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

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:

• Visa's interchange reimbursement fees
• MasterCard Interchange Rates and Criteria
• Merchants are charged a series of costs: interchange, dues, assessments and the provider's markup.   
• Ben Dwyer has a good article on interchange rates and costs.  And I quote a bit...
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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.

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.

Anyone?