Posts by Driving Commerce

Payment Technology

Posted by on Jun 1, 2014 in Blog, Credit Card Processing, Payment Processing, Point of Sale | 0 comments

Technology (Device) Used To Take Payments For our overview video on Taking Credit Card Payments visit this post. There are literally thousands of different devices that are used to take credit card payments. With the advent of the smartphone and mobile technology new ways of taking credit cards are emerging every day. From a very general standpoint, listed below are the three major device categories.   Technology (Device) Options Dedicated (Standalone) Terminal Online (Internet) Gateway Integrated Software / Hardware Solution     Dedicated (Standalone) Terminal The oldest and most common solution in a retail environment is the dedicated standalone terminal. These hardware devices are durable and relatively inexpensive and thus they are still the most popular device for business that take face-to-face, card present transactions. This is also a common device used by mobile and telephone order merchants, but is quickly being replaced in those environments for better options. However because a dedicated standalone terminal can only process credit cards and for security reasons typically do not integrate easily with additional software, they are limited. The merchant lacks the ability to store important data such as inventory levels and customer info, which must be stored with a separate tool if kept track of at all.     Online (Internet) Gateway The online or internet gateway has risen immensely in popularity over the last few years. This is in part due to the need for online gateways to work with a shopping cart for ecommerce transactions. The larger reason for the rise in use however is due to the emergence of virtual terminals and (app based) mobile processing. Both virtual terminals and mobile apps typically use online gateways such as Auth.net to transmit credit card information securely. 3rd party applications and developers have used previously complex integration and encrypted code to create easy and friendly user interfaces. Previously this technology was only utilized in the ecommerce setting for integration into shopping carts. However the increased use of mobile smartphones opened up for processing mobile. The benefits of an online or internet gateway are that software updates are seamless and hardware costs are low. The addition of a USB or phone compatible swiper also gives the user access to card present rates. The limitation is that access to the internet is required. Even if a merchant has a traditional terminal and has no need for processing mobile, having a virtual terminal back-up is a good idea in case the hardware ever fails.     Integrated Software / Hardware Solution Integrated software and hardware solutions have been around as long as dedicated standalone terminals and make use of hardware (typically a PC) and peripherals such as receipt printers, USB magswipers and barcode scanners. This hardware works in concert with a software program designed not only to process credit cards but also to track additional data such us customer information, inventory and more. These are critical elements for large retailers and business that require seamless tracking of data at the point of purchase. This solution also frequently comes with a touch screen interface which is a necessity for fast paced restaurants, bars and night clubs. As technology has improved, traditional siloed solutions have become obsolete as more integrated solutions offering more flexibility, efficiency and effectiveness. A good example is with Intuit, who offers processing along with desktop, mobile and ecommerce solutions. Intuit allows the merchant to integrate all of these solutions into one account for fast and easy tracking and integration. Coupled with Intuit’s accounting software Quickbooks, it makes for a powerful cohesive...

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Merchant Agreements

Posted by on Jun 1, 2014 in Blog, Credit Card Processing, Payment Processing | 0 comments

Merchant Agreement / Contract For our overview video on Taking Credit Card Payments visit this post. Merchant agreements come in many different varieties, with the most common being an application, agreement and contract all in one. You will find this to be the most used tool in the field as it allows a representative to get all of the necessary information in one visit. Online applications are similar but typically broken up into multiple steps. The important items to look at are the fees attached in the Schedule A (commonly page 2 of an application). The other critical item is to look at the terms including cancellation policy and funding timeframes. Regardless of what the rep says, these are the legal obligations you and your business will be held too.   Three Major Fee Areas Interchange Fees Discount Rate / Transaction Fees Monthly / Support Fees   Interchange Fees (Cost) Interchange fees are commonly referred to as “cost,” because they are the fees that every company in the world pays to process credit cards, even businesses as large and bank card heavy as Wal-Mart and Starbucks. These fees are largely out of the control of the merchant and are dictated by Visa/MasterCard and Discover or American Express. What the merchant can do to keep these fees low is to processing correctly with up to date equipment and correct procedures. However much of the fee is decided based on factors such as debit vs. credit, card present vs. not and basic bank card vs. rewards card. The interchange fee can range anywhere from 3% of the transaction to less than 0.1% for high ticket retail debit. Many times the interchange fees are vague or hidden on merchant statements and they are rarely spelled out on merchant agreements. The important point to retain is that interchange fees make up 70% to 90% of total merchant account fees and cost.   Discount Rate / Transaction Fees The discount rate or margin between interchange and quoted rate along with the various transaction fees is the gross revenue that the processing company makes from a merchant account. It is important to denote this as gross revenue as many companies have buy rates (pricing floors) where profit is only made above these amounts. In addition sales companies and buy rate free organizations or processors have certain costs associated with acquiring and maintaining an account before final profit is calculated. However the discount rate and transaction fees are where merchants have room to negotiate the total cost of their merchant account. Discount rate can be a little tricky to identify but is typically a percentage anywhere from 0.10% to 1.00% charge to the entire card volume. It is also expressed as a rate such as 1.9% where the margin is the different between the interchange cost and 1.9%. Transaction fees include but are not limited to, authorization fees, batch fee and AVS inquiry.   Monthly Support Fees Monthly fees are another major area to negotiate on a merchant account. Common monthly fees include the statement fee, service fee, monthly minimum, PCI compliance and gateway fee. Some fees are reasonable and sometimes they can be way out of proportion to the account volume. A lot of it has to do with what software or hardware products that are supported in concert with the account. This can vary widely and thus the monthly fixed fees can fluctuate. Another commonly misunderstood fee is the monthly minimum which contrary to popular belief is the minimum amount of gross revenue that must be generated. If this amount is not generated, than...

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Acceptance Methods

Posted by on Jun 1, 2014 in Blog, Credit Card Processing, Payment Processing | 0 comments

Merchant Type – How You Take Payments For our overview video on Taking Credit Card Payments see this post. Although there are hundreds of different types of merchants and seemingly dozens of ways to take credit cards, for the purposes of processing companies there are three major types of merchants. There are additional Merchant Category Codes (MCC) used to classify the types of goods and services provided as well as for reporting to the IRS. However when it comes to risk for the processing companies and thus application acceptance and associated fees, the merchant type is one of the primary factors. These three merchant types are listed below. Three Primary Merchant Classifications Retail (Face-to-Face) Mail Order / Phone Order (MOTO) Internet / eCommerce   Face-to-Face (Card Present Transactions) Although this merchant type or way of acceptance is commonly referred to as retail, the more appropriate and technical term is “Card Present.” This is especially true today with wireless technology that makes face-to-face card transactions easier and faster than ever before. This type of card acceptance involves the physical swiping of the card, and carries the lowest interchange fees. It is the lowest risk to both the processing company and merchant because fraud is much more difficult face to face. In addition the physical swipe of the card would require a fake card to be made which is an added cost and deterrent to many thieves who have simply bought stolen credit card numbers. Whenever possible it is always best to take credit cards face-to-face. For high ticket purchases, checking the card numbers and card holder’s ID is an absolute must to avoid simple stolen card fraud. In addition, face-to-face transactions afford the ability for the card holder to physically sign a receipt, either on paper or on an electronic device. This signature help further prevent fraud and gives the merchant a chargeback defense in the case the card holder disputes the charges.   Mail Order / Phone Order (MOTO) Although mail or catalog ordering is a bit-outdated in today’s internet age, the term MOTO applies to payment transactions that do not happen face-to-face with the card present. This includes writing the card number down and processing it later. This also includes stored credit card numbers and recurring transactions through a piece of software such as Quickbooks or a Virtual Terminal / Gateway. Obviously taking credit cards over the phone also applies, and is a very common practice in businesses of all types from take-out restaurants to construction and building supply companies. Even though writing down a person’s credit card numbers because the machine is down and taking their info over the phone is fundamentally different, the processing network cannot tell the difference and treats this transactions as the same. They are risker because the assumption is that the card is not there because it is not swiped. This makes using stolen credit card numbers much easier, and thus fees are higher to offset for the higher level of fraud in this category. Practically all businesses have a MOTO element to how they take credit cards, and thus should understand the proper documentation and steps to take to ensure that they are protected.   Online Transactions That last and most risky are transactions that happen online. In this situation, not only is the card not present, but there is typically not a human element involved for additional soft touch fraud prevention. Ecommerce is the highest area for credit card fraud and thus carries the highest restrictions for approval and fees. However many of the fees between MOTO and Internet are...

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Taking Credit Card Payments

Posted by on Jun 1, 2014 in Blog, Credit Card Processing, Payment Processing | 0 comments

Overview: Accepting Credit / Debit Cards Taking credit card payments, rather it be in person, over the phone or online; is one of the most important points in the circle of commerce. This is typically the entry point for most businesses and an area commonly overlooked when it comes to understanding the basics. With new and emerging technologies today, taking payments with mobile phones (iPhone / Android) is now a feasible possibility for all businesses. In addition, setting up an internet storefront or ecommerce solution is easier than it has ever been. Behind the scenes, technology and fraud prevention algorithms are developing at a rapid pace, allowing the payment ecosystem to stay in balance. With all of these new and exciting changes, there are still three basics that are very important to understand, track and document when it comes to taking payments. These three critical areas impact many areas of your business but most importantly impact three important money areas listed below.   Three Money “Hows” Impacted By 3 Critical Areas How Fast You Get Your Money (Funding) How Much Money You Pay In Fees How Safe Your Money Is (Security)   These three important areas that must be understood in order to maximize your businesses cash flow, minimize costs and protect your money are listed below.   Three Important Areas – Taking Credit Cards How You Take Payments (Merchant Type) Merchant Agreement / Contract Technology (Device) Used To Take Payments   How You Take Payments (Merchant Type) The type of merchant you are classified as, or more specifically, how your business accepts payments impacts all three important money areas. Unfortunately, the details are commonly glossed over. Most businesses primarily take payments via the following methods. Retail (Face-to-Face) Mail Order / Phone Order (MOTO) Internet / eCommerce Some business accept payments through only one method however, most merchants take credit cards through a combination of the three areas above. For detailed information on this be sure to check out our Acceptance Methods post.   Merchant Agreement / Contract One of the key areas of payment processing that can potentially have a large impact on funding (cash flow) and processing fees, is the merchant agreement. This contract between the sales organization and the merchant serves as an application, fee schedule and terms of credit card processing. Most agreements are fairly similar with a few stipulations to look out for. The major items to be aware of when it comes to fees are as follows. For further explanation see our Merchant Agreements page. Interchange Fees Discount Rate / Transaction Fees Monthly / Support Fees   Technology (Device) Used To Take Payments Commonly the focus with taking credit cards is the device, hardware, software, etc. that will be used to accept payments. While this area has the smallest impact on fees (other than outlay for device / technology) it has a large impact on the security of both the merchant funds and the personal information of its customers. It also can play a role on how quickly funding takes place. For a discussion about the most common types of devices today, view our Payment Technology...

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Value Chain Networking Summary

Posted by on Jun 1, 2014 in Blog, Business Development, Supply Chain Management | 0 comments

This article is an excerpt from the Total Financial Network (TFN) white paper by Christopher Vincent titled Value Chain Networking.  Download the entire white paper in pdf format HERE. This is the Summary – Return to the Introduction Value Chain Networking (VCN) is the concept of not only honing in on one company’s core value, but continuing to develop it among the other companies in the industry.  It is the activity of creating a Value Network via business networking that includes suppliers, service providers, competitors and even customers. In a broader sense VCN is the continual development of a community, with the core mission of providing value to the marketplace and in a grander scheme, the world.  Companies that engage intentionally in this activity and utilize the technology of today will benefit not only from market position but also from an enhancement in company capabilities. Company ability is the key, as market position and competitive advantages are temporary.  Sustainability and ultimately profitability for a company is not achieved by locking-in market position but rather by continuing to build upon its capabilities, core value-add and its...

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