The Merchant Processing Guru

The Merchant Processing Guru Tip#19 Continued: The Players in the Credit Card Processing Industry.

To be approved to accept credit cards a merchant will approach a “Member Service Provider” or MSP who are approved & registered entities with Visa & MasterCard to offer processing services. Behind them is the “Acquirer” or “Acquiring bank”. The Merchant Acquirer basically coordinates the flow of information and money between the different players, namely the cardholder and their bank and the merchant and their bank. On the front end they use a “payment network” to processes the individual transactions between the cardholder and the merchant (also known as a payment platform). I will get into the actual flow of the transaction in a later post. On the back end network they settle the transactions into a lump sum to be deposited into the merchants account. This is referred to a settlement or batch. A card issuer cannot be an acquirer even though they are both banks, This is why you cannot go “direct” with your bank! This is also how the two separate interests of the cardholder and the merchant are kept apart.

Where do I fit into all this? I represent the Merchant and the Member Service Provider. I am a merchant advocate and it is my job is to make sure that you have the right solution for your particular business needs and to represent you in a dispute between you and the MSP. This is not to be confused with a dispute between you and the cardholder, that is the MSP who then represents you.

Russell Harverson has over 6 years experience in the card processing industry and has build a reputation for “being there” for all his merchants! His goal is to provide you with the right, cost effective processing solution for your individual business needs, no matter how large, small or different, he has done it all. He is your Guru of the Merchant Processing industry, shedding light on the credit card processing industry. To contact him via email theGuru@theMerchantProcessingGuru.com
Or call him at: 1-888-368-GURU (4878)

The Merchant Processing Guru Tip#18: Some facts about the credit card processing industry

Here are some interesting facts about this industry from 2007 that you might like to know.

58.3 Billion electronic payments were made in 2007, totaling a whopping $36.4 Trillion (this is all forms of electronic payment such as ACH, direct debits, etc.).
24.7 Billion transactions were made using a credit card at $2.5 Trillion, this is a growth of 9.7% from 2000.
20.6 Billion transactions were made using a debit card totaling $1.5 Trillion in sales with a growth of 25.5% from 2000.
Check payments numbered 36.7 Billion with a value of $39.3 Trillion. This is a decline of 4.3% since 2004

Studies show that consumers spend 40% more with a credit card compared to cash

A report by AC Nielsen shows that by the year 2020 only 10% of transactions will be made in cash.

In 2004, for the first time in history, electronic payments surpassed check payments. So with checks & cash on the decline, credit cards, online banking and other forms of electronic payments are fast becoming the norm. So if you are in a business that works directly with the consumer and you do not accept credit cards yet as a form of payment, you might want to give that another look as pretty soon it will be unavoidable.

The Merchant Processing Guru Tip#17: High Risk Processing – Continued:

Other reasons for a credit card processing account to be deemed a high risk is bad history in a particular industry. If a particular industry is placed on the “undesirable” or “Unacceptable industry list” then anyone seeking to open a merchant account, who is in one of those industries, is automatically declined by a traditional processor and will have to go to a High Risk Processor to open an account. A High Risk account will typically be at a higher cost as the processor assuming that risk will need to mitigate that risk with higher profits. Some examples of High Risk Industries are: Online Porn and related businesses, Gambling, Online supplement sales & Diet pills, Collection companies & Credit repair, Investment Firms and more. If you have high ticket items that are delivered or shipped after running the customer’s credit card you may also find that you are too high a risk for some processors. I find that the majority of high risk accounts today are in fact ecommerce accounts as so much business is done online today as opposed to several years ago and that is where most of the fraud and purchases with stolen credit cards occur. If you have a rocky financial history you could possibly find this to be problematic as well. If you have questions about this just get in touch with me.

In some cases a domestic High Risk processor will accept one of these accounts but in others we will have to go to an Off Shore High Risk processor which is typically a European bank to get a merchant account. I look at every case individually as no 2 accounts in this arena are the same. The cost for setting up an off shore account are high and the cost for processing through an off shore processor can be high also but if you cannot get approved by a traditional processor or even a domestic high risk processor the benefits of taking credit cards may out way the additional costs and you don’t really have a choice.

I have access to every form of High Risk processing that is available and can place almost any account. If you happen to find yourself in this position then just get in touch with me and we can find out what your options are.

theGuru@theMerchantProcessingGuru.com

The Merchant Processing Guru Tip#17: High Risk – What is High Risk in the credit card processing industry

First of all, let’s explain why a business might be considered a “High Risk” to a processor. One of the most common misconceptions about the credit card processing industry is that people assume that there is no risk to the processor and that they should, without any question, be able to open a merchant account. Well, this is not always the case and I will attempt to cover some of the reasons why a business not only needs to qualify for a merchant account but also why they may not.

Qualifying for a merchant account is somewhat like qualifying for a bank loan or a line of credit. A merchant account is not very different, in as much as the processor is extending the funds that you have processed through your merchant account and may not themselves see that money for up to 30 or even 60 days in some cases. But even worse is the fact that they are liable for every dime that is processed through your account for up to 18 months. If a business were to go out of business and chargebacks (See my post about “Chargebacks”) started to occur the processor is obligated to Visa & MasterCard for that money and under Visa & MasterCard regulations they will have to refund any money that is disputed and cannot be proven to be a legitimate charge.

So when underwriting a new merchant a processor will look at the stability of the business and many other factors. If you are a retail store or restaurant then there is very low risk in most cases and any traditional processor will just look at the major areas of concern and approve your account 99 times out of 100 but if you are an online business or have any type of future delivery business model then they will look closer at the business and its owners to make sure that the risk is low before approving this type of account. They will also require more backup documentation about the business such as a few months of banking statements and perhaps a year or two of the businesses tax returns. This again is to determine the financial stability of the business that is applying for a merchant account.

In my next post I will go into some other reasons a business might be considered a high risk to a traditional credit card processor. Stay tuned!

The Merchant Processing Guru Tip#16: Standalone credit card processing terminals and PCI Compliance

I am hearing of cases where a processor is forcing merchants to upgrade their terminal because their terminal is not PCI compliant. Standalone credit card processing terminals are not affected like PC based processing solutions as standalone terminals do not store credit card numbers. However if you run debit cards through a terminal under the pin-based debit option and you are using your terminals internal pin-pad, that is the portion that may not be PCI compliant. There is a very easy and simple way of getting around that issue, just get an external pin-pad from your processor to plug in to your terminal that is PCI compliant. A pin pad needs to be Triple-DES encrypted (3DES) as these pin-pads store the pin numbers that are entered into them by your customers.

This brings me to the issue of equipment altogether. There is absolutely no reason to lease or even purchase credit card processing terminals, for the most part, any longer. I typically will provide my merchants with equipment for as long as they process with me. I still find cases where merchants are paying between $50.00 & $150.00 a month on a lease for 48 months which is robbery on behalf of the company that set them up, as far as I am concerned. The merchant ends up paying between $2,400 to $7,200 for a piece of equipment that may have cost $250 to $350. The worst thing about this type of lease is that they are “Ironclad”, there is no way to break them. You are stuck with paying the entire amount you owe, including a buyout at the end of the lease which is typically 10-15% of the original value of the equipment. Leases may have had their place several years ago, when done properly & they can still be used in some cases as long as they are beneficial to you and on equipment that is just too expensive to purchase up front, but not for just a simple counter top terminal, that’s ridiculous.

To avoid ever getting into a lease like this again or paying outrageous fees for processing your credit cards, consider this. It has been my goal the past 6 years to always provide those who choose to work with me, the most cost effective solution for them and their business. I believe that in doing so I will build a long lasting business relationship with each and every person I work with. If you believe this is something you would like to have in your relationship with a credit card processing provider then get in touch with me today and I will show you how much I value your business.

theGuru@theMerchantProcessingGuru.com

The Merchant Processing Guru Tip#13: Credit card processing “Chargebacks” What are they and how to avoid them!

A “chargeback” is where a card holder calls up their credit card company to dispute a charge on their card. This will start the process where you as the merchant who placed this charge will have to prove that it was a legitimate transaction. Should you have a signed credit card receipt then you are probably home free but should you not have this very important little bit of information then you have a battle on your hands that you are not very likely to win.

Visa & MasterCard are most interested in protecting their card holders more than the merchants who process the transactions and they will always side on the card holders side whenever possible. Only when you can prove beyond a doubt that a transaction was legitimately made by the card holder will you prevail.

ALWAYS HAVE PROOF OF THE SALE AND THAT THE PERSON WHO’S CARD YOUR PROCESSED MADE THE ORDER! If you are meeting your client in person and not swiping the card on a terminal but entering the card information manually then always get an imprint of the card with an old fashioned manual imprinter, affectionately known as a “Knuckle buster”, with their signature on the slip and filled out completely. If you do not see them in person and you get their credit card information given to you in some other way then this is the riskiest type of transaction and to make it a whole lot safer, you will want to make sure you have something signed by the client, which you can email them and have them sign and fax or scan & email it back to you. This will help eliminate the risk of a “chargeback”. If you don’t have a form to send or aren’t sure how to draft one, I can provide you with a form to send your clients, every time they want to use a credit card, that will cover you in case of a dispute.

If you can’t or don’t want to do this part then the next best thing would be to have an email or some sort of order with the person’s name and as much information about them as possible. Again, this can be risky and the higher the amount of the sale the more you stand to lose if the client disputes the transaction. It is always better to take the extra precautions to cover yourself from a potential, costly dispute. To be continued in my next post.