News: Small businesses are getting ripped off

Fox News has an article and video that discusses how small businesses are getting ripped off bycredit card processors:

"I'm almost embarrassed I fell for their scam," said hair salon owner Magic Munson. 

She was approached by a salesman representing a company called Payment System Corporation who promised the halve her costs for processing credit cards and debit cards. It's a strong pitch to small businesses that are struggling in a bad economy.

But after she signed up, the company couldn't help her hook up several card swipers. She began getting bills even though the machines weren't hooked up.  The salesman was nowhere to be found and the friendly faces pictured in a list of customer service representatives were missing in action.

"If you try to call any of these people, they'll put you on hold. It's a fight to talk with a real person. i was on hold for 20 minutes (once) and after 20 minutes, they just hang up the phone.  She also began getting bills for services that she never used and was denied refunds that were promised.

There are  a 2 things one should take from this article that differ from what the article implies:

1) Never sign a contract! If there is no contractual obligation you will never have an issue going elsewhere, which should make the company you are with bend over backwards to keep you business by servicing you and doing it well. It will also make it less likely that they are hiding fees.

2) If the rates you are being quoted seem to be good to be true...they probably are.

Rates like 1.09% for credit cards are simply impossible as that is below the actual cost.

Be careful out there and only deal with the most reputable company.

Although few companies have  a no contract policy a merchant service provider that advertises as such is Prestige Merchant Services.

Interchange Plus Pricing: Not Everything?

Another great article by credit card processing veteran Phil Hinke:

I am a strong advocate of interchange-plus pricing. To date, I have allowed only merchant account providers that offer interchange-plus pricing to bid for my clients' business. However, I am also concerned about how some providers and salespeople appear to be pitching interchange-plus pricing as a panacea for ensuring merchants are being priced fairly. Therefore, I decided to turn last month’s article into a 3-part series on interchange-plus pricing — so merchants can see that while interchange-plus pricing can be important, it does not automatically guarantee fair pricing. 

This article is the second installment of that series.

Interchange Plus: 2 Things to Understand as a Merchant 

First, card processing is a very perplexing and convoluted industry. You can have, say, 30 different customers use their debit or credit cards to buy the same product at the same price on your website, and you theoretically could be charged 30 different processing rates. This is one of the reasons why a clever salesperson can offer what appears to be a good processing rate — and ends up being anything but that.

Second, don’t expect a salesperson to offer you the best possible price. If you are currently overpaying for processing by $20,000 per year and the salesperson thinks he can entice you into changing providers for $5,000 in savings, he may offer you a rate that saves you $5,000. There is nothing wrong with this type of sales approach. Merchants — like credit card salespeople — want to make as high a profit as possible. However, this perplexing and convoluted industry puts merchants at a disadvantage in the negotiations, which is the reason for my articles here each month. 

An Actual Interchange-Plus Example 

I have worked with several merchants recently that were offered interchange-plus contracts. Fortunately, they understand that interchange-plus pricing was not necessarily fair. As a result, each eventually received — after negotiations — far better pricing and terms and conditions than originally offered. Here is an example of one such merchant. 

This merchant was with one of the largest merchant account providers. The merchant was on a tiered pricing schedule — I explained tiered pricing in a previous article — and was grossly overpaying for the service. Its provider offered interchange-plus pricing at 0.31 percent plus $0.05 plus normal fees, all of which would save more than $100,000 over three years. As impressive as this may sound, in fact there were three problems with this offer.

First, the merchant was overpaying by more than $175,000 during that timeframe. The provider thought it could wow this merchant into thinking that the savings it offered would keep this merchant. However, after negotiating, the merchant ended up getting pricing at 0.07 percent (versus .31 percent) plus $0.08 plus normal fees, which saved the merchant the additional $75,000 over three years. Both rates were interchange plus, but only the latter pricing was fair.

Second, the provider included a “liquidated damages” clause for early termination. I encourage my clients to never sign a contract with a liquidated damages clause. Depending on the specific verbiage, it could cost thousands of dollars to terminate the contract early. In fact, I know of an ecommerce merchant who was forced to continue processing with his provider — or pay several hundred thousand dollars to terminate early. It should never cost more than $400 to terminate your contract early. 

Third, the provider was charging its processing percentage on returns. The provider charged the merchant 3 percent to process a $1,000 sale with a specific card type; the merchant paid $30 in processing for the sale. If the customer returned the goods, the provider would charge an additional 3 percent to reverse the credit card charges. Therefore, the provider received $60 and the merchant had a net sale of zero. There is no reason why a merchant should pay a processing percentage for refunds — other than it’s another way a provider can make money without the merchant understanding he or she overpaid. I know of one ecommerce merchant that was paying $6,000 per year in refund-processing fees.

An Important Interchange-Plus Question to Ask

I now see merchant account providers increase their fees or add new fees, while at the same time claiming to be passing through all of the Durbin Amendment debit-card interchange reductions. This does not seem right to me. Yes, they may be passing on the lower debit interchange rate. However, if at the same time they are taking more money out of the merchants' pockets with new or increased fees, are they really passing through all of the Durbin Amendment reductions? Are they really any different than the provider that is not passing through all the Durbin Amendment reductions? 

So, one of the questions I ask the salesperson during the negotiations is simply “Has your company increased any fees or added any new fees over the last year? If yes, explain why.” This is a question of provider integrity that each merchant should ask. I am not saying that the provider isn’t justified in increasing or adding new fees. However, all merchants should ask this question during the pricing negotiations. 

Conclusion 

In summary, remember these seven points when you negotiate an interchange-plus contract. Interchange-plus pricing is not a panacea. The card processing industry is perplexing and convoluted. Do not expect the salesperson to offer you the lowest rate. You need to work to get it. Do not be wowed by a large savings amount, as there may even more savings left on the table. Do not focus on just the rate. Understand, also, the fees, funding, and terms and conditions in the contract. Avoid liquidated damage clauses. Ask the tough questions during negotiations.

Debit Card Scam from Processors

(Via Bloomberg) The Federal Trade Commission said Friday that it is paying some $350,000 in refunds to 100 small U.S. merchants that were defrauded in a debit and credit card scheme. The scheme involved several firms that falsely promised they would save small businesses money in credit and debit card processing fees by offering lower rates that those of other card processing services. However, the firms failed to disclose fees and concealed pages of fine print until after the merchants had signed contracts for their services, the FTC said.

The FTC identified the firms that perpetrated the scheme as Merchant Processing Inc., Direct Merchant Processing Inc., Vequity Financial Group Inc. and PPI Services Inc. Also involved in the scam were Aaron Lee Rian and Karely McCarthy, also known as Karly Speelman, the FTC said. The agency reached settlements with Rian and McCarthy that banned them from marketing card processing goods or services for sale or lease. Certain of their assets were sold to provide funds for the refunds, the FTC said.Merchants due to receive refunds were to get between $100 and more than $25,000, depending on how much the merchant paid, the FTC said.

More Deceptive Practices to Watch Out For

If you are not aware by now from reading this blog the credit card processing industry is one of the most deceptive. Most of the time  "what you see"  is not "what you get". In this article Phil Hinke describes some more of those very deceptive practices among sales people in the industry and how they hurt merchants:

I have seen merchants deceived on the actual discount rate they received. I have seen merchants deceived on the "terms and conditions." I have even seen a “1” in the discount rate on the merchant application mysterious change to a “7” after the merchant had signed the agreement. 

Most processors will attempt to lock you into a contract because they have hidden fees they simply don't want you to know about. They also have statements that are impossible to understand because they want to keep you in the dark. Make sure to stay clear of those problems so if something does arise you can leave without penalty.

MasterCard releases 5 Yr Plan for EMV in Australia

MasterCard has announced a new five-year plan designed to change how payments work in Australia and around the world :

By October 2011, all new and reissued MasterCard cards will be EMV enabled, 

and by 2013, all cards and payment terminals will need to be EMV capable.

All ATMS must be EMV capable by the end of 2015.

By October 2012, all MasterCards will be PayPass enabled, 

and several new merchants in certain retail categories must be able to accept these contactless payments – these include taxis, newsagents, bookstores, convenience stores, supermarkets, service stations, fast food restaurants, cafes, bars and cinemas.

By 2012, MasterCard debit holders will be able to take cash-out after purchasing goods through a retailer.

"This is a reaction to the increased competitive ambition by EFTPOS. At the moment, the EFTPOS cards have an advantage because they can be used for cash out, and are closing the gap with their own offering."

By April 2013, online merchants must provide MasterCard SecureCode authentication or the equivalent for all transactions over $200, the company announced.

By April 2014, all existing cards must have PayPass, and all merchants in those categories must be able to accept PayPass payments.

The move highlights the growth of contactless and mobile payments. 

Meanwhile, the Wall Street Journal has reported Google is teaming up with MasterCard to produce a new product that will allow users with NFC-enabled Android handsets to make payments with their phones. The program will allow Citigroup-issued card holders to pay for purchases by using contactless terminals at retailers.

The problem with Intuit Go Payment brought to you by Verizon

Verizon is now going to be promoting Intuit's answer to Square mobile payment systems: GoPayment.

The basics:

The pocket-sized GoPayment reader plugs into the audio jack of any supported smartphone or android BlackBerry operating systems. Merchants can swipe consumer credit and debit cards through the reader or enter card information manually, with all transactions processed immediately and funds automatically deposited into the user's bank account within a few business days.

We mentioned previously the problems with Square credit card processing  and as you can imagine with Intuit there is also a big catch. The free version that has no cancellation fees is not cheap: 2.7%. It is not clear but it would not be surprising to find out that is has similar limitations to square (only process $100 per transaction or 1k per month). The paid version of Intuit most likely does have it's typical 3 yr contract and has the regular monthly fees of $12.95 and although they advertise a rate of 1.7% they fail to mention this only applies to regular credit cards but do not mention what is charged for reward and corporate cards ( if it is anything like what they charge for a typical merchant account you can be assured you pay between 3.5-5% or more for those cards). Do your homework as  the seemingly cheapest way can end being the most expensive. The are companies that have secure mobile payment solutions without contracts or set up fees and those payment would hit your account much faster.

Move over Square! Here come Jumio!

We have discussed Square and it's credit card processing via a smart phone from the makers of Twitter. Well they may be getting pushed out a bit by Jumio. Jumio from the Co-Founder of Facebook, is threatening to take a chunk of the pie from Square. This new technology allows the simply a picture of a credit card to be used as a way of making a transaction. The smart phone simply scans the card similiar to the way a barcode scanner would work on your smart phone. How can this be you ask? The technology behind Jumio allows it to sense things such as if the card is actually plastic and if the hologram is real and if the numbers are embossed. They claim it is not only secure but has the ability to interface with E- Commerce. This means that if implemented, instead of entering credit card information you simply upload a picture of your card.  I'm not sure how many customers will feel comfortable about the idea of their credit card picture floating around out there. Time will tell....

Square Credit Card Processing Raises $100 Million

The NYT is reporting that the mobile credit card processing company "Square" has raised a whopping $100 million in in a financing round led by Kleiner Perkins Caufield & Byers. As part of the deal, Mary Meeker, a partner at Kleiner Perkins, will join Square’s board.


“Square has a great product with extensibility which we believe has the potential to have a lasting impact on how people make payments,” Ms. Meeker said in a statement. “Square’s product is fast, easy and fun for both consumers and vendors; a small business can be up and running within minutes.”


There is little doubt that although this space within the merchant service industry is getting a bit crowded, Square is a force to be reckoned with. As I've mentioned the problems with square is that many don't fully comprehend it's limitations. They are great for someone with a very small side business but for serious vendors a traditional merchant service company is what they need.

Don't Get Fooled by Credit Card Processors!

A great article is written here on the 5 deceitful practices by merchant service providers.




Tactic #1: The “Rate Game”


There is no question that without looking at your actual merchant statement no one can tell you they
can actually save you money or even how much. Yet many people get calls such as these and are duped into believing they will. Some switch only to pay even more! This is because of hidden fees and contracts that many processors will try to lock you into without your knowledge.


Tactic #2: The Binding Contract…

Another trick processors use is to lock you into a 2,3, or even 5 year contract – without verbally telling you they’d done so. Sure, you could have found it somewhere in the details of your processing agreement, but it’s rare for someone to read page after page of small print “legalese” when jumping through all the hoops of filling out a contract and listening to a well skilled, friendly salesperson.

Similarly, at the end of the original contract term, another devious trick is to include a clause somewhere in the contract stating that unless the processor is notified in writing at least 30 days prior to the expiration of the original processing agreement, the contract will automatically renew for a period of 1 year.

A good solution is to find a processor with NO BINDING CONTRACT. Which leads to the next problem…

Tactic #3: Early Termination Fees…

Competition is fierce. In an attempt to lower or eliminate high merchant turnover processors have added Early Termination Fees (ETF’s) to the fine print of their contracts. ETF’s ‘fine’ a merchant if they decide to switch processors before the contract terms are up.

The problem with ETF’s is that it gives an unscrupulous processor power over their merchants. Many of them use this clause as a green light to abuse their customers, knowing most merchants will give up an attempt to leave and go to a new processor once they’re made aware that by contractual agreement it’s going to cost them money.

A good solution is to demand, in writing, a contract with NO EARLY TERMINATION FEES!

Tactic #4: New PCI Fees

While it is true that merchants need to be in compliance with Payment Card Industry Data Security Standards (PCI-DSS), most Level-4 merchants are able to achieve compliance without too much difficulty. As long as they use PCI compliant hardware and software, and don’t store sensitive cardholder information, most of their PCI issues are resolved.

Yet credit card processors have almost universally seen fit to require a monthly, quarterly, or yearly “PCI compliance fee” (which really amounts to nothing more than a new ‘annual fee’). At the same time, processors rarely, if ever, do anything to educate their merchants about PCI. Instead, they simply slap them with a new fee which shows up on their statement as being “for PCI compliance”. No wonder merchants get so angry.

Solution? Find a processor that’s committed to educating their merchants on the important issues of data security, and doesn’t require an arbitrary “PCI fee”.

Tactic #5: The Bewildering Statement

Another tactic processors use is in the format and content of the processing statements mailed monthly to each merchant to summarize their card activity. The majority, from what I’ve seen, look as if they are designed to confuse, rather than disclose the rates and fees paid for the month.

Some even go so far as to hide certain fees, or even completely eliminate disclosing what they are. When a processor doesn’t reveal fees on a statement it’s usually an attempt on their part to prevent a competitor from going over it and coming up with a competitive analysis.

While it does protect the processor, it does so in a way that seems highly manipulative. If a processor is fair, open and honest with a merchant then THAT ALONE will go a long way in preventing merchant turnover. Why would a merchant leave a processor that was open, fair, and honest to go with a new one they didn’t yet know if they could trust? Highly unlikely.

The solution is to ask to see a processors statement before going with them. If it looks like it’d take a semester in college to read you may want to keep looking for a processing company with nothing to hide.

These and more are just some of the reasons many merchants have chosen a merchant service provider such as Prestige Merchant Services. They are one of the few companies that advertise clearly "No contracts". the statements are easy to read so the merchant clearly understands what they are paying and why. Interested in finding out how they compare to your merchant provider? Simply fax them your full statement at 832-203-1974 and they will analyze it for savings with a line-by-line comparison.

FTC Goes After $450M Online Scam

By Darren Waggoner

The Federal Trade Commission has brought a legal action against an online operation that allegedly scammed more than $450 million from consumers in five countries.


Jesse Willms and several companies he controls obtained consumers’ credit or debit card account numbers by enticing them with bogus “free” or “risk-free” trial offers that supposedly required only small shipping and handling fees - and also promised “bonus” offers just for signing up, according to the FTC's complaint.


The FTC charges Willms and his companies used deceptive tactics in offering various products online - including acai berry weight-loss pills, teeth whiteners and health supplements containing resveratrol (the supposedly healthful ingredient in red wine) - as well as for a work-at-home scheme, access to government grants and free credit reports. The FTC seeks to stop the operation’s practices and make the defendants repay fraud, injured consumers.


Consumers lured into the scam were located in the U.S., Canada, the United Kingdom, Australia and New Zealand.


The defendants allegedly contracted with affiliate marketers whose banner ads, pop-ups, sponsored search terms and unsolicited e-mail led consumers to the defendants’ Web sites, and the defendants paid the affiliates for each consumer whose credit or debit card was charged.


The defendants allegedly made false claims about the total cost of products, recurring charges and the availability of refunds. They also buried important terms and conditions in fine print, the FTC alleged.


The defendants named in the complaint are Willms, Peter Graver, Adam Sechrist, Brett Callister, Carey L. Milne, 1021018 Alberta Ltd., also doing business as Just Think Media, Credit Report America, eDirect Software, WuLongsource, Wuyi Source, 1016363 Alberta Ltd. - also doing business as eDirect Software, 1524948 Alberta Ltd. - also doing business as Terra Marketing Group, SwipeBids.com, SwipeAuctions.com, Circle Media Bids Limited - also doing business as SwipeBids.com, SwipeAuctions.com, and Selloffauctions.com, Coastwest Holdings Ltd., Farend Services Ltd., JDW Media LLC, Net Soft Media LLC - also doing business as SwipeBids.com, Sphere Media LLC - also doing business as SwipeBids.com and SwipeAuctions.com, and True Net LLC - also doing business as Selloffauctions.com.


Willms could not be immediately reached for contact.


Consumers had no reason to believe they would be charged for the trial product or the extra bonus products, but they were often charged for the  trial plus a monthly recurring fee, typically $79.95. Consumers also were charged monthly recurring fees for the so-called bonus offers.


Although the defendants offered a money-back guarantee, consumers were often unsuccessful in canceling the charges or obtaining refunds, and the process involved time-consuming phone calls and other steps that made the deals far from risk-free, the FTC complaint alleged.


“The defendants used the lure of a free offer to open an illegal pipeline to consumers’ credit card and bank accounts," says David C. Vladeck, director of the FTC’s Bureau of Consumer Protection. " 'Free' must really mean ‘free’ no matter where the offer is made."


The FTC worked with Canadian law enforcement, including the Alberta Partnership Against Cross Border Fraud, in investigating this international scheme. Most of the defendants are located in Alberta.


"Internet fraud is a global problem that requires an international enforcement response,” says Lisa Campbell, deputy commissioner of Competition for the Competition Bureau of Canada. "International cooperation ensures that fraudsters can’t hide behind borders."


The FTC further alleged that the defendants provided merchant banks with false or misleading information, in order to acquire and maintain credit and debit card processing services from the banks in the face of mounting chargeback rates and consumer complaints.

Willms and his companies also allegedly violated the Electronic Fund Transfer Act and Regulation E (issued by the Federal Reserve System’s Board of Governors) by debiting consumers’ bank accounts without their signed written consent and without providing consumers with a copy of the written authorization.

Why Apple is Poised to Become the King of Payments

Via Micheal Koploy of Software Advice

Bear with me as I imagine grocery shopping in 2013. You walk into Sam’s Club and grab a shopping basket. Your iPhone lights up with a new push notification:

“Welcome to Sam’s Club. Do you want to use your standard shopping list?”

You click no, and instead select the “Summer BBQ List” that you found on Epicurious. The app pops open a map of the store and tells you to head to aisle 2. You enter the aisle and find your first item: pickle relish.

“Please scan each item as you place it in your shopping basket,” the screen reads. You locate the bar code on the jar, and scan it with your iPhone.

The iPhone responds, “You have selected Josh’s Pickle Relish. This brand is $0.22 cheaper at your nearby Safeway. Would you like a Safeway coupon?”

Not worth it today. You press, “No,” and continue shopping, guided by your phone, and scan each item as you place it in your basket. The app is smart, of course, and it guides you around the store in the most efficient route, alerting you as you near each item on your list.

You have completed your shopping list. Based on your selection of: pickle relish, ketchup, onions, hot dogs, and buns, would you also like to purchase potato salad? It’s $1.00 off today. If so, head to aisle 11.

Sounds like a good deal. You go for it.

As you walk towards the exit, your iPhone reads, “You have previously chosen to pay with your Visa card ending in 4128. Select, “Pay,” to complete your purchase using this account.

You select, “Pay,” take your cart, and exit the store. You’ll receive an email on your drive home detailing your purchase with electronic coupons for your next shopping trip.

***

Apple has the potential to change our retail experience, and this future is becoming closer to reality.

Apple Payments Would Be a Game-Changer
“It Gets Better.” This slogan has become a staple of Apple’s World-Wide Developer Conference each year, and a creed for the company’s services. If the scenario above is what I can dream up, imagine what the minds in Cupertino can invent. Apple has revolutionized how we consume music, mobile applications, and media, in general. I fully expect them to revolutionize the retail experience, too. In the process, I think they will come to own a huge chunk of the payments industry.

Why is that important? For one, it’s a $48 billion opportunity. Assuming companies like Visa, Mastercard, and American Express receive about 1.5 to 2.5% of every transaction, that’s easily over $20 billion in swipe fees alone. Meanwhile, merchant services providers – the companies that set up retailers with terminals and act as a conduit to Visa, et. al. earn .5 to 1% of every transaction—up to another $16 billion for their role in the process.

We think Apple has a chance to own the later opportunity by acting as a merchant services provider. If Apple can revolutionize the point of sale, consumers will use their iPhone for retail checkout. Behind the scenes, Apple will be processing payments as a merchant services provider. Consumers won’t care who’s processing the transaction or earning fees.

Here’s my experience. I used to only have a Visa credit card, but was forced to obtain a Mastercard because it was the only one accepted by my loan provider. And that is the beginning and end of my payment preferences. I don’t care if I make a purchase with a Visa, Mastercard, or any other card brand, or if the merchant I am purchasing from uses merchant services company A or company B—it makes no difference to me. Consumers are indifferent to the various payment service providers.

I would, however, care if one provider gave me tools to make informed purchases and make the retail experience more enjoyable. And this is why Apple has the potential to shake-up retail and own the payments industry.

The NFC iPhone Will Change Everything
There is increasing speculation that Apple will soon release a touchscreen device with near field communication (NFC) capabilities, most likely a next-generation iPhone. This technology powers services such as Mastercard’s PayPass, where consumers just need to tap their credit card or other PayPass-enabled device to make a purchase.

When Apple releases this device, they’re poised to leave a heavy footprint on the payments industry. Purchases would be facilitated by presenting an iPhone instead of a credit card; Apple can create a merchant services offering to receive the processing fees for these transactions.

This iPhone would not only be a device that facilitates purchases, but one that creates a more robust, efficient, and enjoyable shopping experience. This is why Apple Payments would be different and a game-changer. It would create reason for the consumer to choose one payment network over another, and give Apple leverage to enter and own the payments market.

Apple Has the Done It Elsewhere
Apple already acts as a merchant for its iTunes and App store, and receives a cut of all transactions. Here’s how much they receive from App Store revenues:

• Apple collects 30% of all revenues from App Store sales
• Apple collects 30% of sales revenues from in-app purchases
• Apple collects 40% of ad sales from in-app ads (iAd)
• Apple charges $99 per year for developers to have access to its SDK

Services like iTunes and the App Store enhance the quality of Apple’s products by extending their functionality. And the market for iPhone and iPads is just beginning to reach its potential, as estimates are that only 30 to 40% of mobile phone users have a smart phone.

As Apple has matured their hardware and adopted this revenue-sharing model, they have become increasingly closer to Apple Payments. Apple is poised to enter the merchant services market—as soon as they release an NFC iPhone.

Consumers Would Force Merchants to Switch
iPhone users would input their credit cards numbers into their iPhones, and present their phones at virtual checkouts to complete their transactions. No more waiting in line. With consumers overjoyed at the convenience of iPhone checkouts, retailers would have no choice but to adopt Apple payments.

But why would merchants switch to Apple Payments? Traditionally, merchants made these decisions based on their own interests. But Apple could offer an experience that other providers don’t, and can’t. Bundled with Apple’s customer loyalty, this could potentially force the merchants’ hands, and allow Apple to demand whatever they saw fit for processing fees. By doing so, Apple could enter the $16 billion merchant services market I alluded to earlier.

But what if they take it a step further. What if Apple owned the entire payment network? What if consumers didn’t pay with their Visa card on their iPhone, but their Apple credit account on their iPhone? This could entitle Apple to up to another 2.5% of every purchase.

Yes. I realize I’m starting to get a bit out there, but who ten years ago would have thought Apple would dominate the music industry today? Or the smartphone industry? Or tablet computers? Apple is sitting on Scrooge McDuck-esque cash reserves, an amount sure to grow over the next few years. A few years from now, maybe Apple could just buy Visa and own the entire payment industry.

What Will It Take For Apple to Be the Payments King?
If and when Apple announces an NFC-capable iOS device, it will assuredly be bundled with an official Apple Payments app—third-party apps would be subject to Apple’s revenue sharing, and that would never work.

Apple will need to release an NFC iPhone, and prepare a merchant services portal. This means that Apple will have to prepare these services well before they announce the device, meshing with new rumors that the iPhone 6, not 5, will be the one with NFC capabilities. Once in place, merchants can accept iPhone transactions, and will pay Apple a processing fee. After they establish this network, Apple can blow the entire industry out of the water, and become a new credit brand à la Visa and Mastercard.

So, what do you think? Do you think Apple could shake-up the payments industry? This would assuredly make Apple one of the most powerful companies in history, so maybe a better question would be: would Apple play nice as the King of Payments?

Square: Getting a Boost from Visa

The latest big news for Square is Visa coming on board as an investor. This no doubt gives the mobile credit card service a boost of credibility and warning shot to potential competitors that it is here to stay. What's in it for Visa? As Forbes explains they get  a piece of the action when it comes to really small business who normally use cash and are switching to credit cards. Square is a fantastic solution for people with a small side business that perhaps use it for small dollar amounts and use it somewhat infrequently. Square does not accept Amex nor can it deal well with larger dollar amounts on a daily or monthly basis (as explained here). It also does not work with a blackberry. For those who are serious about accepting credit cards they should be seeking a merchant service provider who can provide software and/or hardware for your smart phone but stay clear of contracts and termination fees.

Deceptive Credit Card Processing Tacticts

Phil Hinke a veteran of the merchant service industry, has a great article at Practical E-Commerce.He goes on to discuss many of the various pricing methods used in the credit card processing business including tier and interchange pricing. Phil explains some deceptive interchange pricing practices:

"Interchange-plus pricing is typically the best way to go. However, there are some processors who claim to be offering interchange-plus pricing, but are deceptively offering something worse. The first are those processors who are offering interchange-plus pricing with the under-the-breath caveat that it is only for 'qualified' transactions. What they are really offering is a tiered pricing plan because there will be no qualifying transactions. Therefore, every transaction will downgrade at a much higher rate to one of their tiered pricing levels.

"The second deceptive interchange-plus pricing plan is the one that inflates the interchange rate. A salesperson recently sent me one of his own merchant statements to analyze — many salespeople do not trust their processor any more than merchants do. He felt something was not right but could not put his finger on it. I quickly figured out that the processor was adding 0.25 percent to the interchange-rate it was posting on the merchant statement."

He also discusses deceptive merchant statements:

Do not necessarily believe the numbers on your merchant statement. As previously mentioned, I analyzed a merchant statement where the interchange rates listed were not the true card association interchange rates. I analyzed a merchant statement where the per-item fee list was 6.2 cents, but after doing the calculations it was obvious that the merchant was being charged 6.5 cents; 0.3 cents may not seem significant, but for this large merchant it was.

"One of statement types I continually come across — which confuses merchants — is the one that does not show all the charges for the month on the statement, and in fact may delay showing all the charges for up to two months. I have spoken to salespeople who love this statement because when they sign up a new merchant, that merchant generally does a cost comparison after the first month to see how much money he or she is saving after switching processors. Unfortunately, the merchant does not realize that some of that month’s processing cost will not show up on the statement for up to two months. Therefore, a merchant’s total processing fees for April sales may not show up until the June statement."

Prestige Merchant Services offers potential merchants a free statement analysis so they can see how much they are paying and how much they can save by switching without a contract or set up fees.

The benefits of accepting credit cards.

The B2C has a great article that really outlines some of the many benefits of accepting credit cards for your business. Not all of them have to do with expanding your customer base:

Security – Besides the obvious fear of losing or being robbed of their cash, more and more consumers appreciate the security of using credit cards offered by their bank. This often comes in the form of backing up the consumer in the event of a dispute, lost card, etc. In addition, these protections are often provided for free as long as the event is reported in a timely manner.

Tracking – All of a consumer’s purchases are accounted for and can be totaled at the end of each day, week, month, and year. This also assures the consumer accuracy and regularity when it comes to their bank accounts and speeds up the rectifying process.

Convenience and Protection – When purchasing high dollar items with their credit or debit card, consumers are free to do so without having to write a check or carry large sums of cash. Some cards offer insurance for larger ticket items as part of the agreement. Many of the higher-end cards also offer protection on certain items purchased in the event of theft or acts of God. In addition, the record of the purchase can also be valuable for insurance claims.

Employee Purchases – Many employees make purchases on the behalf of their employers, or when they travel on company business. These people are often issued a company credit card that is to be used for all purchases for the company. These potential customers are therefore limited to merchants and service providers that accept credit cards.

Rewards – People who are enrolled in rewards programs will often go out of their way to pay by credit card. There are special incentives and rewards programs offered by almost every bank or Credit Card Company to their customers today. The points can go towards travel, shopping, even event tickets. While it is true that the merchant generally pays slightly higher rates for accepting these cards, the customers that use this type of card tend to spend more because they are incentivized.

Business to Business – Many sales can be lost to B2B purchasing by individual specialty type buyers and their companies. Businesses that are making purchases of products or services for their own internal use often prefer to pay with a credit card. This usually is for accounting reasons, but by not accepting credit cards you are losing out on the opportunity to serve those specialized and likely repeat customers.

Business Travelers – A smaller, but relevant group of potential customers are the business travelers. These customers almost always avoid carrying cash on them in any large amounts, plus they are more than likely writing much of their trips off of their taxes, so they want receipts as well as clear documentation in the form of a credit card statement.

Every day, credit card companies are finding new ways to entice consumers to use their plastic rather than paying with cash or a check. At first it may seem like the cost of accepting credit cards is too high for your business, but the truth is in most cases you cannot afford not to. Every year the numbers show that more and more consumers are using plastic to pay for their wants and needs, so it is better to get on board the trend before you are left behind.

Wondering Why PCI Compliance Is a Big Deal?

Cyber criminals are targeting point-of-sale terminals. 

POS devices read the magnetic stripe on the back of a card that contains account information, which is then transmitted for payment processing.

The POS systems that are connected to the Internet could fall prey to cyber attacks particularly  for small businesses. This is all according to Trustwave's global Security report of 2011:

Although there are rules for security controls that developers should use for the devices, such as the Payment Application Data Security standard (PA-DSS), Trustwave said that "these controls are rarely implemented properly."

Further, many small businesses rely on third-party integrators to support the POS devices. But those integrators often have poor security practices. In 87 percent of the breach cases it studied, the integrators make mistakes such as using default credentials in operating systems or with remote access systems, Trustwave said.

Using SEO to Grow Your Business: Black Hat SEO

Recently big corporations have run afoul of Google's webmaster guidelines. Companies like JCPenny and Overstock.com have been caught using tactics to inflate their positions within Google's rankings. If you want to make sure your business doesn't get blacklisted, you probably want to stay away from Blackhat SEO. What is Black Hat SEO? Black-hat SEO utilizes tricks to inflate your Google ranking positions but when Google finds out what your up to they will do to you what they did to these corporations or worse. How do you avoid this? PC World has some good tips and I suggest you read them.Remember, if you hire an SEO firm to help you get better search results, it's your responsibility to keep them in check.

Problem with Square Credit Card Processing

Square has been getting  tremendous media coverage for the past few months. They now have a lot more competition but they are still getting the most press. The fact still remains that unless you are a small timer, square is not the product for you. There are some serious drawbacks to using square as far as the allowed processing amounts go, which are not listed but vaguely referenced in their terms of service. Basically if you process more than $100 a day or $1000 a month they may hold your funds for 30 days! Between that and the high rates if you are serious about accepting credit cards you are best off with a merchant service provider that offers low rates and no contracts and free software.

Phishing Campaign Targets First Data

(Via Softpedia)

Researchers from email security vendor AppRiver warn about a phishing campaign that targets merchant accounts from a payment processing vendor called First Data.

It the pool of phishing attacks targeting online banking accounts, credit card information, personal details and other online accounts, scams aiming at merchants are not very common.The rogue emails detected by ApprRiver bear a subject of "MERCHANT ACCOUNT UPDATE" and purport to come from "FIRSTDATA SERVICES."

The message contained within reads "Dear First Data customer, please update your login. Download the attachment in this e-mail and proceed."

The attachment is an HTML document called "Update Your Account Information.html," which, when opened inside the browser, displays a spoofed First Data Global Gateway login page.

The page contains a form for inputting the merchant's store number, user ID, tax ID, phone number and password.

"Once the hacker has gained access to the First Data account they will likely have gained control over that specific merchants account," warnsTroy Gill, security researcher at AppRiver.

The obvious danger here is that compromised merchant accounts might contain records of customer transactions, however, according to Mr. Gill, this aspect of the breach remains unclear.

First Data is an Atlanta-based provider of online and on-site payment solutions which caters to merchants, financial institutions and government agencies.

Its product portfolio includes credit and debit card processing, check acceptance and cashing solutions, international payment processing, automated clearing house payments processing and PCI compliance.

The company explains on its site that "the Global Gateway Virtual Terminal is an online payment application that allows you to accept credit cards and other payment types using your PC.

"The Virtual Terminal also acts as your Global Gateway account management application and allows you to view gateway processing reports, edit fraud settings, manage users, and more."