Square and Intuit Face Off With Mobile Payments

Square and Intuit are facing off with their very own versions of mobile credit card technology. As mentioned previously, Square is a great solution for a vendor processing small monthly amounts and small per transaction amounts. Once you get more serious you run into issues: Process large amounts and square will hold onto your fund for 30 days. You can't accept Amex and many complain the swiper unit is easily lost. The problem with both of these solutions is the rates are far from competitive and when you process larger amounts the rate is what is most important. If you are serious about using a Mobile Merchant Service you will bes best off to find an honest credit card processor with great rates and service but beware of contracts, termination and set up fees.

Cutting Debit Card Fees-Durbin Amendment

Via CSPnet.com:

Federal Reserve seeking comment on rules to cut debit-card fees up to 90% 

WASHINGTON -- The Federal Reserve, fulfilling a Congressional order to examine whether merchants were being charged excessive fees to process debit-card transactions, has proposed new rules that analysts said could cut those fees as much as 90%, reportedThe New York Times. "It's bad for the issuers and the card networks," Rod Bourgeois, a payments analyst at Sanford C. Bernstein, told the newspaper.

As part of the Dodd-Frank Act's overhaul of the financial code, Congress directed the central bank, which oversees the regulation of electronic payments, to ensure that the swipe fees charged by the banks and payment card networks like Visa and MasterCard were "reasonable and proportional" to the cost of processing the transaction.

The Fed has proposed limiting interchange fees from 7 cents to 12 cents per transaction, or approximately 0.3% of the face value of a purchase. Merchants now pay debit-card processing fees averaging about 1.3%, according to the Times, citing the Nilson Report, a payment industry newsletter. Smaller retailers are charged more because of lower transaction volume and limited bargaining power, said the report.

The Fed proposed that it re-evaluate the fee cap every two years and asked for more time to consider whether it should be increased to reflect the costs of fraud protection.

The National Association of Convenience Stores (NACS) called the Fed's proposed rulemaking related to debit-card swipe fees a "positive step" and said it will continue to push for the reforms demanded by Congress and consumers alike. "The proposed rules are a positive step in addressing the anti-competitive behavior of the banks and credit-card companies and an acknowledgement of the voice of American small businesses and consumers," said NACS president and CEO Hank Armour in a separate statement.

Both Visa and MasterCard argued that the Fed had not considered all the costs incurred to operate debit-card programs.

Visa said it had "concerns that the [Fed's] proposal includes artificial caps on debit interchange that do not realistically reflect the value of card acceptance."

MasterCard went a step further and openly criticized the proposal, saying it would simply shift costs to consumers from merchants. "This type of price control is misguided and anticompetitive and in the end is harmful to consumers," Noah J. Hanft, MasterCard's general counsel, said in a statement cited by the paper.

Gate Petroleum, which operates about 100 gas stations in the Southeast, has seized on a separate piece of the Dodd-Frank Act that lets merchants charge different prices to customers using different forms of payment, said the Times. This fall, Gate began offering a discount to customers who used cash to buy one of the company's new prepaid fuel cards. Just over two months into the discount program, about 20,000 cards are in use, the company said.

David Dill, the company's vice president for sales and marketing, said Gate saved about 4 cents a gallon whenever it made a sale that did not touch a Visa or MasterCard payment network. Customers receive a discount of 3 cents a gallon; the other penny goes toward the cost of operating the card program. "It's really a loyalty program for the customer," Dill told the paper.

For years, some stations charged higher prices when customers used credit cards, sometimes simply in defiance of the card processing contracts and other times taking advantage of legal technicalities, the report said. In many states, stations could comply with the rules by posting separate prices for cash and credit.

Dodd-Frank lifted that barrier by allowing merchants to steer customers toward the payment method that is cheapest for them to process, without having to post separate prices.

Dodd-Frank also forces Visa, MasterCard and others to compete more aggressively for merchants' business by requiring that all debit cards run on the networks of at least two different payment companies. So when a customer uses a Visa debit card, for example, the merchant could process the transaction on a network other than VisaNet.

Through exclusivity agreements, many debit cards run on the network of only one payment company. The change will take effect in July, after a review by the Fed.

Taken together, these measures significantly strengthen the hand of merchants. Analysts expect merchants to negotiate sharply lower prices with the banks and reclaim a portion of the tens of billions of dollars they spent last year on processing fees for debit and credit cards.

"All of the sudden, the merchants have bargaining power," Bourgeois said. "They have an ability to drive prices down because there will be multiple payment brands on every card, and on top of that, the merchants will have the ability to use the lowest-cost route of whatever payment network they choose."

The banks are setting out to make up for the expected drop in card processing fees, the report said. Bankers say they may offset part of the lost revenue by assessing higher monthly fees on deposit accounts. Debit cards offering rewards points, which cost merchants more to process so they can cover the cost of the programs, could be another casualty, added the report.

The Fed has requested comment on a proposed rule that would establish debit-card interchange fee standards and prohibit network exclusivity arrangements and routing restrictions. The Fed's proposal would implement the debit-card interchange fee and routing provisions of the Dodd-Frank Wall Street Reform & Consumer Protection Act.

The proposed new "Regulation II, Debit-Card Interchange Fees & Routing" would establish standards for determining whether a debit-card interchange fee received by a card issuer is reasonable and proportional to the cost incurred by the issuer for the transaction. These standards would apply to issuers that, together with their affiliates, have assets of $10 billion or more. Certain government-administered payment programs and reloadable general-use prepaid cards would be exempt from the interchange fee limitations.

The Fed is requesting comment on two alternative interchange fee standards that would apply to all covered issuers: one based on each issuer's costs, with a safe harbor (initially set at 7 cents per transaction) and a cap (initially set at 12 cents per transaction); and the other a standalone cap (initially set at 12 cents per transaction). Under both alternatives, circumvention or evasion of the interchange fee limitations would be prohibited. The Fed also is requesting comment on possible frameworks for an adjustment to the interchange fees to reflect certain issuer costs associated with fraud prevention.

If it adopts either of these proposed standards in the final rule, the maximum allowable interchange fee received by covered issuers for debit-card transactions would be more than 70% lower than the 2009 average, once the new rule takes effect on July 21, 2011.

The proposed rule would also prohibit all issuers and networks from restricting the number of networks over which debit-card transactions may be processed. The Fed is requesting comment on two alternative approaches: one alternative would require at least two unaffiliated networks per debit card, and the other would require at least two unaffiliated networks per debit card for each type of cardholder authorization method (such as signature or PIN). Under both alternatives, the issuers and networks would be prohibited from inhibiting a merchant's ability to direct the routing of debit card transactions over any network that the issuer enabled to process them.

According to the recently released 2010 Federal Reserve payment study, debit card use in the United States now exceeds all other forms of noncash payments and, by number of payments, represents approximately 35% of total noncash payments.

Comments on the proposal are due by February 22, 2011.

NACS and other organizations that are part of the Merchants Payments Coalition (MPC) will carefully study the rules the Fed has proposed and offer its suggestions for strengthening the final rules, which the Fed expects to publish in April 2011 and go into effect June 21.

Click here to view the Federal Reserve's official statement.

And click here to view the full text of the Notice of Proposed Rulemaking.

The Problem With Paypal

Many small businesses use PayPal because they are not familiar with a traditional merchant account. PayPal may be a cheaper option for someone that only processes $500 a month, since there are no monthly fees. PayPal makes money on their high percentage rates which range from 3-4% depending on the credit card type. One of the major issues with Papypal is their lack of real customer service and thier ability to just hold on to your money with little reason. Take this email I recently recieved:

Your payments will be held in a pending balance

We're writing to let you know about a change to your PayPal account.

Starting Nov/23/2010, money from payments you receive will be placed in a pending balance for up to 21days. By doing this, we're making sure that there's enough money in your account to cover potential refunds or claims.

Even though you can't access the money right away, please ship orders quickly and communicate with your customers. After 21 days, you can withdraw money from each payment as long as the customer hasn't filed a dispute, chargeback, claim, return, or reversal.

The money may be available sooner if:

1. We can confirm that the item was delivered.
2. Your buyer leaves positive feedback. (Applies only to eBay items)

This change isn't necessarily permanent. We'll review your account every 35 days and re-evaluate if we should continue to hold your payments. If we decide to stop holding payments, we'll email you to let you know.

Why are my payments being held?
We reviewed your account and determined that there's a relatively higher than average risk of future transaction issues (such as claims, or chargebacks, or payment reversals). We understand that it may be inconvenient to have your payments temporarily held but please know that we didn't make this decision lightly.

Before deciding to hold payments, we consider many factors. These factors include account and transaction activity, the rate of customer disputes, the type of business a seller runs, average delivery timeframes, customer satisfaction, performance and history.

Many people after seeing letters like these,  will see the light and switch to a traditional merchant service provider. Try to find the phone number to PayPal and you"ll begin to understand why it's so hard to find.

Square Mobile Credit Card Processing. How good is it?

Square has certainly been making a big splash in the news. With promises of allowing just about anybody to accept credit cards simply by signing up and getting their little square plastic swiper to accept credit cards. Before you jump on the square bandwagon however, there are some things to consider. How serious are you about accepting credit cards? If you think you'll only be processing $1,000 or less a month it might be a good move. If however you are processing more than that,  you may be best be served with a traditional merchant account. The reasons are many:

1) Square rates are expensive 2.75% for swiped and 3.50% for key in:traditional merchant accounts could get you rates of  as little as 1.29% for debit cards and 2.15% for key in.

2) Square has had issues working with new Iphones.Square only has 128 bit encryption as opposed to a blue-tooth reader which has Features Triple DES data encryption.  

3) Square for many is considered a very fragile piece of equipment. 

4) They may have issues with their underwriting departments. 

5) Square might be promoting drug use (ok maybe, maybe not). 

5) Square being a new company may not have the best customer service.

Mobile Credit Card Processing: So Easy Even a Caveman Could Do It!

It amazes me that more people are not taking advantage of this fabulous new technology. There are applications that can turn your smart into a mobile credit card machine. This will allow many business to really get out there and pound the pavement and accept new business in ways they couldn't afford to before. It's really inexpensive and rates can be especially low  if you are swiping the credit card. You can now avoid having to lease or purchase a very expensive wireless credit card reader and also pay wireless fees. This technology is a must for people who accept credit cards on the go i.e. plumbers, electricians or even people who simply want to sell outdoors. You no longer have to carry a laptop either. This technology can be used on droid and Iphone, Itouch type phones. You do need to open a merchant account to get one but that's easier than opening up a bank account in most cases.

What College Students Should Know About Credit Cards

I always hated the way credit card companies would prey upon college students. They would set up shop right on campus, offering free items if you signed up. You could get a nice credit limit regardless of you credit history. The college of course gave no courses on finance that dealt with debt-to-income ratio or credit scores.Here is a great article on the 10 things college students should know about credit cards. Click here for the article.

PayPal Deals with Security Issues

According to Forbes, A new XSS (cross site scripting) vulnerability was identified on Paypal.com. It was discovered by a researcher and was disclosed on both Security-Shell and XSSed. That bug would allow a malicious hacker to insert code on the site that could potentially be used to access a user’s account.

The problem, technically, is found in the parameter sender_country in a transaction called nvpsm. NVP is Paypal’s API for Merchants to use when interacting with the Paypal web site, it stands for Name-Value Pair. SM is short for ’send money’. A problem such as this can be used to capture a user’s session (essentially log in as that user) and perform privileged actions (money transfers) as that user, as well as send a user a valid Paypal URL but then redirect them to a malicious third party site (phishing, malware, etc.).

As if PayPal doesn't have enough problems.