1. Merchant Processing Overview
Annette Slidge, Sr. Director
Paul Gurtner, Director
Chris Moore, Client Executive
Glen Green, Regional Sales Manager,

2. Agenda Merchant Processing 101 Municipalities and Localities
Process Flow
Merchant Processing Expense
Statement Review
Back Office
Municipalities and Localities
Payment Card Industry Data Security Standard (PCI-DSS)
Value Added Services
Electronic Check
Gift Card
Convenience fee Guidelines
Durbin Amendment

3. Merchant Card 101 “The lesson begins”

4. Define Who’s Who
Issuer – A financial institution or other entity that issued the Credit Card or Debit Card to the Cardholder.
Acquirer – Financial institution or other entity that enrolls merchant for the purpose of presenting transaction to the Card Assoc, and funding merchants for transactions presented to the Acquirer
Card Association – MasterCard and Visa
Consumer – Any individual who possesses or uses a Payment Device
Merchant – Entity identified on or under a processing agreement permitted to submit payment to Acquirer.
Interchange – The clearing and settlement system for Visa, MasterCard, Discover and Debit Cards, where data is exchanged between Acquirer and the Issuer through the applicable Card association.
Foreign network – Authorization and Settlement network other than Elavon
Authorization – The approval of credit worthiness of the transaction
Settlement – The closing of credit card batches and the start of the movement of funding to a Merchant.
Elavon is YOUR Global Acquiring Solution!

5. Process Flow

6. Process Flow - Authorization
E-Commerce
Transaction
ProtoBase
Counter
Transaction

7. Process Flow - Funding $$ $$ ProtoBase E-Commerce Transaction Counter

8. Merchant Processing Expenses

9. Association fees Elavon Costs Interchange Cost Assessment Fees
Miscellaneous Fees
Elavon Costs
Processing Fee
Voice Authorization
Chargeback

10. Interchange Expense
Card Brand Fees

11. Interchange Costs Managed and updated by the Card Associations
Interchange costs vary in amount based on:
Industry type
Manner which cards are authorized
Timeliness of settling batch for payment
Additional Data provided at the Point of Sale
Card Product (Consumer, Check Card, Commercial/Corporate, Rewards)

12. Interchange Fees – Best Rates

13. Interchange Fees
Scenario 1 Retail – Customer makes a purchase with a consumer Visa card at the Department of Motor Vehicle. Mag-stripe is read and the transaction is settled within 24 hours.
Scenario 2 Card Not Present – Customer calls the Department of Motor Vehicles to make a purchase with a Corporate Visa.

14. Interchange Costs – Card Association
Card Association Fee
MasterCard Assessment fee is 0.11% plus the Network Access Brand Usage (NABU) of $ This is billed on all transactions including Sales and Refund settled Items.
Visa Assessment fee is 0.11% plus the Network Acquiring Processing Fee (NAPF) of $ on the Authorization.
Visa also has authorization-based fees to promote the merchant proper use of the Card member credit availability.
Zero Floor Limit Fee applied to any Visa clearing transaction submitted without proper authorization, $0.10 per transaction
Mis-Use of Auth Fee applied to authorizations not matched by a clearing transaction, $0.045 per transaction
Account Verification allowing merchant to verify a cardholder account status with zero dollar amount, $0.025 per transaction

15. YOU Can Help Control Costs Remember These Interchange Tips
Consider
Only One Authorization per Transaction
Consider Account Verification Status Check according to business need (remember it costs $0.025/trans)
Avoid processing $1 Pre-Auth with no matching settle transaction (remember it costs $0.045/trans)
Avoid processing $1 Sale with no matching settle transaction or void (remember it costs $0.045/trans)
Always
Close Batch Daily if not setup on Auto-Close
Always follow POS device transaction prompts entering valid data not pressing enter or “0” to by-pass the prompt
Hand-keyed Transactions – Always Enter Address Verification ((AVS) Zip Code)
Commercial Cards – Always Enter Sales Tax and Customer Code When Prompted at the Point-of-Sale

16. Elavon Fees

17. Elavon Costs Processing Fee
Transaction processing fee
$0.025 per transaction (level II)
Voice authorization fee
$0.55 per VRU
$0.65 per voice with AVS
$1.25 operator assisted transaction
$3.00 Bank Referral Authorization
Chargeback fee
$5.00 per chargeback
On-Line Reporting
Merchant Connect – Free

18. Statement Review

19. Statement Section Merchant vs. Chain Statement Section of Statements
News For You
Summary
Volume Recap
Deposits
Visa/MC/Discover/American Express Processing Charges
Card Association Fees
Other Transaction Charges
Authorization Fees
Elavon is YOUR Global Acquiring Solution!

20. Voice Authorization

21. Voice Authorization Is…
An authorization process whereby Merchant calls the Voice Authorization Center and provides Cardholder credit card/purchase information over the telephone
An operator or an interactive voice response (IVR) unit provides Merchant with the Authorization Code given by the Card Issuing Bank
When is this Process Used?
When the response to an authorization at the point-of-sale is “Referral” or Call Auth”
Merchant can also use this process if an Approval Code is received, but is still suspicious about the Cardholder, Card or circumstances of the Transaction
- When suspicious, call Voice Authorization request a “Code 10 Authorization”-

22. Voice Authorization Definitions
“Referral” or “Call Auth”
Indicates the Card Issuing Bank is requesting Merchant to call the Voice Authorization Center
Voice Authorization Center will provide
an Approval Code or ask Merchant to request additional information from cardholder (e.g., mother’s maiden name, city of birth, first elementary school…)
Voice Authorization Center routes this information to the Card Issuing Bank which provides either an “Approve” or “Decline” the Transaction
“Code 10”
Term used by the Card Associations referring to suspicious or questionable transactions, Cards or Cardholders
When Merchant is suspicious of a Card Transaction, contact the Voice Authorization Center and request a Code 10 Authorization. Using the term allows Merchant to question Transaction without alerting the Cardholder
Follow the instructions given on how to proceed by the Voice Authorization Center to minimize any discomfort between you and the Cardholder

23. Chargeback

24. A Chargeback Is…
A transaction disputed by the Cardholder or Card Issuing Bank
If a Merchant receives a Chargeback, the Acquirer will debit the Merchant’s DDA (checking account) or designated Chargeback account for the amount of the Transaction
There are many reasons for chargebacks, but the most common are:
Returned merchandise
Terminated services
Disputes, errors, or fraud
Merchants must be able to provide proof that the disputed transaction is valid and in accordance with Visa/MasterCard regulations or risk having their account debited for the disputed transaction amount as well as chargeback fee

25. What Does a Chargeback Mean to Me?
For the merchant, a chargeback translates into:
Additional processing time and cost
A more narrow profit margin for the sale
And, possibly a loss of funds/revenue
Important Note:
Carefully track and manage the received chargeback disputes
Take steps to avoid future chargeback disputes
Know your re-presentment rights to chargeback disputes
Always consider taking measures to recover losses from customers who are financially liable for transactions that were charged back to you, the merchant

26. Chargeback Info & Tips
While it may not be possible to eliminate Chargebacks entirely -
Merchants can reduce the occurrences by promptly resolving issues and disputes with the Cardholder
Merchant should follow the proper established Card Association Authorization and Processing procedures
Chargebacks can be costly, you can help make every effort to prevent the chargeback

27. How to Prevent Chargebacks
Remember to-
Avoid duplicate processing of a Transaction
Work with the Cardholder to resolve disputes regarding the quality of merchandise or services rendered
Refuse to process a Transaction when you receive a Declined Code during Authorization
Call for Voice Authorization if needed
Call for Code 10 Authorization if you are still suspicious of the Cardholder, Card or Transaction after receiving an Approval Code

28. How to Prevent Chargebacks
Remember to-
Verify that Transaction Receipts equal the POS device to eliminate duplicate transactions
Include a description of goods or services on the Transaction Receipt
Deliver merchandise or services before charging the Card
Obtain an Authorization Code
Include the CVV2/CVC2 and AVS Codes for Card Not Present Transactions if applicable
Submit Transaction Receipts on the same day Transactions are authorized

29. How to Prevent Chargebacks
Remember to-
Make sure an Imprint appears on Manual Transaction Receipts or that the relevant Transaction information appears on the Terminal-generated Transaction Receipt
Do not accept expired Cards or Cards having effective dates prior to the date of the Transaction
Make sure the signature on the Transaction Receipt matches the signature on the back of the card

30. Municipalities and Localities

31. Break Time

32. Payment Card Industry – Data Security Standards
Are you compliant….

33. Payment Card Industry - History
Visa instituted the Cardholder Information Security Program (CISP) in June 2001, the program is intended to protect cardholder data—wherever it resides—ensuring that merchants, and service providers maintain the highest information security standard.
The CISP and related MasterCard Site Data Protection (SDP) programs were implemented to help ensure consumers that the businesses they are dealing with maintain the security of their bankcard account and other personal identifiable information.
Visa and MasterCard aligned their security requirements in December 2004 to form a Payment Card Industry Standard for Security.
PCI Data Security Standard requirements can be found at .
These data security requirements require all entities that store, process, or transmit card data to be compliant with these payment card industry standards for security.
This program generally requires all merchants who store, process, or transmit card data to complete an annual security questionnaire and have their IP addresses scanned quarterly by a VISA/MC certified vendor.
Compliance has many benefits: Safe harbor from fines if a location is hacked and the VISA/MC “good seal of approval for” processing, customer confidence and maintain brand reputation.

34. What level is your account?
PCI-DSS is categorized into 4 levels
Level I – Any Merchant processing over 6MM Visa transactions annually
Level II – Any Merchant processing between 1MM – 6MM Visa transactions annually
Level III – Any Merchant processing 20K – 1MM Visa E-commerce transactions annually
Level IV – Any Merchant processing less that 20K Visa E-commerce transactions, or less than 1MM Visa transactions regardless of the channel
PCI-DSS

35. 12 Guidelines for PCI Compliance
Install and maintain a firewall configuration to protect cardholder data
Do not use vendor-supplied defaults for system passwords and other security parameters
Protect stored cardholder data
Encrypt transmission of cardholder data across open, public networks
Use and regularly update anti-virus software
Develop and maintain secure systems and applications
Restrict access to cardholder data by business need-to-know
Assign a unique ID to each person with computer access
Restrict physical access to cardholder data
Track and monitor all access to network resources and cardholder data
Regularly test security systems and processes
Maintain a policy that addresses information security

36. Non-Compliance: Risks, Fines, Fees, Costs, Loss
Damage to brand/reputation
Investigation costs
Remediation costs
Ongoing compliance audits
Victim notification costs
Financial loss
Fines & Fee
Non-compliance (each brand issues separate fines)
Re-issuance
Fraud Loss
Data loss
Chargeback’s for fraudulent transactions
Operations disruption
Sensitive info disclosure
Denial of service to customers
Possibility of business closure
Potential legal liabilities beyond the Association rules

37. 4 New PCI DSS Self Assessment Questionnaires (SAQ)
In an effort to make the process of becoming PCI DSS compliant more streamline, the PCI Council has developed 4 new SAQ’s for merchant validation. New SAQ’s are as follows:
SAQ A:  Addresses requirements applicable to merchants who have outsourced all cardholder data storage, processing and transmission.
SAQ B:  Created to address requirements pertinent to merchants who process cardholder data via imprint machines or standalone dial-up terminals only.
SAQ C:  Constructed to focus on requirements applicable to merchants whose payment applications systems are connected to the internet.
SAQ D:  Designed to address requirements relevant to all service providers defined by a payment brand as eligible to complete an SAQ and those merchant who do not fall under the types addressed by SAQ A, B, or C.
The new questionnaires and further information can be found at:

38. Compromise Statistics
Food Service Industry represents the majority of the compromises
Retail Industry is the next largest industry with compromises
Trustwave data is gathered from more than 300 card compromise cases
* Source of data is from the Trustwave March 2008 quarterly report 38 38

39. Value Added Services

40. Value Added Services Electronic Check Services (ECS) Gift Card
Conversion
Conversion with Verification
Conversion with Guarantee
Gift Card
Closed network solution
Reloadable Card
On-line Services
Outsourcing to Elavon for delivering cards

41. Elavon
ECS Solution Offering

42. Elavon's Electronic Check Service
Innovative product that supports full portfolio of flexible solution and service level options
Not a one-size-fits-all solution
Provided in partnership with leading financial institutions
Extension of services from bank partner, not third-party provider
Retailer gets one-stop solution for debit and credit cards, electronic check, consolidated statements and even online reporting
Extensive image storage and reporting capabilities

43. Checks Supported Supported with Single Sided Imagers
Consumer checks
Business Checks
Corporate Checks
Convenience Checks
Supported with Dual Sided Imagers
Money orders
U.S. treasury checks
Cashier’s checks
Federal Reserve checks
Government Checks
Payroll checks
Third-party checks
Travelers checks

44. ECS Service Level Options
Conversion with Guarantee
Checks are converted into electronic transactions and all funds are guaranteed
All paperwork is eliminated – no follow-up needed from merchants
The retailer assumes no risk for all qualified and approved transactions
Conversion with Verification
Checks are imaged and converted into electronic transactions
Routed for verification either through the participating Visa bank or through EnCircle for ACH submission
Retailer retains the risk of returned items for all transactions
Conversion only
Checks are imaged and converted into electronic transactions, retailer performs own authorization

45. Point of Purchase (POP) Solution
Enables merchants to convert checks to electronic transactions in a check present/consumer present environment at the time of check acceptance
Utilizes Direct DDA, the ACH network and Check Replacement Documents (CRD’s) for authorization and clearing
Signature required
Check must be returned to check writer
Posted and take away consumer notification required

46. Accounts Receivable Conversion (ARC) Solution
ARC is used for check present/consumer absent transaction environments
receivable payments
mail order receivables
drop-box/lock-box environment
Customers are provided a notice explaining that checks will be processed electronically
Offer Consumer Opt Out Service with PC Solution
Utilizes the ACH network and Check Replacement Documents (CRD’s) presenting and clearing
Online real-time or batch delivery of transactions

47. Elavon Gift Card Solution

48. Gift is a Quickly Growing Industry
Gift Card Sales
$50 billion in 2005
$57 billion in 2006
$61 billion in 2007
$65 billion in 2008 (estimated)
$80 billion by 2011
Gift Card Popularity
The #1 gift during the holiday season
50% of gift cards received during the holiday season were redeemed by the end of January
Average breakage ranges from 4-15% 48

49. It’s Much, Much More than a Gift Card Program
Promotional Marketing Tools
Discount cards mailed to target prospects
Gift with purchase
“Come back” rewards
Corporate Incentives
Sell to companies to use as employee incentives
Use internally for rewards or spiffs
Prepaid Vehicles for Recurring Services
Coffee shops, auto detail, movie theaters
Merchandise/Service Returns
Cash back is not the only way
Customer Appreciation
Turn service issues into a retention opportunity
Fund Raisers
Sell cards at a discount to schools/non-profits

50. Merchant Benefits Increased Sales Reduced Costs
Attract new customers to the business
Retains full face value = no cash back
Switching from paper certificates to gift card can result in 2-4 times the volume…by capitalizing on impulse purchases
61% of recipients spend more than the card value
Most consumers spend 25% more than the face value of the card when redeeming a card received as a gift
Reduced Costs
More efficient and cost effective than paper
Industry average is $1.22 to issue and $1.22 to redeem
Increased Security & Reduced Fraud
Cards have no value until activated
Easy to Use
Works seamlessly with same solutions used for credit cards
Electronic reporting and tracking

51. Guidelines for Convenience fee

52. Convenience Fee Rules Overview
Imposing a Convenience fee is permissible under the following conditions:
Transaction must be processed in a non face-to-face environment
The Payment channel needs to provide a true convenience to the cardholder and the card member must have the ability to pay the transaction in another environment without fees
The fee needs to be disclosed prior to the completion of the sale with an opportunity to cancel the transaction prior to the cardholder being charged.
This fee must be disclosed as a convenience fee and not a surcharge.
Convenience fee needs to be applied to all payment channels (Visa, MC, AMEX, DI, ACH).
Visa requires that all fees must be a fixed amount; MC and Discover allow percentage based fees.
Visa requires that all Convenience Fees be assessed in the same transaction amount.
Visa does have programs specifically for Tax Payment programs that have different allowances.
Visa and MasterCard both prohibit establishing minimum or maximum transaction amounts for a purchase.

53. Convenience Fee exception
Commonwealth of Virginia State Law
§ Authority to accept revenue by commercially acceptable means; service charge; bad check charge.
A. Subject to § , any public body that is responsible for revenue collection, including, but not limited to, taxes, interest, penalties, fees, fines or other charges, may accept payment of any amount due by any commercially acceptable means, including, but not limited to, checks, credit cards, debit cards, and electronic funds transfers.
B. The public body may add to any amount due a sum, not to exceed the amount charged to that public body for acceptance of any payment by a means that incurs a charge to that public body or the amount negotiated and agreed to in a contract with that public body, whichever is less. Any state agency imposing such additional charges shall waive them when the use of these means of payment reduces processing costs and losses due to bad checks or other receivable costs by an amount equal to or greater than the amount of such additional charges.
C. If any check or other means of payment tendered to a public body in the course of its duties is not paid by the financial institution on which it is drawn, because of insufficient funds in the account of the drawer, no account is in the name of the drawer, or the account of the drawer is closed, and the check or other means of payment is returned to the public body unpaid, the amount thereof shall be charged to the person on whose account it was received, and his liability and that of his sureties, shall be as if he had never offered any such payment. A penalty of twenty-five dollars or the amount of any costs, whichever is greater, shall be added to such amount. This penalty shall be in addition to any other penalty provided by law, except the penalty imposed by § shall not apply.
(2002, c. 719.)

54. Convenience Fee exception - Courts
Commonwealth of Virginia Courts Statue
Fees collected by clerks of circuit courts; generally.
A. A clerk of a circuit court shall, for services performed by virtue of his office, charge the following fees:
27. For the acceptance of credit cards in lieu of money to collect and secure all fees, including filing fees, fines, restitution, forfeiture, penalties and costs, the clerk shall collect from the person presenting such credit card a reasonable convenience fee not to exceed four percent of the amount paid.

55. Durbin Amendment Dodd - Frank Act

56. Durbin Provisions
Minimum Purchase Amounts – Merchant may now apply a minimum fee not to exceed $10.
Maximum Purchase Amount – Government Agencies and Higher Education Institutions are now permitted to set a Maximum amount
Surcharge – Merchants are not permitted to add a surcharge to a transaction amount however, merchants are permitted to give a discount or offer an in‐kind incentive for payment by any method of payment (cash, credit, debit etc). Merchants may not offer discounts that favor one issuer or network over another.
Debit Interchange Regulations – Require that Debit Interchange fees be “reasonable and proportional” to the incremental cost to the issuer processing the transactions. The Federal Reserve will establish standards for assessing whether Debit Interchange Fees (general use reloadable prepaid cards are exempt) are “reasonable and proportional.” Final Debit Interchange Rules will be issued by April 21, 2011 and will be in effect July 21, 2011

57. We Appreciate Your Continued Partnership!