Archive for the ‘Domestic Merchant Account’ Category

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Rolling Reserve – the fine print

Wednesday, November 16th, 2011

Acquirers and third party processors need to guarantee a portion of the volume processed to cover for potential business risks mainly related to chargebacks.

Some processors require a deposit when setting up the account, others pay in delay, yet most acquirers set a rolling reserve mechanism. In principle it should have been easy. A standard rolling reserve mechanism, with a single negotiable parameter – the rolling reserve percentage.

Rolling Reserve - the fine print

Reality shows that this is not the case. Surprisingly enough acquirers are much creative and tend to set different rolling reserve mechanisms, using in-house algorithms, generating unexpected outcomes.

Just recently I came across a very creative international acquirer with a weekly based rolling reserve algorithm that could only go up. The sophisticated algorithm was supported with an extensive blocking period disabling funds release on account termination.

Negotiating the rolling reserve terms, the acquirer agreed that the mechanism used resulted with a higher reserve percentage than the industry standard, and yet pushed back due to the fact that changing the algorithm will be highly problematic, due to further development needed for implementation of a new replacement mechanism.

The solution was changing the percentage stated on the commercial terms – a point the acquirer had a hard time arguing, once agreeing that the algorithm used resulted with a higher effective rolling reserve rate. On the same opportunity additional provisions causing delays of funds release on account termination were deleted.

Most merchants do not believe that rolling reserves are negotiable and tend to agree to the terms offered. Others try negotiating the rolling reserve percentage, yet fail to read the fine prints… Walk the extra mile – understand the algorithm behind reserve creation and funds release – it isn’t complicated and can do wonders to your cash flow!

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

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Posted in Credit Card Processing, Domestic Merchant Account, Intl Merchant Account | 13 Comments »

Online PIN-only debit card processing

Tuesday, June 14th, 2011

Until recently no PIN-only debit cardholder could use his card online. The online checkout flow, originally designed to support signature debit and credit card processing, simply did not support a PIN-only scenario and related to a PIN-only debit card as to any other debit/credit signature card. No online payment page enabled entering a PIN code and the checkout flow did not pass the PIN code to the debit card issuer. As a result, online PIN-only debit card transactions were declined, as the PIN needed to authenticate the deal was missing.

While most online merchants still do not accept PIN-only debit cards, first online PIN-only solutions are finally being developed. PIN-only debit card processing

PULSE has recently introduced PULSE® Internet PIN debit solution, which enables merchants to accept PIN-only debit cards issued by the PULSE issuers network. The solution enables shoppers to enter their PIN using a graphical, scrambling, PIN pad, which changes each time a digit is entered.

The upcoming Durbin Bill is expected to accelerate the adoption of online PIN-only debit card processing methods. Though the Bill does not apply to PIN-only debit cards, it targets an issuer interchange cap of $0.12 for an online signature debit card transaction.

As issuers will have to find a way to gain the lost interchange back, and as suggested cap only applies to signature debit cards yet does not apply to PIN-only debit cards, issuers’ one course of action would be aggressively marketing PIN-only debit cards over signature debit cards and changing the debit card market. Such a change will provide merchants a higher incentive to accept PIN-only debit cards to maintain their market share.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

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Posted in Credit Card Processing, Domestic Merchant Account | 7 Comments »

How bad is third party processing?

Monday, October 11th, 2010

According to Wikipedia third party processing has “been responsible for the worst horror stories”. Indeed… and yet some third party processing pros are worth mentioning.

If you wish to accept credit cards, you can either open a direct merchant account, or use third party processing.

In order to know what you’re offered, take a look at the footer of the site you consider using. If you see an ISO/MSP indication, you are going after a direct merchant account. Otherwise – third party processing.

Direct merchant account

Visa, MasterCard, American Express and Discover – all have programs that enable sales agents to market merchant accounts. As always, no standardization exist and each association has named its program differently. Visa has chosen Independent Sales Organization (ISO), MasterCard – Member Service Provider (MSP), American Express – External Sales Agent (ESA) and Discover – Referral Agent Program (RAP). Putting aside closed loop/open loop systems, the essence is identical. Your application will be submitted the an acquirer, for approval, in order to open you a merchant account with same acquirer.

Third party processing

Direct merchant account agents accuse third party processors for:

1. High processing fees – 5% plus;
2. Long and delayed payment schedules;
3. Funds delayed are not FDIC insured;
4. Merchant’s name missing on credit card statements.

Not all accusations are accurate, for example, many IPSPs are now capable of adding through ‘soft descriptors’ the (real) merchant’s name. Moreover, there are cases third party processing is your only choice…

Many startups get rejected when applying for a direct merchant account and lack the knowhow needed to manage direct online credit card processing. Using third party processing functions as an incubating stage, through which volume reaches a point starting a direct merchant account makes sense. Other high risk businesses find it easier to operate under a third party processing umbrella. In many cases working behind a third party processor sets a ‘fire wall’ between the merchant and the associations, which saves the merchant the risk associated with owning a direct merchant account.

Once you are familiar with the different options and better understand each pros and cons you are more likely to make the decision that suits you best.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

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Posted in Credit Card Processing, Domestic Merchant Account, High Risk Merchant Account, Intl Merchant Account | 22 Comments »

How will FX 50:1 limit effect the credit card processing industry?

Tuesday, September 28th, 2010

The U.S. Commodity Futures Trading Commission (CFTC) announced on August 30, 2010 its final FX rule fact sheet.

This new rule, effective as of October 18, 2010, allows a leverage of up to 50:1 on major currencies (minimum 2% security deposit) and 20:1 (minimum 5% of the notional value of the transaction) for all other currencies.

The U.S. FX industry will have to accommodate, while worldwide FX brokers could continue offering higher ratios (IBfx enables 400:1). US individuals already trading globally are expected to try maintaining their global trading accounts. Those who don’t might try taking their trading elsewhere.

As with gambling, the U.S. authorities will most likely try blocking Americans from trading out of the U.S. This can be accomplished by assigning the 7995 MCC to foreign forex brokers.

Should this happen, global FX brokers, IPSPs providing credit card processing services to such and their acquiring banks will have to, once again, distinguish Americans from the rest of the world.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

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Posted in Credit Card Processing, Domestic Merchant Account, High Risk Merchant Account, Intl Merchant Account | 17 Comments »

Valid Credit Card Numbers

Thursday, February 25th, 2010

14,800 valid card numbers, 9,900 valid credit card numbers, 8,100 hacked credit card numbers, 8,100 real credit card numbers, 6,600 stolen credit cards and 5,400 fake credit card numbers that work, are just a couple examples of the number of searches per month on Google alone for free, fake, hack, stolen, or other credit card numbers, that “work”…

As a merchant accepting credit cards online, you must read the comments Claus got on his superb Credit Card Number Generator post. Ninety Nine percent of the comments were received from potential buyers or sellers of stolen credit card numbers.

Buyers asked for HELP as they truly wanted to buy something on the internet and NEEDED a credit card number (that works…) and sellers were just trying to make a living… A potential buyer (playing it safe) wrote: “I need genuine credit cards with all the details. If you give valid credit cards, I will pay you once I try it and it worked”…

Sellers, trying to “make a living”, testified regarding the quality of data provided: “fresh”, “valid”, “today”, “that works”, etc., had Tariffs for different card brands, types and geographical issuing locations, and offered packages (prices for minimum of 5 cards…).

I strongly recommend reading the comments Claus received. It’s a wakeup call! Once you do, you feel the danger and must ask yourself what are the measures you have taken to fight the fraud attempts coming your way…

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

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Posted in Credit Card Processing, Domestic Merchant Account, High Risk Merchant Account, Intl Merchant Account, Online Payment Gateway, Online Virtual Terminal | 203 Comments »

“card not supported” on a credit card machine

Tuesday, February 16th, 2010

Looking at Google Analytics (yes, I’m addicted…) I noticed Google referred to our site someone who was looking for: “what does card not supported mean on a credit card machine”. Knowing the answer to this question is not there, I couldn’t leave that spot unattended…

When you receive the notice: “card not supported” on your credit card machine, it means just that – the specific card brand (or type) you are attempting to charge is not supported by your processor (or you are yet to register for processing that card brand).

99.99% of credit card processing providers will enable Visa and MasterCard processing, yet for processing American Express and Discover you almost always need to apply separately. If you failed to do so, or was not approved for processing these brands, trying to charge Amex or Discover will generate the notice you received.

There are plenty of other card brands: Diners Club, JCB, China UnionPay, BC, Maestro (Switch, Solo), Visa Debit, Carte Bleue, Girocard and many others… Check what card brands and types are supported by your processor, so you’ll know in advance which cards you can charge.

If your processor can only accept Visa and MasterCard, it might be the right time to look for alternatives… I personally switched to iPhone credit card processing, yet this has to be reported on a separate post.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

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Posted in Credit Card Processing, Domestic Merchant Account, iPhone credit card app | 3 Comments »

What stops the online micropayment industry from breaking through?

Tuesday, November 3rd, 2009

If you ever tried finding a payment solution for an online micropayment product you can skip the introduction… The existing card based solutions include a per transaction element and therefore have a predefined floor limit, below it, they no longer make any economic sense. Low cost micropayment products are currently not supported (on a “single purchase” base) and must be sold through aggregation or subscriptions.

As the online micropayment industry grows, people are working on alternative solutions, to bypass the credit card associations and enable a true support for a single purchase of online micropayment products.

The solution should have been provided by the credit card associations long ago. A simple micropayment pricing, could solve all of the micropayment industry needs in a second. As of today the associations charge (on most transactions) a fixed 10 Cents per transaction fee. This fee, first calculated and forced long ago, was justified when processing, encoding, saving and backing up transactions was cost consuming. In today’s world the cost of processing a single transaction is insignificant and surely runs below 1 Cent.

The risk embedded in online micropayment transactions is minimal. Micropayment transactions’ amount is immaterial, which automatically lowers the inherent risk embedded in a micropayment transaction to a ridiculous threshold. The nature of an online micropayment transaction lowers the risk even further. 99.99% of online micropayment transactions are digital goods with zero cost and no market value fraudsters can gain for re-selling the downloaded content.

That said, there’s no doubt that the cost structure set by the associations as of today, simply does not meet the micropayment criteria, and must change.

So why does it not? Once showing that the act of processing has long gone below the 10 cents currently charged, the associations will have a hard time explaining why such is charged on non micropayment transactions… Believe it or not, this is the true obstacle currently putting at hold the micropayment industry.

Instead of waiting for the associations to come to their senses – use PayPal. They offer a micropayment solution for 5% plus $0.05 per transaction. Open a PayPal Business (or premier) account, then search at PayPal search box for “micropayments”. Press on “PayPal Micropayments Website” and then “Signup”. Now request to change the Business (or Premier) account you just opened to a micropayment account. Congratulations – you just opened the best micropayment card solution currently available!

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

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Posted in Credit Card Processing, Domestic Merchant Account, Intl Merchant Account, Offshore Merchant Account, Online Payment Gateway, Online Virtual Terminal | 3 Comments »

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