September 16th, 2014 by Elma Jane
When plastic cards become digital tokens, they become virtual. So how do you say that the Card is Present or Not Present. The legendary regulatory difference that the cards industry has relied on to differentiate between interchange fees for Card Present and Card Not Present transactions.
Apple secured Card Present preferential rates for transactions acquired by iTunes on the basis that the card’s legitimacy is verified with the issuer at the time of registration and the token minimizes probability of fraud. If an API call to the issuing bank is sufficient to say that the Card is Present, who is to say that the same logic can’t apply to online merchants who also verify the authenticity of Cards on File when they tokenize them? How can one arbitrarily say that the transaction processed with token from an online merchant is Card Not Present, but the one processed with Apple Pay is Card Present even though both might have made the same API call to the bank to verify the card’s validity?
In the Apple case, a physical picture of the card is taken and used to verify that the person registering the card has it. It is not that hard for an online merchant to verify that the Card on File converted as a token does belong to the person performing an online transaction.
As we move towards chip and pin the card present merchants will spend substantial money upgrading their hardware and POS systems. That expense will be offset by that savings in losses due to fraud. MOTO and e-commerce transactions ( card NOT present ) will always have a higher cost because the nature of processing is NON face to face transactions. Of course the fraud and losses are higher when the card is manually entered or given to someone over the phone……Face to face will always have the lowest cost per transaction because it is usually the final step in the sale. Restaurants are low risk because you had the transaction AFTER you eat. If there is a dispute it happens before the merchant even sees the credit card.
In the long run, as cards become digital and virtual through tokens, we are all going to wonder if card is present or not present. May be some will say. Card is a ghost.
Posted in Best Practices for Merchants, Credit card Processing, EMV EuroPay MasterCard Visa, Visa MasterCard American Express Tagged with: (POS) systems, API call, Apple secured Card Present, bank, Card Not Present transactions, card present, card present merchants, cards, cards industry, chip, credit-card, digital and virtual, digital tokens, e-commerce transactions, fees, fraud, hardware, industry, interchange, interchange fees, issuer, issuing bank, low risk, Merchant's, moto, NON face to face transactions, online, online merchants, online transaction, PIN, Processing, Rates, token, transactions
April 15th, 2014 by Elma Jane
Amsterdam, Netherlands-based Cardis has been piloting its technology in Europe with Raiffeisen Bank in Austria and Sberbank in Russia. They are now focused on the U.S., as this is the fastest growing mobile payments market in the world, where there’s a huge opportunity. Integration of technology with a large U.S. processor and with a major U.S. retail brand, which will be launching a mobile site and mobile app using Cardis solution.
Cardis International is planning an April launch in the U.S. for its technology, which enables merchants to accept low-value contactless or mobile payments without incurring high processing charges. Cardis is able to bring down the processing cost of low-value payments, the company said, by aggregating multiple transactions into a single payment.
The problem
Contactless card and NFC-based mobile payments are typically for low amounts, and yet still use a card processing infrastructure that was designed 40 years ago when the average credit card transaction was $100.
Traditional card processing systems require each transaction to be individually processed through the payment system, including authorization, clearing and settlement. The resulting variable costs of processing each transaction are independent of the transaction amount and too high for low-value payments, particularly in low-margin industries such as quick-service restaurants. QSR restaurants often have a 3 percent profit margin, yet, for low-value contactless payments, the processing cost could be as high as 6-7 percent of the transaction value.
Mobile and contactless cards offer consumers a convenient form factor. But they don’t solve the problem that low-value card payments are very expensive for merchants.
As an ever-increasing percentage of transactions have become cashless, card processing fees have become a significant cost. Costs that are based on the number of transactions, rather than their value. With average per person expenditures of $5 or under, feels each swipe fee much more than a business where customers spend $50 or more. But not accepting credit/debit cards for low-value transactions isn’t an option as many of customers don’t carry cash anymore.
Aggregation
Cardis’ solution is to act as an aggregator of low-value payments, sending a single batched transaction through to a processor instead of multiple low-value transactions. As there is no per transaction processing of individual low-value purchases, the cost-per-transaction is significantly reduced.
Cardis provides its technology as a software plug-in to payment service providers for contact-based and contactless card payments, mobile wallet transactions and NFC payments.
There are two models. For card payments, it will aggregate multiple purchases by an individual cardholder at a single merchant on a post-paid basis up to a specific amount, for example $20. To guarantee payment to the merchant, since the aggregated transaction is processed at a later date, it will pre-authorize an amount, for example $15, the first time the customer makes a purchase at that merchant.
Alternatively, merchants can opt for Cardis’ prepaid system. This involves the consumer setting up a prepaid account hosted by Cardis’ sponsoring bank that is topped up via ACH (automated clearing house) transfers. Using the Cardis prepaid account on a smartphone provides the digital equivalent to cash.
With its post-paid solution, merchants will save 30-50 percent per transaction compared to conventional card processing fees, while its prepaid solution saves merchants 80 percent per transaction. With the post-paid solution, it will only aggregate a customer’s purchases at a single specific merchant. But, as the prepaid solution aggregates the customer’s purchases across multiple merchants, this enables to offer a much lower processing fee to the merchant.
Cardis provides an audit trail enabling consumers to track individual transactions that are aggregated using its technology. Consumers don’t lose any of their card protection rights and guarantees by agreeing to let a merchant aggregate their payments through Cardis. They can always charge back any disputed transactions.
Cardis sees opportunities for digital content providers such as online music stores and games providers to use its aggregation technology. It can integrate solution with existing digital wallets.
Raiffeisen
In 2012, Austria’s Raiffeisen Bank launched a pilot of Cardis technology for NFC-based Visa V Pay debit card payments in partnership with Visa Europe. Raiffeisen’s MobileCard mobile payment product uses a secure element stored on an NFC-enabled MicroSD card inserted in a mobile phone. Although Cardis supports secure elements stored on SIM cards as well as on MicroSD cards and on the cloud, Raiffeisen opted for MicroSD cards, as this is an easier solution to implement.
Raiffeisen cardholders participating in the pilot use MobileCard on average three times a week, with an average transaction value of ($5.70). Merchants accepting MobileCard are seeing 40 percent to 70 percent lower merchant processing fees for an average transaction value of ($5.43) to ($13.60).
Spindle
In October 2013, Spindle, a U.S. mobile commerce company, signed an agreement with Multi-max, a manufacturer of vending machines for mid-size and small offices throughout North America, Europe and Asia. Spindle will integrate its MeNetwork mobile commerce technology into Multi-max’s line of K-Cup vending machines for rollout across the U.S.
The MeNetwork solution will incorporate all card-based payment acceptance services, as well as mobile marketing services. Spindle’s partner Cardis will provide low-value payment processing services for purchases at K-Cup vending machines.
Posted in Credit card Processing, Credit Card Security, Digital Wallet Privacy, e-commerce & m-commerce, Electronic Payments, Gift & Loyalty Card Processing, Internet Payment Gateway, Mobile Payments, Mobile Point of Sale, Near Field Communication, Payment Card Industry PCI Security, Smartphone, smartSD Cards, Visa MasterCard American Express Tagged with: accept, ach, aggregated, aggregation, aggregator, authorization, automated clearing house, average transaction, batched, card payments, card processing infrastructure, card processing systems, card-based payment acceptance, cardholders, clearing, contactless, contactless payments, cost-per-transaction, credit card transaction, debit card payments, Digital wallets, high processing charges, low-value payments, merchant aggregate, Merchant's, microSD, mobile app, mobile commerce, mobile payment, Mobile Payments, mobile site, mobile wallet transactions, nfc-based, payment service providers, pre-authorize, prepaid, processed, Processing, processing cost, processing fees, processor, settlement, smartphone, transactions, transfers
November 15th, 2013 by Elma Jane
November 7, 2013 – Payment Card Industry (PCI) Council’s recent acceptance of the world’s first Point-To-Point Encryption-validated solution is great news for both acquirers and merchants, and will aid in reducing merchant scope and increasing business security worldwide. If your P2PE know-how is a little spotty, here are the basics.
What is P2PE?
Point-To-Point Encryption (P2PE) is the combination of hardware and processes that encrypts customer credit/debit card data from the point of interaction until it reaches a merchant solution provider’s environment for processing. Because card data is immediately encrypted as the card is swiped (or dipped), it prevents clear-text information from residing on the payment environment. Encrypted card data is then transferred to, decrypted by, and processed through the solution provider processor who is the sole holder of the decryption key.
In a POS environment, merchants often store decryption keys on their backend servers. Bad idea. If a cybercriminal hacks into that environment, they not only have access to the encrypted card numbers, but the decryption key as well. Hacker jackpot. Many question the difference between P2PE and typical point of sale (POS) encryption.
The reason P2PE is arguably the most secure way to process is because merchants don’t have access to decryption keys. If a hacker breaches a merchant using a validated P2PE solution, he/she will only recover a long string of useless encrypted card numbers with no way to decode them.
Why use P2PE?
Basically, P2PE increases data security and has the ability to make a merchant’s job of reaching PCI compliance easier. The main point of using a P2PE-valiated solution is to significantly lessen the scope of security efforts through PCI Data Security Standard (DSS) requirement and P2PE Self-Assessment Questionnaire (SAQ) reduction. Compared to the 80+ questions required of mainstream merchant SAQs, the P2PE-HW SAQ only requires merchants to answer 18 questions.
Are all P2PE solutions created equal?
Answer is no. Many P2PE solution vendors claim their solution reduces scope, but in order for a merchant to qualify, they must select only P2PE-validated solutions listed on the PCI Council’s website.
To get P2PE solutions and applications listed on the approved website, solution provider processors must go through a rigorous testing process performed by a qualified P2PE Qualified Security Assessor (QSA). P2PE QSAs help entities thorough the 210-page document of P2PE requirements, testing procedures, and controls required to keep cardholder data secure – a task which only a few companies in the world can do.
As of this post, the only P2PE hardware solution approved by the PCI Council is European Payment Services’ (EPS) Total Care P2PE solution, validated by P2PE QSA SecurityMetrics. A number of other P2PE solutions are currently undergoing the review process and will be added to the list once approved.
Posted in Best Practices for Merchants, Credit card Processing, Credit Card Security, Electronic Payments, Merchant Services Account, Payment Card Industry PCI Security, Point of Sale, Visa MasterCard American Express Tagged with: acceptance, acquirers, backend, cardholder, credit/debit, cybercriminal, data, decode, decrypted, decryption, DSS, encrypted, encryption, encrypts, hacker, hardware, key, Merchant's, p2pe, p2pe-hw, Payment Card Industry, PCI Council, point of sale, point-to-point, POS, process, processed, processes, Processing, processor, provider's, saqs, secure, solution, transferred, validated
October 22nd, 2013 by Elma Jane
Sponsored by Artisan Mobile, this webinar on Nov. 7, 2013 from 2 p.m. – 3 p.m. will cover the challenges and opportunities that will come with the transition to iOS as well as what it means for retailers and marketers that rely on the mobile medium for success.
The iOS 7 release is the most significant mobile operating system update since the launch of the iPhone. And while mobile developers are testing new features and debating the merits of Apple’s latest overhaul, it is not clear that C-level executives are aware of the enormity of the effect that iOS 7 will have on retailers and marketers.
The Apple update brings along with it a new mobile user interface, new gestures, more sophisticated background processing support and auto-layout updates. The changes will not only affect existing iPhone and iPad applications, but will significantly shape app design strategies moving forward.
Posted in Mobile Payments, Mobile Point of Sale, Smartphone Tagged with: app, Apple, application, auto-layout, design, developers, executives, iOS, ios 7, ipad, Iphone, marketers, medium, mobile, Processing, retailers, strategies, success, update, webinar
October 17th, 2013 by Elma Jane
VeriFone and National Payment Card Association (NPCA) debuted a mobile payment and rewards solution that enables convenience store and petroleum retailers to provide customers with smartphone-based payment options at the pump.
Utilizing VeriFone’s Smart Fuel Controller and NPCA’s mobile payment solution, c-store and gas station operators with VeriFone payment acceptance systems can quickly implement a fixed low-cost mobile payment and rewards program built on existing infrastructure used for merchant branded debit cards.
Consumers are increasingly drawn to rewards-based fuel purchase programs and they expect to be able to use their mobile phone to complete transactions at the pump. NPCA and VeriFone are showing how easy it is for CSPs to offer mobile payment and reward options to customers that increase loyalty and sales.
VeriFone Smart Fuel solutions make it easy for CSPs to offer forecourt pump POS payment without incurring the cost of installing new dispensers. The Smart Fuel Controller combines pump and pay-point support into a single unit, simplifying installation and maintenance, and eliminating the need for third-party interface devices to integrate pay-point management with in-store POS systems.
Merchants can develop their own mobile app, or apply their brand to a mobile app supplied by NPCA, to enable customers to pay for purchases and receive loyalty incentives using their smartphones.
Consumers today would rather utilize the capabilities of their smartphones versus pulling out their wallets. Using this solution, retailers can easily and cost-effectively create mobile loyalty programs that attract and reward high-value customers – without having to replace their existing payment infrastructure.
NPCA’s debit-based payment programs provide retailers with the ability to drive customer loyalty and reduce the cost of payments. Fuel discounts are funded from interchange savings that retailers would otherwise pay to banks. Payment processing is done by NPCA using the automated clearing house (ACH) system to clear debits to cardholder checking accounts and net settle with retailers each day. The company holds five patents related to the processing and methods for ACH-based decoupled debit and mobile payments.
Come November VeriFone and NPCA mobile payments solution will be available for beta testing.
Posted in Electronic Payments, Mobile Payments, Point of Sale, Smartphone, Visa MasterCard American Express Tagged with: acceptance, ach, app, apply, cardholder, consumers, cost, debit cards, devices, infrastructure, interchange, interface, loyalty, merchant, mobile, pay-point, payment, payments, phone, POS, Processing, rewards, sales, smart, Smartphones, solution, transactions, verifone, wallets
October 15th, 2013 by Elma Jane
What is an electronic check?
Electronic Check also known as Echeck – is an electronic version of a Paper Check. Electronic Checks allow merchants to convert paper check payments made by customers to electronic payments that are processed through the (ACH) Automated Clearing House Network. It’s a fast, efficient, and secure way to process check payments.
Because of the many benefits and increased security methods that electronic checks offer, this method of payment is quickly growing in popularity. In 2007, electronic check conversion increased by 30%, with more than 3.1 billion paper checks converted to echecks through in-store transactions. Familiarizing yourself with how electronic checks work, the benefits and security features they offer, and how you can get started with electronic check conversion will save you time and money and help you provide greater protection for your business and your customers.
How it works:
Electronic check conversion is a simple method of processing payments, and the changes to how you do business are minimal. One of this method’s greatest advantages is that you can electronically submit checks instead of having to physically take them to the bank, saving you time and increasing employee efficiency.
When you receive a paper check payment from your customer, you will run the check through an electronic scanner system supplied by your merchant service provider like National Transaction Corporation (NTC). This virtual terminal captures the customer’s banking information and payment amount written on the check. The information is transferred electronically via the Federal Reserve Bank’s ACH Network, which takes the funds from your customer’s account and deposits them to yours.
Once the echeck has been processed and approved, the virtual terminal will instantly print a receipt for the customer to sign and keep. Employees should mark the paper check as “void” and return it to the customer. Your merchant transactions will be available online for viewing with customized detailed reporting, which may vary in features depending on the merchant service provider you choose.
Using electronic check conversion to process your customers’ payments holds many benefits over paper checks:
Benefits:
1. Received Funds Sooner. Businesses that use electronic check conversion have funds deposited almost twice as fast as those using the traditional check processing method, with billing companies often receiving payments within one day.
2. Reduced Fraud and Fewer Errors. Echecks are processed using an automated system, which cuts down the number of people who must handle the check, reducing the potential for error and fraud. Merchant service providers (NTC) also maintain, monitor, and check files against negative account databases that store information about individuals or companies that have past records of fraud to help decrease fraudulent activity.
3. Reduced Processing Costs. In general, the cost to process an echeck is substantially less than that of paper check processing or credit card transactions. Echecks require less manpower to process and eliminate incidental costs such as deposit and transaction fees that accompany paper checks. With Echecks, you can save up to 60% in processing fees.
4. Sales Increase. If your business didn’t accept paper checks in the past, you can expand the payment options available to your customers and increase sales by offering echecks. If you are converting from accepting paper checks to echecks, you can still expand your customer base by being able to accept international and
out-of-state checks without the worry of fraud. Echecks require account validation and customer authentication processes that identify bad checks within seconds.
5. Safe, Simple and Smart. Electronic check conversion is easy to set up and relies on the ACH Network for processing, the same reliable and trusted funds transfer system that handles Direct Deposit and Direct Payment. Plus, echecks are a smart choice for the environment, helping to reduce more than 67.4 million gallons of fuel used and 3.6 million tons of greenhouse gas emissions created by transporting paper checks.
Increase security with electronic checks – Electronic check conversion leverages the latest information protection features such as encryption and message authentication. Because of this, many retail merchants, merchant service providers, and financial institutions consider it to be one of the most secure payment methods in the electronic payment processing industry.
Authentication – Merchants must verify that the person providing the checking account information has the authority to use that checking account. There are a number of authentication services and products available to merchants, including:
Digital Signatures or Digital Certificates are a way of Encrypting information that gives the receiver a more reliable indication that the information was sent by the claimed sender. They are used by programs on the Internet to confirm the identity of a customer to concerned third parties, serving a similar purpose as a handwritten signature. Digital Signatures cannot be easily tampered with or imitated and are easily transportable, thereby making them a reliable method for verifying identity when implemented correctly. Digital Signatures are often used to implement Electronic Signatures, a broader term that refers to any Electronic Data that carries the intent of a signature.
Duplicate Detection and prevention is another way to reduce fraudulent activities. Financial institutions have software and operational controls in place to prevent duplication of the scanned electronic representations of customer checks.
Encryption The ACH Network automatically encrypts messages using 128-bit encryption and a secure sockets layer (SSL).
Public Key Cryptography is an Encryption/Decryption Security Method that uses one key to Encrypt a sent message and another to Decrypt it. With Electronic Check Conversion, the Private Key is a secret mathematical calculation used to create the digital signature on the Echeck, and the Public Key is the corresponding key given to anyone who needs to verify that the sender signed the echeck and that the electronic transfer has not been tampered with. Public Key Cryptography is another way to ensure authenticity of the Electronic Transfer of Funds.
What is the (ACH) Automated Clearing House Network?
The Automated Clearing House (ACH) Network is a funds distribution system that moves funds electronically from one entity to another. This highly reliable and efficient nationwide electronic network is governed by the rules established by the National Automated Clearing House Association (NACHA) and the Federal Reserve (Fed). The ACH payment system also handles debit card transactions; direct deposits of payroll, Social Security, and other government benefits; direct debit payments; and business-to-business payments.
How to get started with Echeck:
Useful advice to help make the implementation of electronic check conversion at your business run smoothly:
Choose a processing company that is well established in the market. While a competitive pricing package may also be of importance, having a processor that is reliable with a good reputation is essential.
Look for a processor that enables you to easily align your current business processes with your new electronic processing system. Ensure that you can easily export customer data and smoothly integrate the electronic payment processing system with your business management software.
Notify your customers that your business will begin using electronic check conversion to process payments. Federal rules require you to post a notification about this change in practice as well as to give your customers a takeaway copy of the notification. You must also provide customers a telephone number to request more information about electronic check conversion.
Posted in Electronic Check Services, Electronic Payments, Financial Services Tagged with: ach, authentication, automated clearing house, bank, check, checks, conversion, deposited, digital, echeck, electronic, electronically, encryption, fees, in-store, market, merchant, merchant service provider, money, online, payments, process, Processing, reporting, scanner, Security, signature, submit, terminal, transactions, virtual
October 14th, 2013 by Elma Jane
First what is a Merchant Account? It is a type of bank account that allows businesses to accept payments by payment cards, typically debit or credit cards. A merchant account is established under an agreement between an acceptor and a merchant acquiring bank for the settlement of payment card transactions. In some cases a payment processor, independent sales organization (ISO), or member service provider (MSP) is also a party to the merchant agreement. Whether a merchant enters into a merchant agreement directly with an acquiring bank or through an aggregator such as PayPal, the agreement contractually binds the merchant to obey the operating regulations established by the card associations.
Merchant Account comes in 2 Basic Types – Aggregated Accounts and Dedicated Accounts.
Aggregated Merchant Account – such as those provide by PayPal that use a single merchant account to provide credit card processing for an entire portfolio of companies.
Dedicated Merchant Account – are provisioned specifically for your business.
Each has its Advantages and Disadvantages.
4 Key Points to Consider when deciding which type is the most advantageous for your small business.
1. Creditworthiness: To obtain a dedicated credit card processing merchant account your business will need to go through comprehensive underwriting. If you’re in a difficult to underwrite industry or if your business is very new and if it has a less than stellar credit history then an aggregated merchant account is the best choice. You still need to provide information about your business, underwriting for aggregated accounts is typically far less rigorous than for dedicated merchant accounts.
2. Funds Control: With an aggregated merchant account, transaction proceeds go to the service provider and are then deposited to your bank account at the provider’s discretion. There are no industry standards or rules that govern how an aggregated merchant account provider handles or disburses your money. The provider makes the rules, and can change them at will, so if you choose an aggregated merchant pay very close attention to the contract terms and any changes made to them. With a dedicated merchant account, transaction proceeds, less processing fees, are deposited directly into your business account. While the merchant account provider can correct errors, react to potential fraud and debit your account for customer “chargeback” claims. This must all be done based on industry-standard credit card processing rules.
3. Neighborhood: With an aggregated account, you’ll have no idea about the other companies processing transactions. If a good number of them engage in fraudulent activity, it is possible that the service provider’s processing account will be terminated and even honorable businesses like yours will lose credit card processing ability. If you do go with an aggregated account, it is very important to make sure that your provider is large enough to absorb fraud generated by a few bad apples.
If you’re using a small provider, try to get a list of the other business using the service and check them out to see if you want to live in the same neighborhood. With a dedicated merchant account the only company processing credit card transactions through it will be yours. You are in full control of keeping the account in good standing.
4. Speed: Getting a dedicated merchant account can take time. While there are some providers automating the process and providing same-day decisions. A typical application will take 48 hours to approve and additional time to integrate into a POS or electronic payment processing environment. Signing up for a credit card processing under an aggregated account service provider can usually be done in minutes, and it often comes with an online system that can have you actively processing payment within the hour.
Offering your customers the option to pay with a credit card is a great way to enhance revenue for your small business. Customers want the points associated with rewards cards, and they want to manage their own cash flow by floating balances or financing their purchases. Allowing them to use credit cards accomplishes both. So, give the customers what they want. If you don’t accept credit cards yet, now is a great time to start. Having made that decision, the next step is to obtain a merchant account for credit card processing.
The actual credit card processing rates you’ll be charged are a critically important factor as well. But as with most things, you get what you pay for. So don’t choose a low rate without also considering how the provider you select will impact your overall business.
For Merchant Account Services Please call National Transaction at 888-996-2273 or visit our website www.nationaltransaction.com to know more about our services.
Posted in Credit card Processing, Merchant Services Account Tagged with: account, accounts, acquiring, aggregator, card, cards, chargeback, credit, debit, electronic, environment, fees, financing, fraud, ISO, merchant, msp, payment, PayPal, POS, Processing, provider, transaction, underwriting
October 10th, 2013 by Elma Jane
Merchant Cash Advance was originally structured as a lump sum payment to a business in exchange for an agreed upon percentage of future credit card and/or debit card sales.
Notion Merchant Cash Advance companies provide funds to businesses in exchange for a percentage of the businesses daily credit card income, directly from the processor that clears and settles the credit card payment. A company’s remittances are drawn from customers’ debit- and credit-card purchases on a daily basis until the obligation has been met. Most providers form partnerships with card-payment processors and take payments directly from a business owner’s card-swipe terminal.These Merchant Cash Advances are not loans – they are a sale of a portion of future credit and/or debit card sales. Therefore merchant cash advance companies claim that they are not bound by state usury laws which limit lenders from charging excessive interest rates. This technicality allows them to operate in a largely unregulated market and charge much higher interest rates than banks. This structure has some advantages over the structure of a conventional loan. Most importantly, payments to the merchant cash advance company fluctuate directly with the merchant’s sales volumes, giving the merchant greater flexibility with which to manage their cash flow, particularly during a slow season. Advances are processed quicker than a typical loan, giving borrowers quicker access to capital. Also, because MCA providers typically give more weight to the underlying performance of a business than the owner’s personal credit scores, Merchant Cash Advances offer an alternative to businesses who may not qualify for a conventional loan.
Usage Merchant cash advances are most often used by retail businesses that do not qualify for regular bank loans, and are generally more expensive than bank loans. Competition and innovation led to downward pressure on rates and terms are now more closely correlated with an applicant’s FICO score.
Generally there are three different types of repayment methods for the business.
1. ACH (Automated Clearing House) Withholding: When structured as a sale, the finance company receives the credit card processing information and deducts its portion directly from the business’s checking account via ACH. When structured as a loan, the finance company debits a fixed amount daily regardless of business sales activity.
2. Lock Box or Trust Bank Account Withholding: All of the business’s credit card sales are deposited into bank account controlled by the finance company and then the agreed upon portion is forwarded onto the business via ACH (Automated Clearing House), EFT ( Electronic Funds Transfer) or wire. This is the least preferred method since it results in a one-day delay in the business receiving the proceeds of their credit card sales.
3. Split Withholding: When the credit card processing company automatically splits the credit card sales between the business and the finance company per the agreed portion (generally 10% to 22%). This is generally the most common and preferred method of collecting funds for both the clients and finance companies since it is seamless.
Opting for a merchant cash advance is a decision made by small business owners every day of the week across this country. If you’re having a hard time establishing a business line of credit or getting approved for a business loan, a merchant cash advance may very well be the best option available to you to help you finance your business.
Here are reasons why a business cash advance makes sense.
A. Can take out more advances as advance is repaid
Most business loans will not be extended as you pay off your balance, but with a merchant cash advance, you can get more money as you pay off your advance.
B. Even with less-than-perfect credit, you can be approved
No worries about being approved if you have less-than-perfect credit, a high credit score is not a major factor in whether you are can receive business funding from a cash advance.
C. Flexible repayment terms – repayment is based on sales volume, not a flat rate
Some businesses can run into financial hardships with traditional business loans that require flat-rate monthly payments, but with merchant cash advances your monthly payments are dependent on your sales volume. This means that if you have a slow month, you pay back less.
D. Frees up time because of the simple application/approval process
The application and waiting process for a business loan or even a business line of credit can be outstanding –sometimes you have to wait 30 days just to receive notice of approval from your application, add the wait time to the back and forth calls, document signing, etc – and it can be an arduous process. However, by choosing a merchant cash advance, you can quickly qualify online or by phone.
E. Gives you more money in your pocket to improve cash flow
Cash advances can give you the opportunity to receive more money than you would be able to borrow from a bank.
F. Gives you money right away
With a merchant cash advance you literally can have your cash in as little as 72 hours from your applications approval – and most businesses get their funding in less than a week. Now that’s a simple process
G. New business friendly
Many small business loans require that you have a well-established business (2 years or more) to even consider you for business funding. With a cash advance, you can receive funding even if your company is newly in business.
H. No personal liability for repayment of the cash advance
Much unlike with business lines of credit and small business loans, you are not personally responsible for repayment of the advancement.
I. Non-restrictive usage on what you use the funding for
Too many times business owners are restricted by what they can do with their business loans. But, because a cash advance is designed to help you improve your cash flow, you can use your new funds wherever your business needs them.
J. Qualification is easier than with traditional business loans
Banks have a lot of stipulations for businesses that they loan money to or extend credit lines – cash advances have minimal qualifications and high approval rates.
Posted in Best Practices for Merchants, Merchant Cash Advance, Merchant Services Account Tagged with: ach, automated clearing house, bank, business, businesses, capital, cash advance, credit-card, eff, electronic, excessive, flat-rate, funds, loan, loans, merchant, money, online, pay, payments, Processing, purchases, Rates, signing, transfer
October 10th, 2013 by Elma Jane
There are various payment processing rates that apply to credit and debit card transactions. Visa and MasterCard do not publish their rules and regulations or the payment processing standards required to get the lowest interchange rate. It’s up to credit card processing companies to understand and implement them to their merchants’ benefit. A high downgrade rate may indicate that your processor does not know the standards, or may be reluctant to implement best practices or new rules changes. The application of these rates is based on a variety of factors related to the particular circumstances of the sale and the way the payment is processed, as well as on the type of the card that was used. Typically payments processed in a card-not-present environment (e.g. online or over the phone) are assessed higher processing fees than payments processed in a face-to-face setting. Payments made with regular consumer types of cards are generally processed at lower rates than payments made with rewards, business-to-business or commercial cards. Debit cards are processed at lower interchange rates than credit cards. In order to simplify the pricing for their merchants, the majority of the processing companies have elected to use various tiered pricing models (two-tiered, three-tiered, six-tiered, etc.). There are three general classifications used in the various tiered pricing models:
Qualified Transaction (also referred to as the Swiped Rate) This is the rate charged per each transaction when the card is physically swiped through a credit card terminal. When a transaction is processed in accordance with the rules and standards established in the Payment Processing Agreement, signed by the merchant and the processing bank, and It involves a regular consumer credit card, It is processed at the most favorable rate. This rate is called a “Qualified Rate” and is set in the merchant’s Payment Processing Agreement. The Qualified Rate is set based on the way a merchant will be accepting a majority of their credit cards. For example, for an internet-based merchant, the internet interchange categories will be defined as Qualified, while for a physical retailer only transactions where cards are swiped through a terminal will be Qualified.
Mid-Qualified Transaction This is the rate charged when a transaction is manually keyed-in using AVS – Address Verification Service (card #, expiration date, address, zip code and CVV code all match). When a consumer credit card is keyed into a credit card terminal instead of being swiped or The cardholder uses a rewards card, business-to-business or another special type of card the transaction is charged a discount rate that is less favorable than the Qualified. This rate is called a “Mid-Qualified Rate.”
Non-Qualified Transaction This is the rate charged when manually keying-in a transaction without using AVS – Address Verification Service. When a special kind of credit card is used (like a rewards card or a business card), or a payment is not processed in accordance with the rules established in the Payment Processing Agreement, or It does not comply with some applicable security requirements.
Qualified Transaction Conditions
One electronic authorization request is made per transaction and the transaction/purchase date is equal to the authorization date. The authorization response data must also be included in the transaction settlement. The authorization transaction amount must match the settled (deposit) transaction amount. The card that is used is not a commercial (business) credit card The credit/debit card is present at the time of the transaction, the card’s full magnetic stripe is read by the terminal, and a signature is obtained from the cardholder at the time of the transaction.
The transaction must be authorized and settled under a standard retail industry code.
The transaction must be electronically deposited (batch transmitted) no later than 1 day from transaction/purchase/authorization date.
Mid-Qualified Transaction Conditions
One or more of the Qualified conditions were not met
Non-Qualified Transaction Conditions
One or more of the Qualified conditions were not met, or The card that was used was a commercial card without submitting the additional data or:
The transaction was electronically deposited (batch transmitted) greater than 1 day from the authorization date, or:
The transaction was not electronically authorized, or the authorization response data was not included in the transaction settlement.
Posted in Best Practices for Merchants, Credit card Processing, Electronic Payments, Financial Services, Merchant Services Account Tagged with: account, authorization, authorized, best, business, card, card-not-present, credit, cvv, debit, downgrade, interchange, keying, lowest, MasterCard, merchant, payment, processed, Processing, qualified, rate, rewards, standards, swiped, transaction, visa
