Presentation on theme: "Annette Slidge, Sr. Director Paul Gurtner, Director Chris Moore, Client Executive Glen Green, Regional Sales Manager, Merchant Processing Overview."— Presentation transcript:
Annette Slidge, Sr. Director Paul Gurtner, Director Chris Moore, Client Executive Glen Green, Regional Sales Manager, Merchant Processing Overview
2 Agenda Merchant Processing 101 – 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
MERCHANT CARD 101 THE LESSON BEGINS 3
4 Define Whos 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!
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 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- Voice Authorization Is…
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., mothers 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
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 Merchants 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 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 Chargeback Info & Tips
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 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 How to Prevent Chargebacks
29 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 How to Prevent Chargebacks
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 datawherever it residesensuring 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 https://www.pcisecuritystandards.org. https://www.pcisecuritystandards.org 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 1.Install and maintain a firewall configuration to protect cardholder data 2.Do not use vendor-supplied defaults for system passwords and other security parameters 3.Protect stored cardholder data 4.Encrypt transmission of cardholder data across open, public networks 5.Use and regularly update anti-virus software 6.Develop and maintain secure systems and applications 7.Restrict access to cardholder data by business need-to-know 8.Assign a unique ID to each person with computer access 9.Restrict physical access to cardholder data 10.Track and monitor all access to network resources and cardholder data 11.Regularly test security systems and processes 12.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 Chargebacks 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 SAQs for merchant validation. New SAQs 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: https://www.pcisecuritystandards.org https://www.pcisecuritystandards.org
38 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 Compromise Statistics * Source of data is from the Trustwave March 2008 quarterly report
39 Value Added Services
40 Electronic Check Services (ECS) – Conversion – Conversion with Verification – Conversion with Guarantee Gift Card – Closed network solution – Reloadable Card – On-line Services – Outsourcing to Elavon for delivering cards Value Added Services
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 Dual Sided Imagers Money orders U.S. treasury checks Cashiers checks Federal Reserve checks Government Checks Payroll checks Third-party checks Travelers checks Supported with Single Sided Imagers Consumer checks Business Checks Corporate Checks Convenience 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 – Retailer retains the risk of returned items for all transactions
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 (CRDs) 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 (CRDs) 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%
49 Its 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 – 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 inkind 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