By Avi Jorisch

American Express has rolled out a new program in the last few months which should help many merchants reduce the fees they incur for Amex acceptance. Specifically geared towards small businesses, merchants who have been reluctant to accept Amex until now because of the historically high rates may now wish to reconsider that decision.

The new program, known as OptBlue, allows the merchant processor to set the final processing rates, similar to the way Visa, Mastercard and Discover operate. For those who have read previous postings on merchant processing rates, Amex has now established their own wholesale/interchange, above which the processor can set the processing component.

In plain English, as is the case with the other card associations, the final rate a merchant is charged is determined by a combination of the wholesale rate and assessment fees which are fixed, plus the processor mark up which are variable.

But unlike VS/MC/DS, the Amex “interchange” rate is determined by a merchant’s industry and the actual size of the ticket being processed. For the average merchant, a sale under $150 engenders the lowest interchange rate; for sales between $150.01 and $3,000 a higher rate is incurred; and for sales above $3,000 the highest interchange rate. To be clear, the actual rate and tier varies by industry. In addition to the wholesale rate, there are two other fees merchants may wish to be aware of. First, Amex will also charge an additional network fee – VS/MC/DS call this an assessment fee. In addition, if a card is not present and/or issued internationally, there may be additional costs.

But not all businesses are eligible for OptBlue. Only those merchants who process less than $1,000,000 in annual Amex processing are accepted into the program.  Additionally, because the program is just being rolled out, not every merchant processor can actually offer the program. If your merchant provider does not currently offer the program, depending on the amount of Amex you accept annually you may wish to consult with a processor that does.