A B2B supplier’s guide to optimizing commercial card payments review

Mastercard and The Strawhecker Group released A B2B supplier’s guide
to optimizing commercial card payments. Selecting the right merchant acquirer and payment gateway, and optimizing interchange, can help reduce suppliers’ collection efforts and costs associated with commercial card payments. By Marie Elizabeth Aloisi and Peter Michaud. Christine Speedy, blog author, reviews the guide. In my opinion some elements, present an incomplete picture for merchants, especially the business suppliers accepting commercial payments that is the target of the paper.

The executive summary cites research that suppliers can reduce the cost of collecting funds from customers by 31% if they accept credit cards. I googled to find that commercial credit card research data, and though this is not the referenced Mastercard and Kaiser Associates, Commercial Card Acceptance Cost-Benefit Study, of November 2016, it has similar data:

  • This study estimated card acceptance at the point-of-sale to be 37% less costly than using other payment collections methods – yielding savings of $12 on a $500 transaction
  • Card acceptance provides a similar sized net benefit regardless of the funds transfer tool it replaces – e.g. check vs. ACH vs. wire
  • The bulk of value from commercial card acceptance lies in its use as a pre-payment tool – providing revenue assurance against bad debts

 

I have a problem with the next line in the report, “That’s because getting paid by check—or even ACH or wire—involves many manual steps, onerous costs, and potential errors that are a burden to a supplier’s accounting, finance, and treasury functions.”  Checks are still the most onerous even with a scanner, but with electronic bill presentment and payment, any other payment method can be automated for increased efficiency. Our cloud payment processing solutions, including integrated with ERP, automate all types of payment processing, including check/ACH, wire, credit card, and can update journals etc.

The paper goes on to explain why working with your acquirer is critical. While it mentions suppliers can benefit from advanced gateways, most acquirers offer a limited number of payment gateways to merchants. In fact, they may offer suppliers only one solution – they’re own- and it may not be the best for the supplier, it’s just the only one they offer. Independent payment gateways, like CenPOS that I offer, can provide significant advantages to maximize profits, efficiency and flexibility. For example, fulfilling the need to simplify wire transactions and match to invoices.

The three best practices cited to work with acquirers are to automate payments, optimize interchange and negotiate pricing. 

The devil is in the details not cited. For example, “suppliers can only take advantage of lower interchange rates if the payment gateway is set up to pass Data Rate 3 information along with the transaction.” This is true. But the bigger problem is compliance with all the other rules required to qualify the transaction for Data Rate 3. For example, suppliers often do a preauthorization, which expires before settlement (but can still settle) or is not the same as the final settlement amount. These common transaction types will nullify qualifying for the best interchange rates, including MasterCard Data Rate 3. There are many more rules that make it tough to qualify and if the payment gateway does not automatically manage for suppliers, passing Data Rate 3 info doesn’t matter. The reality is most payment gateways do not have a solution to help suppliers comply.

Again, if the acquirer doesn’t have the best solution, should suppliers rely on their advice? A supplier client of mine went to their acquirer (top 5 in USA) and told them what I was offering. They would keep their acquirer but switch to my payment gateway; they’d use our electronic bill presentment and payment solution to eliminate paper credit card authorization forms and employees getting cardholder data over the phone. Customers would self-manage their payment methods, including storing & tokenizing if they chose to. Their acquirer did not want them to use any solution other than their own.  They offered them a substantially worse solution- the silliest I’ve ever heard. The acquirer would give them a new merchant account with virtual terminal exclusively for one large client that they knew was using a commercial card. What about all the other clients? What about eliminating employee access to cardholder data and storing data on paper? Advising to use substandard solutions happens all the time.

In summary, Mastercard and The Strawhecker Group put out some great research data for suppliers. I’m a huge fan of the people at The Strawhecker Group and their work. Suppliers should look to cloud payment processing solution providers like myself at CenPOS for advice. Suppliers need the best payment gateway because without it, the rest doesn’t matter. Combining a robust payment gateway, business solutions, and the flexibility to change acquirers without business disruption can provide significant advantages.

All comments and statements herein are strictly my personal opinion and do not represent that of any company.

Christine Speedy, CenPOS sales 954-942-0483. CenPOS is a cloud business solutions provider with end-to-end payments engine that drives enterprise-class solutions for businesses, saving them time and money, while improving their customer engagement.

MasterCard Bin 2 Series In Play: Declines and Fines

Previously, MasterCard announced a new card number BIN series, requiring everyone in the payment ecosystem to update in order to support the new card acceptance. Merchants need to update software and or terminals to comply by the June 30, 2017 mandate deadline. The consequences are both transaction declines and heavy fines.

Credit card processing:

  • Traditional countertop terminals may need a software download, contact your processor.

    Verifone vx520 emv terminal

    Verifone vx520

  •  Point of Sale solutions or the payment gateway that drives terminals need to be updated. This may occur seamlessly in the background with no impact to merchants and nothing to download.
    verifone MX915 EMV terminal

    Verifone MX915 EMV chip terminal

    Equipment & Payment Gateway NOT affected:

    • Authorize.net
    • BridgePay
    • Cayan
    • CenPOS
    • Clover
    • Ingenico w/ EMV Chip Card Technology
    • First Data w/ EMV Chip Card Technology
    • Future POS (Version 5.0.96.30)
    • Gravity Gateway
    • Lavu
    • Merchant Link
    • Micros
    • NMI
    • Payeezy
    • Paytrace
    • Shift 4
    • Shopkeep
    • Swipe Simple
    • USAePay/Gravity Link

    Credit Card Terminals Requiring a Software Update:

    • Apriva cellular terminal
    • FD 50 TI (Non EMV Chip Card)
    • FD 100 TI (Non EMV Chip Card)
    • FD 130 (Non EMV Chip Card)
    • FD 200 TI (Non EMV Chip Card)
    • Ingenico (Non EMV Chip Card)
    • Verifone VX520

    Credit Card Terminals Requiring Replacement: These terminals are end of life and cannot be updated.

    • All Hypercomm Terminals
    • Fd 50 (non TI)
    • FD 100 (non TI)
    • FD 200 (non TI)
    • FD 300 (non TI)
    • VX 510
    • VX 570

    Consequences for non-compliance with MasterCard Bin 2 Series

  • Mastercard Transactions for cards beginning with a 2 in the range of 222100-272099 will be declined.
  • If you do not update your software before the deadline, you will fall into a status of non-compliance. A non-compliant occurrence is defined as any attempted and failed transaction that is confirmed as failed due to a merchant’s lack of readiness to support 2-Series BIN transactions.
    • $2,500 per occurrence in the first 30 days.
    • Escalating up to $10,000 in the next 60 days.
    • Up to $20,000 per occurrence for the subsequent violations.

    These fines may be assessed per merchant location per failed transaction for not implementing support of the new cards.

    Fines will be pushed to acquirers. If acquirers are compliant, but the merchant is not, the fines will be passed down. If you’re sitting on old software and terminals, now is the time to change! It’s simple for MasterCard to identify non-compliance.  Contact us for immediate help- keep your merchant account, get new compliant credit card processing technology.

Disclaimer: This list and accompanying information may be out of date at any time. Check with your acquirer for the most current information.

 

Mastercard Lane and Unique Terminal Identification (TID) Mandate

The Mastercard Unique Terminal ID mandate is another attempt to stem and more quickly identify fraud at merchants using integrated retail point of sale solutions. This mandate was announced back in 2013, and requires unique terminal identifiers for each independent card reading device at a single location, not to be confused with the acquiring TID.

Effective January 1, 2017, merchants who do not adhere to the MasterCard Unique Terminal ID mandate will fall into a status of noncompliance. Fines for non-compliance go into effect December 31, 2017. Multiple card-reading devices, such as PIN pads and terminals, connected to a single host terminal are each required to have a Unique Device ID to remain compliant and avoid potential fines from Mastercard.

MasterCard Fines will be assessed for each transaction that violates this mandate.

If you do not regularly update your POS software, as is also required for PCI Compliance, you’re probably not compliant. with MasterCard and may be fined. Action: contact your POS provider for further information. Read your merchant statement messages for these and other critical alerts.

Hotel credit card authorization form 2017 change

Hotel and lodging industry must update best practices due to 2016 and 2017 changes in Visa and MasterCard rules. Cardholder authentication and multiple authorization indicators are two key components of change. Hotels that comply will maximize profits and security. Noncompliance will result in higher credit card acceptance fees due to penalties, increased declines, reduced profits, and new chargeback risk.hotel credit card authorization formFor those still using paper credit card authorization forms, few are in compliance with Visa Core Rules 5.4.2.5 Prohibition against Requiring Cardholder or Account Data – US Region.

“A US Merchant or its agent must not: Request the Card Verification Value 2 data on any paper Order Form.”

Authorization validity is front and center to the 2017 rules changes. Merchants used to get and authorization, and settle it later at checkout. Now merchants must send the correct transaction types and link them all together with a unique identifier:

  1. The ESTIMATE (Visa) or UNDEFINED (MasterCard) indicator is sent when the final settlement amount is unknown. The customer must be informed that it is an estimate as well.
  2. INCREMENTAL authorization is obtained when the original authorization expires or to increase the amount on hold.
  3. Final Authorization says this is the final transaction.

TIP: Merchants need 3-D Secure (Verified by Visa, MasterCard SecureCode), a global cardholder authentication standard for card absent transactions, to maximize profits and compliance for card not present transactions, which is only available with customer initiated transactions: hosted pay page, digital payment request, online booking. Paper forms don’t create a digital record tied to the credit card, and cardholder authentication is not possible, as defined by the card brands. It’s also not possible to comply with the rule by key entering data into any desktop terminal.

The unique transaction transaction identifier can be a point of breakdown in the process. For example, the events manager obtains a paper credit card authorization form. The first charge is a deposit; the second charge is at the end of the event; a third charge occurs after assessing damages to a room. In each case, the amount is key entered into the payment processing terminal. Since there is no transaction identifier tying them all together, the authorizations are invalid and the ISSUER is within their rights to chargeback for invalid authorization, example Visa reason code 72.

There are so many nuances to the rules, and changes needed in the payments ecosystem, hotels should not assume existing partners have completed the required updates to comply. Technology that can automatically manage the authorization and settlement process- not the old way, but with all the new rules changes- requires a sophisticated payment gateway. Like EMV, there will be vendors that struggle to adapt.

For compliant solutions that can be used standalone or integrated, improving your customer experience, contact Christine Speedy, 954-942-0483.

Reference materials:

  • MasterCard® Pre & Final Authorization Mandate by CyberSource, December 2016.
  • Visa Core Rules October 2016.
  • MasterCard Revises Standards for Processing Authorizations and Preauthorizations by Vantiv December 2016.
  • MasterCard Transaction Processing Rules, November 2016.

See merchant bulletins – downloads for links to many resources.

Mastercard Chip Momentum: Reducing Fraud One Year In

Chip Cards in Market at 88 Percent as Chip-Active Terminals Reach 33 Percent

September 12, 2016 09:00 AM Eastern Daylight Time
PURCHASE, N.Y.–(BUSINESS WIRE)–At the one year anniversary of the shift to chip approaches in the U.S., Mastercard today unveiled data confirming the positive impact the technology is having on issuing banks, merchants and consumers. To date, chip adoption continues to grow:

“Payment cards are an essential part of commerce; EMV requires a change to the customer experience as the industry shifts from swipe to chip”

•    As of July 2016, 88 percent of Mastercard U.S. consumer credit cards have chips, representing a 105 percent increase in chip card adoption since the October 1, 2015 liability shift.
•    The company also sees 2 million chip-active merchant locations on its network, a 468 percent increase in chip terminal adoption since October 1, 2015. Two million merchants represent 33 percent of all U.S. merchants.
•    Of the 2 million chip-active merchant locations, 1.3 million are regional and local merchant locations, representing a 159 percent increase since October 1, 2015.
“Since 2012, Mastercard has championed chip technology. We need chip cards in wallets and chip terminals at checkout to continue to drive card fraud out of the U.S. This country is one of the most complex markets in the world so we know things won’t change overnight,” said Craig Vosburg, president of North America for Mastercard. “However, we’re encouraged by the significant progress over the last 11 months. With every additional chip transaction we move closer and closer to our collective goal – moving fraud out of the system.”
Chip Impact on Merchants
The biggest benefit of chip technology is minimizing the cost of fraud caused, in part, by the use of counterfeit cards. Now, the chips in terminals “talk” with the chips on cards creating unique codes for all purchases. The unique codes protect cards from being counterfeited.
Mastercard fraud data shows a 54 percent decrease in counterfeit fraud costs at U.S. retailers who have completed or are close to completing EMV adoption, when comparing April 2016 to April 2015. Demonstrating the power of EMV and the risk of not adopting it, counterfeit fraud costs increased by 77 percent year-over-year among large U.S. merchants who have not yet migrated or have just begun the migration to chip.
“Payment cards are an essential part of commerce; EMV requires a change to the customer experience as the industry shifts from swipe to chip,” said Brian Riley, director, Credit Advisory Service, Mercator Advisory Group. “There is no doubt chip cards will curtail fraud and it is exciting to see enhancements at the point of sale that will propagate usage, reduce friction and accelerate transaction time.”
Mastercard continues to work closely with merchant partners to ease the adoption of chip. Recent initiatives and programs have included: speeding the terminal certification processes from days to hours, while maintaining quality; adding more intelligence on its network to minimize chargeback costs to merchants; and introducing M/Chip Fast, a new application to help speed transactions and shoppers through checkout lines.
U.S. Consumers Prefer Chip
U.S. consumers have also been central to chip card adoption. While there was an initial learning curve on the chip experience, they now also are seeing the benefit of increased chip safety and security.
Chip card use continues to rise in the U.S. according to a recent Mastercard survey of over 1,000 U.S. consumers:
•    Nine-in-ten Americans commonly use chip cards, a 38 percentage point increase year-over-year, from 49 percent in 2015 to 87 percent in 2016.
“As more U.S. cardholders use their Mastercard chip cards, they are learning the benefits of increased safety and security. It’s no small undertaking to change the way people pay for things. The only reason to start this big a task is to make people’s lives better. Chips have the potential to do just that,” said Chiro Aikat, senior vice president of product delivery – EMV, Mastercard.
METHODOLOGY:
Braun Research conducted an online survey in the United States between June 27 and July 15, 2016 among a nationally representative sample of about 1,000 general population consumers, 18 years of age and older. The sample was weighted to be nationally representative of the US population as it relates to age, gender and region, as well as ethnicity/race. At the 95 percent confidence level, the margin of error is about +/- 3.1 percent.
About Mastercard
Mastercard (NYSE: MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. Mastercard products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MastercardNews, join the discussion on the Beyond the Transaction Blog and subscribe for the latest news on the Engagement Bureau.