Below are highlights of a few credit card processing 2013 rules changes applicable to many 3D merchant blog readers. Please note, the information contained herein is limited and does not contain all the applicable details. Refer to the card brand rules for specific details or contact your merchant services provider.

CARDS ISSUED OUTSIDE US: Effective April 19, 2013, American Express increases Fee from 0% to 0.40% for Prepaid Cards. Effective April 1, 2013, MasterCard increased the Acquirer Program Support Fee from 0.55% to a new amount of 0.85%.
DISPUTES: Effective April 20, 2013, Visa will update International Operating Regulations with modified and new compelling evidence rules for the dispute resolution process.
Visa New Representment Right for Compelling Evidence
Related dispute reason codes: 30 – Services Not Provided or Merchandise Not Received; 53 – Not as Described or Defective Merchandise; 81 – Fraud Card Present; 83 – Fraud Card Not Present.
EXAMPLES:

• For a Mail/Phone Order transaction, a signed order form.
• For a card-not-present transaction, evidence that the transaction uses data, such as IP address, email address, physical address, and telephone number, that had been used in a previous, undisputed transaction. Evidence that the transaction was completed by a member of the cardholder’s household.
• For a transaction in which merchandise was delivered to a business address, evidence that the merchandise was delivered and that, at the time of delivery, the cardholder was an employee of the company at that address (e.g. confirmation that the cardholder was listed in the company directory or had an email address with the company’s domain name). A signature is not required as evidence of delivery.
• For a card-not-present transaction in which the merchandise is picked up at the merchant location, any of the following:Cardholder signature on the pick-up form. Copy of identification presented by the cardholder. Details of identification presented by the cardholder.

Effective October 19, 2013 Change to MasterCard return policy for reason code 60 – Credit Not Processed. If a merchant doesn’t accept buyer’s remorse returns and cancellations, special terms must be disclosed them at the time of the sale. Cardholders must be informed of the Refund Policy prior to completion of the sale at the point of interaction. Failure to disclose will result in the merchant requirement to accept the goods for return and issue a credit to the cardholders account.
Note: Special Terms would include but not be limited to; restocking fees or in-store credits.

Please refer to official documents for further information. Here’s a list of links to card brands.

Effective April 20, 2013, Visa will be updating the International Operating Regulations to allow additional as well as clarify the types of compelling evidence that can be used during the dispute resolution process. Compelling evidence can be provided during the representment stage to allow the merchant the opportunity to show that the cardholder participated in the transaction. Compelling evidence does not mandate that the cardholder participated in, received goods or services, or benefited from the transaction.

Allowable Compelling Evidence examples:

Evidence, such as photographs or e-mails, to prove a link between the person receiving the merchandise and the cardholder, or to prove that the cardholder disputing the transaction is in possession of the merchandise.

For a card-not-present transaction in which the merchandise is delivered, documentation (evidence of delivery and time delivered) that the item was delivered to the same physical address for which the merchant received an AVS match of “Y” or “M.” A signature is not required as evidence of delivery.

For a transaction in which merchandise was delivered to a business address, evidence that the merchandise was delivered and that, at the time of delivery, the cardholder was an employee of the company at that address (e.g. confirmation that the cardholder was listed in the company directory or had an email address with the company’s domain name). A signature is not required as evidence of delivery.

For a Mail/Phone Order transaction, a signed order form.

Please refer to the Visa International Operating Regulations after April 19, 2013 for specific details.

Interestingly, it’s 2013 and yet a 2010 document related to cardholder data breaches affecting franchise locations is a top 5 rated download at Visa.com. The definition of Corporate Franchise Servicer (CFS) , the new Visa third party servicer category, links related to the subject, and commentary are shared below.

Visa determined that data breaches quickly spread among franchises that use a system owned or operated by a corporate franchise organization. Particularly when the franchisor has no role or say in the system used to process, store or transmit payments,  they cannot manage PCI DSS (Payment Card Industry Data Security Standards) compliance.

As a result Visa created a new third party category. From Visa, “A Corporate Franchise Servicer is defined as a corporate entity or franchisor that provides or controls a centralized or hosted network environment irrespective of whether Visa cardholder data is being stored, transmitted or processed through it.” Further, “If PCI DSS-compliant segmentation exists between these assets and the franchisee cardholder data environment, the corporate franchise may be excluded from this requirement.”

Is Your Data Secure? – Published by Multi-Unit Franchise, Issue 2 2011

Visa Classifies Corporate Franchisors As Third-Party Agents - Storefront Backtalk November 11th, 2010

BLOG AUTHOR COMMENTS:

CenPOS 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.  CenPOS products include a virtual terminal, electronic bill presentment and payment, secure online pay page, and mobile payment applications. Additionally, the Dashboard provides executives insights with hierarchy based organization.

CenPOS reduces the burden of PCI DSS compliance, while also providing transparency and scalability in the franchise environment.  Special markets include business to business, automotive, fitness, moving and storage, retail and medical.

In November 2012, the United States District Court for the Eastern District of New York preliminarily approved a proposed settlement agreement in the In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. As part of the merchant class action settlement, beginning January 27, 2013, merchants in the United States and U.S. Territories will be permitted to impose a checkout fee on consumers when they use a credit card.

Key elements:

• Merchants who choose to surcharge must notify MasterCard,  notify Visa and notify their acquirer 30 days prior to beginning to surcharge.
• Brand Surcharges (Visa, MasterCard) cannot exceed the lesser of the maximum amount of 4% of the underlying transaction, or the average effective merchant discount rate**.
• Product Surcharges ( Rewards, Purchasing etc)  must not be more than the merchant’s cost to accept the particular credit product, minus the Durbin Amendment’s cap on debit interchange fees.
• Must be able to apply the same surcharge rules to competitive networks, where allowed by law
• DETAILS ARE IMPORTANT, including receipt requirements- Please read all the official rules, see links below.
• Debit transactions are protected under the Durbin Amendment of the Dodd-Frank Act, 2011 and may not be surcharged.

States With No Surcharge Laws*
California
Colorado
Connecticut
Florida
Kansas
Maine
Massachusetts
New York
Oklahoma
Texas

*Source: Visa.com 1/13/2013

** We assume that they mean the average effective credit card processing rate, not the average effective merchant discount rate, which is only the portion of fee over and above actual interchange fees paid.

Visa surcharge rules

MasterCard Surcharge Rules

Discover was not part of the litigation, and lifted it’s no surcharge rule in 2012. With all the rules above, if a merchant chooses to surcharge customers, they will need technology to ensure all the rules are complied with. CenPOS is a rules based payment processing network, including payment gateway,  that works with all major credit card processors. If interested in surcharging, please contact Christine Speedy.

About CenPOS “Creating efficiencies through payment innovation”
Founded in 2009, Miami-based CenPOS is a SaaS payment technology provider. CenPOS 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. Global Sales: Christine Speedy (954) 942-0483.

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.

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.