Spend management has it’s benefits, but do the consultants really know what’s the best credit card processing solution for your business? Spend management consultants often mistakenly focus on the very same financial issue as merchants: the merchant discount. The biggest savings are achieved with interchange management.

3 questions every business to business company should ask before changing merchant accounts or credit card processing technology:

1. How will your solution help me manage interchange qualification? (What specifically will it do to ensure that transactions achieve qualified instead of non-qualified interchange rates? Does it rely on employee training or does it handle it automatically?)
2. How often does the company roll out new innovations? (The payments industry is changing fast, will they be able to keep up? Is this company a market leader?)
3. How will your technology impact my PCI Compliance burden? (Payment Card Industry Data Security Standards or PCI DSS)

I’ve talked to a bunch of spend management experts over the years. Rarely do they have the expertise to guide merchants to the best solutions. They can help you reduce costs, but don’t leave money on the table by only solving part of the problem.

About the author: Christine specializes in providing merchants with innovative technology to manage the cost of accepting credit cards, without changing merchant accounts.  With a primary focus on “card not present” payment processing solutions for mid-size companies, including manufacturers and wholesale distributors,  merchants improve PCI Compliance and streamline the payment experience for both their company and their customers. It’s fast, easy to use, and requires no capital investment to implement. For sales call Christine at 954-942-0483 or click here for more information.

Level 3 credit card processing is explained, including merchant account and payment gateway requirements in this video of a slide presentation. What is it? What are the financial benefits? How can I get level 3 credit card processing for my business to business company?

Plus a brief mention of our technology that creates merchant efficiencies to qualify eligible purchasing, corporate, and business cards for level 3 qualified interchange rates.

To get level 3 processing for your merchant account or for more information about solutions to streamline payment acceptance for your business to business company with card not present customer transactions, contact us.

The Vantiv billing is a bit different than we’ve experienced with other processors, but the end result is the same. Below is an example of the text that appears on a Bank Of America business checking account for a merchant using Vantiv merchant services and CenPOS SaaS payment technology, as offered by your blog author, Christine.  Merchants are billed once per month for all fees, via ACH.

ACH Fees on Bank Of America Statement:

1. On 3/4/2013 we were charged  MTHLY UNBN MERCHANTSERVCS CCD           -$876.66  “123456″*
2. On 3/6/2013 we were charged GEN CENPOS CCD -$—-  “123456″
3. On 3/11/2013 we were charged BILLING MERCH SERVICES CCD  -$255.26 “123456″

Item 1: MTHLY UNBN MERCHANTSERVCS CCD. These are pure interchange fees. Interchange is always a percentage of the transaction plus a per item fee. Interchange comprises the bulk of credit card processing fees. They’re non-negotiable, but they can be influenced, which is a significant factor in merchants choosing CenPOS, an intelligent payment gateway that optimizes transactions for qualified interchange rates.  Interchange rates reflect the cost as determined by card card type and other factors.

Fifth Third Merchant Services changed their name to Vantiv, see prior article for more information. The mailed statement return address is Merchant Services, Cincinatti.

Item 2: GEN CENPOS CCD. Fees match the CenPOS agreement and monthly statement.

Item 3: BILLING MERCH SERVICES CCD. sThese are costs for credit card processing services, in other words, the supplier of your merchant account. This includes accessing networks etc. For this statement, they’re all are dead cost passed through from Vantiv, plus the stated Vantiv fees. The merchant discount, per the agreement, is our profit.

* Each dollar amount has an account number “123456 example” that follows. For security reasons, the account numbers have been omitted from this blog post.

All costs/net sales=effective rate
old effective rate= 4.25% Includes all interchange, merchant fees, etc.
new effective rate = 1.63% Includes all above and CenPOS.
Nice!  While fees vary every month, the effective rate is a good indicator of the health of your credit card processing solution.

1.6% is a below average effective rate for a 100% business to business company with customers using corporate, purchasing, and international cards over 87% of all dollar volume. Additionally, all transactions are card not present.

CenPOS works with your existing processor, and is most effective with merchant accounts set up on wholesale or ‘pass through interchange’ pricing. CenPOS is fast, easy, and requires no capital investment to implement. For CenPOS, or for information about a new merchant account, call Christine at 954-942-0483 or click here for more information.

 
Christine Speedy

No. This article provides an in-depth review of AVS as it applies to Visa. AVS is an abbreviation for address verification service. Today we review what it is used for and how it impacts merchants for Visa cards. All of the rates shown are true interchange costs as published by Visa. Some industries may have different interchange rates, such as hotels, but the principals are the same.

CARD PRESENT OR RETAIL TRANSACTION

Assumption:  Retail merchant key enters a transaction, with the customer present. Visa requires the zip code to match or full address match. The resulting qualified interchange rates vary depending on the card type:

• CPS/Retail Key Entry, Debit, exempt Visa Check card – 1.65% + $0.15
• CPS/Retail Key Entry, Debit, regulated Visa Check card – 0.05% + $0.21
• CPS/ Retail Key Entered Credit, Visa Signature preferred- 2.10% + $0.10
• CPS/ Retail Key Entered Credit, CPS/Rewards 2- 1.95% + $0.10
• CPS/ Retail Key Entered Credit,Other-  1.80% + $0.10
• Commercial cards- 2.05% + $0.10

What happens if you do not enter the zip code, or it does not match?  Automatic interchange rate downgrade to non-qualified rate EIRF. The transaction will still be approved unless the merchant has special programming to reject it, which is atypical, but the cost will go up.

• Electronic Interchange Reimbursement Fee (EIRF), Debit- exempt Visa Check card -1.75% + $0.20
• Electronic Interchange Reimbursement Fee (EIRF), Debit- regulated Visa Check card-  0.05% + $0.21
• Electronic Interchange Reimbursement Fee (EIRF), Visa Signature preferred- 2.40% + $0.10
• Electronic Interchange Reimbursement Fee (EIRF), most other Visa cards- 2.30% + $0.10
• Commercial Electronic Interchange Reimbursement (EIRF) Fee- 2.75% + $0.10

This article does not cover every possible card option. It’s clear to see from the examples shown that not passing the correct data results in higher interchange fees to merchants from .10% to .65%. This profit does not go to your processor, but rather to the card issuing banks.

What can a merchant do to better manage interchange?

• Ensure point of sale equipment is programmed to prompt for AVS for key entered transactions. This may not be possible with some equipment.
• Train employees to not bypass the prompts for additional information.
• Use technology solutions to manage interchange fees paid. For example, I offer merchants CenPOS SaaS. With this service, employees are automatically prompted for the correct data needed to qualify this and any other transaction. Merchants are given the tools to stop employees from impacting their cost of accepting credit cards, as well as impacting risk of accepting cards.

A future article will address card not present, AVS, and chargeback risk mitigation. Are you confident that your processor or agent is able to help you manage interchange? If not, call now.

TODAYS BULLETINS:

• Fraud costs
• Mobile Payments- as easy as Apple
• Historic $7.2 Billon dollar settlement may result in consumers paying swipe fees
• Interchange qualification question of the day: sales tax exempt and corporate cards

Retail Fraud Taking a Greater Financial Toll According to LexisNexis® 4th Annual True Cost of Fraud Study. This year’s cost of $2.70 per $1.00 in merchandise is up $0.40 from last year’s level of $2.30. One of the areas of major fraud growth is the mobile sector. This year, mobile merchants paid $2.83 for every $1.00 lost compared to just $2.00 for 2011, an increase of more than 40 percent. If you have losses due to fraud, call me to discuss prevention options.

One mobile payment solution that really stands out you may have seen in an APPLE STORE. I recently blogged about the Linea Pro hardware Apple uses. It’s more expensive than other options, but it also can help solve more problems. A recent client meeting uncovered a desire to collect donor information at special events for auction items. One option is to combine the Linea Pro hardware with CenPOS mobile; merchants can swipe the drivers license and collect just the name & address to append the payment file. If permitted by local law, full drivers license data can be swiped as well. For the Linea Pro, or any other mobile payment need, contact me for assistance to help choose the best solution for your needs.

Payment networks Visa and MasterCard, as well as a number of large retailers, agreed to a $7.25 billion settlement that may allow merchants to impose a “checkout fee” on consumers for credit card transactions and end a seven-year battle over credit card swipe fees.

• Read ABC News Article
• Visa Press release Visa, U.S. Retailers Resolve Claims in the Federal Multi-District Interchange Litigation
• National Association of State Procurement Officials Brief- 9/2012 (pdf download) if you do business with governments, read this.
• Expect announcements in the October Merchant update- until then, I recommend taking no action.
• Interchange qualification: corporate cards

INTERCHANGE QUESTION OF THE DAY: If a customer is tax exempt, how can the transaction qualify for lower interchange rates? If a customer is tax exempt, the merchant cannot qualify the business/purchasing card transaction with level 2 data for preferred corporate card rates, which requires a sales tax other than 0. Merchants rarely know what kind of card a customer has, and have no way of knowing what the rules are for that card. CenPOS solves this problem by identifying the card issuer in real time, and automatically prompting for the right extra data ONLY when needed. For example, when using alternative payment gateways or terminals, the merchant is usually stuck with 2.65% interchange rate. With CenPOS, a processor that supports level 3 data, and the CenPOS level 3 data prompt turned on, the merchant can qualify certain MasterCard transactions as low as 1.80%, a .85% savings. Look for CORP DATA RATE I (US) PUR, CORP DATA RATE I (US) BUS, EIRF or STD on your merchant statement for examples of transactions that may have been eligible for better rates.

Warm regards,
Christine  Speedy

Law firms and other professional services businesses often have tax exempt sales. Regarding credit card processing interchange rates, if Visa Level II is only applicable on transactions with sales tax,  does this mean Comm Card Elec transactions that are at 2.95% cannot qualify for Level II and lower rate?

Not exactly. Merchants, including law firms, can qualify for lower rates than 2.95% for corporate cards.  The merchant must have a qualified business code (MCC) as submitted on their merchant application. The transaction must also be supplied with the correct data to qualify the transaction, which may vary depending on different factors.

Below is related information from Visa. Visa does not publish the ‘qualification criteria’ for different rate types, leaving it up to merchants to figure it out, or to rely upon their credit card processing vendor to help them.

Visa International Operating Regulations April 2012:

Commercial Card – Non-Travel Service, Level II Interchange Reimbursement Fee – U.S. Region In the U.S. Region, the Commercial Level II (non-Travel Service Category) Interchange Reimbursement Fee is available for taxable Commercial Visa Product Transactions that are CPS-qualified and meet certain additional data requirements as specified in the U.S. Interchange Reimbursement Fee Rate Qualification Guide. Tax-exempt Commercial Visa Product Transactions and Commercial Visa Product Transactions using the CPS/Account Funding program are not eligible for the Commercial Level II (non-Travel Service Category) Interchange Reimbursement Fee.

Commercial Card Business-to-Business (B2B) Interchange Reimbursement Fee – U.S. Region
In the U.S. Region, Commercial Visa Product Transactions that do not meet the Level II Enhanced Data requirement will qualify for the Commercial Business-to-Business Interchange Reimbursement Fee. To qualify for this program, the Transaction must be CPS-qualified as specified in the U.S. Interchange Reimbursement Fee Rate Qualification Guide and be completed at a Merchant properly assigned a business-to-business Merchant Category Code as specified in the Visa Merchant Data Standards Manual.

EDITORS NOTE: Looking at the Visa chart above, can you tell which rates are ‘qualified’ or ‘non-qualified’? No. And that’s the difficulty merchants, CFO’s,CPA’s and controllers face every day. The qualified rate rules are also different for MasterCard corporate cards which will be addressed in a later article.

CenPOS is a universal payment processing platform that provides efficiencies for merchants and their customers, reduces PCI DSS compliance burden, and many other benefits, including,  CenPOS is an intelligent payment processing platform that replaces inefficient and outdated solutions. A key differentiator is the proprietary way CenPOS helps merchants qualify transactions automatically. Unlike other solutions, it doesn’t rely on employees to do the right thing at the time of transaction.

WHERE TO BUY

CenPOS is sold through direct agents and resellers. There is also a referral program. Click here to become a CenPOS agent, reseller, or referral partner.  Click here to become a customer or call the hotline at the top of this web page.

Credit card processing is evolving from dial up terminals to web based virtual terminals, even for the retail environment. These hosted solutions are not all alike. Addressing just the pin debit function for payment processing, CenPOS and SkipJack perform differently. The hardware set up for each in this scenario is a virtual terminal, magnetic stripe card reader and pin pad.

• The Skipjack user must look at the consumer card and ask if it will be ‘debit or credit’.
• The CenPOS user will automatically prompt the customer for their pin number IF it fits the merchant settings.

What’s the difference?

With Skipjack, employee decisions at the point of sale impact merchant risk and cost of accepting credit cards. With CenPOS, the customers and employees are prompted automatically to achieve the desired result at the point of sale. CenPOS is an intelligent payment platform that routes transactions based on merchant settings for risk tolerance and payment costs.

Statistically, CenPOS merchants achieve a national average of over 75% pin debit conversion. Merchants can verify this information for their account in the executive dashboard, and also create alerts for their conversion rate, such as if it falls below a certain percent.  While I don’t know other product statistics, published reports of aggregate retail merchants are substantially lower- less than 30%; most businesses I encounter  have under 10%.

What’s the merchant benefit to increase pin debit conversion?

• 14 days for a dispute period vs 120 day for signature debit.
• Tougher to lose disputes.
• Dues and assessments do not apply.
• Additionally, the Durbin Amendment requires 2 debit networks on every card. With CenPOS least  cost routing, the debit transaction will be routed to the lower cost network, according to all applicable rules.

DISCLAIMER: This review uses publicly available information posted on the competitive product web site as of 7/01/2012. The article does not address all features, just the pin debit conversion. Skipjack is a registered trademark of Skipjack Financial Services, Inc.

EDITOR CHRISTINE SPEEDY COMMENTS:

• According to their web site http://www.skipjack.com/solutions.aspx?cmsphid=85781357|4347063|2831168, “PIN-based debit is currently available only for Canadian merchants.” However, I don’t think that is accurate.
  
• Regardless of the features you need, CenPOS generally outperforms Skipjack when all the facts are compared, especially for automotive and business to business applications.
• API is available to integrate into ERP and other software packages.

WHERE TO BUY

CenPOS is sold through direct agents and resellers. There is also a referral program. Click here to become a CenPOS agent, reseller, or referral partner.  Click here to become a customer or call the hotline at the top of this web page.

What happens when you key enter a credit card on a retail merchant account? Most merchants and even merchant services sales agents don’t really understand the consequences of how this impacts what you pay in credit card processing fees, specifically how you qualify for different INTERCHANGE rates.

For this example, let’s assume you have a RETAIL merchant account. This means when you signed up for a merchant account, you signed an agreement that most of the time your customers are present and will swipe their credit card. As a result your account is coded in such a way that it’s expected you’ll transmit data from the magnetic stripe on the back of the card, or embedded chip. You’re also required to get a signature from the customer. For interchange qualification, the assumption is that if you key enter a transaction, it’s due to a misread of the magnetic stripe, not because your customer is placing a phone or fax order.

For a MOTO merchant account, the opposite is true. Your account is coded so that you are NOT expected to send the data that comes from the magnetic stripe, nor are you expected to have a signature. Instead different information is required. For example, Visa requires the address.

What happens when you key enter a transaction on a retail merchant account? The expected data is not received, and therefore the transactions does not QUALIFY for the associated ‘best’ interchange rate for the specific card.

EXAMPLE RATES FOR A RETAIL STORE with a RETAIL MERCHANT ACCOUNT and the customer uses a traditional rewards card:

Visa CPS/Rewards 1 1.65% + $0.10. The customer is present and the magnetic stripe data is sent. This is called the Qualified rate.

Visa Electronic Interchange Reimbursement Fee (EIRF) 2.30% + $0.10. The customer is NOT present and no magnetic stripe data is sent. The transaction is key entered. If you do not enter address on a key entered transaction, EIRF is the result. Let’s face it- your cashiers are not going to know when they need to enter an address and unless they are forced to, they will skip entering it anyway.

Visa Standard Interchange Reimbursement Fee 2.70% + $0.10. The customer is NOT present and no magnetic stripe data is sent. This transaction was key entered and additional required information was not present. How do your cashiers know what additional data is needed on a transaction by transaction basis?

Do you see how even if you have a great merchant discount rate, it doesn’t mean you’re paying the lowest rates possible? There are a number of reasons why EIRF and standard can occur, though I’ve discussed only one above.

EXAMPLE FOR A RETAIL STORE, with a RETAIL MERCHANT ACCOUNT USING CENPOS, and automated switching is on.

Visa CPS/Rewards 1 1.65% + $0.10. The customer is present and the magnetic stripe data is sent.

Visa CPS/Card Not Present CPS/Rewards 2 1.95% + $0.10.  The customer is NOT present and no magnetic stripe data is sent. This transaction is key entered, and CenPOS automatically prompts for the address and any other information required to qualify the transaction for the best card not present rate, or per merchant custom settings.

Using the CenPOS virtual terminal solution, the merchant qualifies for the best rate under both types of transactions, swiped and key-entered. Savings using CenPOS on this transaction= .45% or .75%, the difference between qualified key entered and EIRF or Standard.

The illustration shows part of the payment cycle that applies to interchange qualification.

Plus risk is mitigated:

• The merchant is not expected to have a signature on the key entered transaction, which will be required to defend against disputes.
• A common retail fraud check is the last 4 digits, but for key entered, that is useless. Instead, address is automatically prompted for by CenPOS.

How does CenPOS compare with other internet based credit card processing solutions and virtual terminals? The vast majority do not have the switching technology and intelligence required to automatically force the desired transaction as described above. They either don’t do it, or leave it up to the cashier to make the right decision at the point of sale. The evidence that other solutions don’t work are in your merchant statement detail. Just look for EIRF, standard, stnd, std or non-qualified in any of the interchange or fee descriptors.

TIP: Are you thinking about mobile payments to your CARD NOT PRESENT or MOTO merchant account? The same logic will apply. The CenPOS switching technology will enable you to qualify for retail card present rates on you MOTO merchant account. Will you qualify for retail rates with any other solution? The proof will be if you see CPS Retail 1.51% and $.10,  Visa CPS/Rewards 1 1.65% + $0.10, and other card present interchange rates.

About CenPOS: “Creating efficiencies through payment innovation”
CenPOS, based in Miami, is an intelligent payment processing network that streamlines the payment experience for businesses and consumers by using state-of-the-art technology to replace inefficient, outdated payment systems. The network reflects the core values that drive the experienced and innovative CenPOS team: Simplicity, Scalability, Security and a holistic approach to payment processing strategies.
CenPOS provides solutions to a range of organizations including but not limited to retail, card not present merchants, automotive dealers, professional services and academic institutions; special programs are also available for non-profits.

WHERE TO BUY

• CenPOS  is sold through limited authorized resellers and agents.
• Keep your existing merchant account.
• Contact Christine for CenPOS for your business and for reseller opportunities.