Monday, May 16, 2016

New Style Payment Page With Direct Bank Billing

Today I was ordering a book online and I saw a new style online payment page. It suggests as the first type of payment, pick your bank! I guess the idea is to bypass merchant accounts and credit cards and online payment systems and do a direct debit

The online payment page is marked: Powered by PayPal". While the idea really caught by eye, I predict that this will FAIL in the mark place.

Why do I predict this direct bank withdrawal  not take off in the market place as a payment system. Because it  primarily addresses the vendor's issues. For a vendor, it probably reduces the fees from credit card processing. It probably speeds up payment. It might also cut down on chargebacks but all of these issues matter only the vendor.

From a consumer's point of view, I'm less likely to share my bank details than my credit card details. Also, I don't carry my bank details around with me whereas I do have my credit cards in my wallet.

Heh PayPal, do you have any views on this?  Am I missing the point?

Online Pay with Online Bank Account
Online Pay with Online Bank Account

In contrast, I paid for my lunch today with ApplePay. WOW, that was fast and easy!

Saturday, April 23, 2016

Credit Card Chip System in the US: So Messed Up

Whether you got chips in your cards or not in the last few years, I'm sure you are aware of the painfully slow performance of the chip-based card payment system.  If you use the chip, if you're like me, you try to avoid using the chip since it takes an extra 20+ seconds. Even if you don't have a chip, I'm sure you've waited in line behind people who do.

We've all wondered why. It turns out, it's poor software.  Visa announced this past week that they will update the software with a faster implmenetion. And I quote:

An upgrade from Visa aims to shave a significant amount of time off this process. If Visa’s new “Quick Chip” upgrade — announced this morning — works properly, customers will no longer have to stand there awkwardly for 10-20 seconds with their card sticking out of the reader, waiting for approval. Instead, it would be more akin to the typical ATM experience, where the customer dips the card into the reader for only a second or two.
However, it's much worse than a simple question of speed.  Here's what's wrong:
1. We all prefer Apple pay. It's faster and more convenient and it's coming on fast.  Bravo to the credit card companies for totally blowing their dominance of automated payments by a slow late awkward implementation.
2. The chip system does not really address security very well. While it does move away from the incredibly easy to copy magnetic stripes, it does not fully implement what is known as the "chip and PIN" system used in all the countries in the world except for the US.  In all the other countries, there is both a chip and then the user must enter their PIN to maintain security. Most of the world implemented this.  However, the US  did not implement the PIn system since we felt it might be too hard on consumers so we remain with a sytem which is not so secure or advanced.
Why is the US doing it this way? It might be a problem of our economic system which is dogmatically private sector-oriented so the government cannot dictate a move to a higher security system.  So instead, the market is left to figure out how to move forward which means since nobody wants to show leadership, the low security system remains in place with the costs of fraud remaining incredibly high which of course, ultimately gets stuck back onto the consumer.

Sunday, February 28, 2016

Card Not Present, Recurring Bills, and All the Business Questions

Dear Readers,
I'm going to totally update the content on this site with a set of new posts, or maybe pages, summarizing our knowledge on these key topics.

It will be a summary of the key business issues related to the credit card processing of a card not present intangible subscription business model. It'll be a course unto itself.

I have written on all these topics before but for my own purposes, I will update and review my thinking on these topics and write out a top level summary.

You lucky readers will benefit from all this wisdom. In return, I ask for not for cash. If you think it is useful, just comment on the site saying so,  link to this site, tweet or post about it (directly to the articles that you find most useful) and also, if you see an ad that is of interest to you, don't hesitate to click on it and patronize the advertiser.  At $0.20 a click to me, after a few years, I might find that given the time that I will investing in this site, that I might be making all of a dollar an hour. Woo hoo!

Topics (subject to change, feedback desired).

Credit card transaction cost systems: Interchange versus <what's the other one called?>
Interchange rate details
Key Metrics on an online subscription business: Recruiting and Retaining
Shopping Card Declines
Subscription Member Services
Credit Card Declines: Interpreting the codes
Credit Card Processing:  Storing Cards, Cards in a Vault with tokens,
Changing Credit Card Vendors
Credit Card Processing Contracts
Visa, Mastercharge, Diners Club, Discover, and American Express
Shopping Cart Software

Friday, February 26, 2016

Card Not Present Credit Card Fees

I would like to thank the Card Fellow people who have a great guide to credit card processing. Worth reading....

One of the ways that credit card processing figure costs is with the interchange rates.  The interchange fees f  change twice a year in April and October. Here are the current interchange fee schedules:
Historically, interchange has been imposed upon merchants to reimburse issuing banks for lost interest resulting from a cardholder's grace period for repaying their debt. This is why Visa still refers to interchange fees as "interchange reimbursement fees." Today, Visa states that "the primary role of interchange is to create an equitable balance of incentives between a cardholder's financial institution — which issues Visa cards to consumers — and a retailer's financial institution that enrolls retailers and processes Visa transactions for them." (Source)
When a credit card transaction takes place the issuing bank (cardholder's bank) pays the acquiring bank (merchant bank) for their cardholder's purchase less the interchange fee for the transaction. The acquiring bank then pays their merchant from the remaining balance minus a markup for processing the transaction.

Monday, February 22, 2016

Mastercharge To Reduce Unnecessary Credit Card Declines

MasterCard is introducing behavioral and contextual analytics tools to help card issuers navigate fraud risks. Called Authorization IQ and Assurance IQ, the tools are part of a new product line called, of course, MasterCard IQ.
Mastercharge recently announced a mobile alert system for Mastercard holders to notify them of out-of-locale or large spending.  They are following this with announcements related to reducing credit card declines which they are calling Mastecharge IQ.  
Authorization IQ offers issuers insights on the behavioral patterns related to user accounts, analyzing them to determine the risk level of a current transaction. Assurance IQ, meanwhile, extracts information from a merchant concerning a transaction’s circumstances and analyzes it to produce a risk score with respect to potential fraud.
The problem being addressed is false declines.  These false declines create several problems.  One is that it results in lost business. The value of false declines per year is estimated now as $118 billion. By any measure, hat is a huge amount of lost business.  
But it gets worse since once a person finds that their card is unreliable, they start to lose confidence in their card and to use other cards instead.  So this is a very competitive area for people to improve on. I saw a number of sites today that rehashed the Mastercard announcement about reducing credit cards declines.  What I didn't see is any analysis of whether this brings Mastercard up to par with Visa and Amex declines or whether it puts them ahead.

Thursday, December 3, 2015

P-Cards or Procurement Cards for Schools

Pcard procurement card for schools
Pcard procurement card for schools
Procurement by schools can be complicated and bureaucratic.  Enter the idea of streamlining purchasing for purchases under $5,000 with a purchasing card also known as a School PCard , School Procurement cards, or P-Card.

The Educational PCard allows schools to purchase  goods and services  as part of a traditional purchase order system or through a streamlined system. 

In England,  purchasing cards are known as procurement cards. And trucks are lorries, cops are bobbies, and elevators are lifts but that's another story. Click to know more about UK vs US language and words.  

I learned about school pcards from a leading educational vendor known as VocabularySpellingCity.  They are one of the national leaders with sales directly to teachers which is now being broadly adopted by schools and districts based on some adapting they made to the more advanced needs of principals and districts.  VocabularySpellingCity leads as an Supplementary ELA product for elementary schools

An alternative approach to giving money directly to schools is to use an advanced teacher level funds distribution and purchasing system such as ClassWallet. 

Another vendor that helped educate me on purchasing for schools is MyPrepWorks, a leading educational company specialized in test preparation systems for algebra EOC tests, high stakes standardized tests (SAT, ACT), and so on.

Saturday, October 3, 2015

EMV Cards | October 1, 2015 | Merchants Now Responsible for Fraud

I think we just crossed over a big change in the credit card world which I wish I more fully understood.  We're moving finally away from the weak security of credit cards with magnetic stripes and towards a pin and chip system.

Traditionally, if someone buys something at a retailer with a fraudulent credit card,  the merchant  was in no way responsible for the loss. I guess the issuing bank was responsible for the losses.

Also traditionally, in the US, our credit cards are based on a simple magnetic stripe on the back.  Even though the rest of the world has switched decades ago to a chip with pin system, the US has not.  It's one of the weird things about the US over the last 50 years.  While other countries have gone shooting ahead with innovations that improve the economy for everyone but require investment and some adjustment and some collective planning, the US seems a little too....something... to move forward. Lazy? Complacent? Disorganized? Examples...

Time to go metric which is better for industry and education? England and India and Brazil and China can do it.  But not the US.

Time to teach kids to read properly which means starting with the sounds (not the names) of letters? The UK and France have switched but we, being far more traditional, have not (yes, our rate of illiteracy is much higher than those two countries combined).

Time to move to an all digital cellular phone system?  Most of the world made the switch about 10-15 years ahead of the US.

Time to move from a ridiculously insecure system of credit cards where no pin is required and a fake card can easily be made since it's just a magnetic band on the back?  The rest of world did it decades ago but the US is only switching now and we're not really bothering with the pin part since it's a little inconvenient and it's hard for our highly competitive (with each other) credit card players to make the switch so we're only going to try adding a chip at this time.

OK, I've had my rant, now back to a description of the new system.  Going forward, if a retailer only uses the magnetic stripe reader and hasn't upgraded to or started using the chip system, the retailer will take responsibility for the losses if the card is fraudulent.

For merchants and financial institutions, the switch to EMV means adding new in-store technology and internal processing systems, and complying with new liability rules. For consumers, it means activating new cards and learning new payment processes.
Most of all, it means greater protection against fraud. Quoted from which has a great article on the topic.  It continues to explain liability....
Today, if an in-store transaction is conducted using a counterfeit, stolen or otherwise compromised card, consumer losses from that transaction fall back on the payment processor or issuing bank, depending on the card's terms and conditions.
After an Oct. 1, 2015, deadline created by major U.S. credit card issuers MasterCard, Visa, Discover and American Express, the liability for card-present fraud will shift to whichever party is the least EMV-compliant in a fraudulent transaction.
Consider the example of a financial institution that issues a chip card used at a merchant that has not changed its system to accept chip technology. This allows a counterfeit card to be successfully used.
"The cost of the fraud will fall back on the merchant," Ferenczi says.
However, what the article does not cover and what I'm seeking to understand is what has changed for us Card Not Present merchants? In a separate article, says the problem of fraud for online transactions is going to get worse.  More quoting....
Sophisticated online fraud rings are expected to flourish in the next few years, even as the U.S. switches to credit cards embedded with anti-fraud computer chips.
Following the lead of most other developed countries, card issuers in the United States have begun phasing out credit cards with only the traditional magnetic stripe and replacing them with cards that also contain a newer technology known as an EMV chip, which makes the cards nearly impossible to counterfeit.
However, as the ability to use counterfeit cards in stores dries up, fraudsters are expected to turn to other forms of fraud that prey on different vulnerabilities. At the top of the list, payment security experts say, is using stolen card numbers to buy stuff from the Internet.

And that might be only the beginning. "As long as we innovate and develop new financial services, there will always be some exploit that will be created and someone seeking to take advantage of a poorly executed or nonexistent control," says Seth Ruden, senior fraud consultant with ACI Worldwide.
In every country that has switched to EMV cards -- and the United States is the last developed country to do so -- online fraud has jumped, says online fraud expert Brian Krebs. "Fraud doesn't go away, it just goes somewhere else, and that somewhere else is always online," he says. "The thieves can still steal the card number and expiration date, which still can be used online. So that's generally what will happen. We'll see a pretty big uptick in card-not-present fraud."