0. Wells Fargo Bank Wholesale Merchant Solutions
Merchant Services 101 and Electronic Payments __________________________
Wells Fargo Bank
Wholesale Merchant Solutions
Rich Toomey
VP, Wholesale Merchant Solutions
Office:

1. Merchant Services Basics II. Understanding & Managing Costs
Topics
Merchant Services Basics
II. Understanding & Managing Costs
III. PCI Compliance
IV. Payment Trends & Payment Gateways 1 1

2. Processing Flow 2 2

3.        Payment Flow Payment Gateway  Buyer Merchant
Associations
Issuing
Bank
Web Store
FDMS/
Processor
Encrypted
Transmission (SSL) 
Payment Gateway 
API
Hosted Order Pay
Page
Virtual Terminal
Call Center 
POS System
Payments
Compliance and
Risk Management
Subscription Services
Reconciliation
ACH Network
RDFI
WF/ODFI .  
Machine Readable
Files
Web-based
Reports

4. The Players & Their Roles4 4

5. Gateway/Middleware 5 5

6. What Do Merchants Pay? Pricing Components Discount rate
Interchange – the largest portion of the discount rate, paid to the card Issuing banks
Assessments – fees paid to the Card Associations (Visa/MC)
Access Fees – fees paid to the Card Associations ( Visa/MC)
Processing fees – paid to the merchant Acquiring bank
Equipment/ Software/ Gateway fees
Set up fees
Monthly service and statement fees
Non-Bank (i.e. AMEX) Authorization Fees
Chargeback fees
Compliance fees (i.e. PCI)
Downgrade fees 6

7. Merchant Services Pricing
Interchange
Non-negotiable, determined by, paid to Card Issuer
Assessments
Non-negotiable, determined by, paid to the Card Associations
Access Fee
Processing / Discount Fee
Negotiated with and paid to your Merchant Processor
Reality Check – There are multiple pricing methods presented to merchants; many merchant processors bundle the above components which makes deciphering the cost basis impossible
So how many of you accept merchant card payments? Show of hands, for how many years? 1 year? 5 years? 10 years? For those who have been accepting payments for 10 years or more, do you remember when:
Electronic payment processing is so impactful that it has driven new development in areas you never would have guessed.

8. Interchange Schedule 8 8

9. Pricing Strategies Interchange Plus
Acquiring banks pass through Assessments, Access Fees and Interchange to the merchant and add a per-item fee and/or percentage.
Formula: Interchange + Assessments + Access Fees + Processing
Bundled Pricing
Bundling of all of the price points into one rate, typically has 2 down grade categories.
Example: Qualified Rate: 1.90% + $0.15
Mid-Qualified Rate: 2.65% + $0.25
Non-Qualified Rate: 3.45% + $0.25 9 9

10. Interchange Plus (Pass-through) Example10 10

11. Bundled Example 11 11

12. The Cost Pie 12 12

13. Determining Interchange Rates
1. MCC Codes
2. Transaction Type (Card Present, Card Not Present)
3. Transaction Amount (Large Ticket vs. Small Ticket)
4. Card Type (Consumer, Commercial, Purchasing)
5. Product Type (Utilities, Fuel, Taxes, Government etc.) 13 13

14. Managing Interchange
Put procedures and solutions in place to qualify for “optimal” interchange rates
Must be priced on Interchange Plus (Pass-through)
Level II and Level III for Commercial/Purchase cards
Ensure employees are trained on the proper way to enter a transaction (i.e. Address Verification for telephone payments)
Register for Card Association programs where appropriate (i.e. Large Ticket Program) 14 14

15. Level III Data Visa Minimum Level III requirements input by merchant
Item Commodity Code
Item Description
Product Code
Item Quantity
Item Unit of Measure
Item Freight/Shipping Amount
Duty Amount
Unit Cost 15 15

16. Durbin Amendment
As part of Financial Regulatory Reform, US Congress has approved the Durbin Amendment.
Cap on Interchange costs associated with Debit Card transactions (both Signature Based and PinDebit)
2. Last week the Senate approved to NOT delay the implementation of the debit card cap.
3. Initial cap has been pegged between $0.07 and $0.12
4. Potentially create significant reduction in card processing costs, for Merchant’s that accept high percentage of “debit” cards 16 16

17. PCI Compliance 17 17

18. PCI Compliance Payment Card Industry Data Security Standard (PCIDSS)
A common set of industry tools and measurements to help ensure the safe handling of sensitive information.
Developed and managed by the PCI Security Standards Council
Applies to all merchants and third party service providers that:
Store/Process/Transmit Card Holder Data
Develop/ Sell Payment Applications

19. Enforcement Structure
VISA
MasterCard
Amex
Discover
JCB
PCI Standards Council
PCI Data Security Standard (PCIDSS)
VISA
CISP
DISCOVER
DISC
MasterCard
SDP
Merchant Payment Solutions (Acquirer)
Merchants

20. PCI DSS Validation Requirements Per Visa and MasterCard
Compliance Classification Level
Annual submission of compliant PCI DSS Report on Compliance
Annual submission of PCI DSS Self Assessment Questionnaire (SAQ)
Quarterly
Net work Scan
Level 1
>6 MM annual transactions
(All Transaction Types)
Level 2
1 MM to 6 MM annual transactions
(All Transaction Types) For 2010 calendar year
Level 3
20K to 1 MM annual transactions
(ecommerce only)
Level 4 (recommended)
< 20K e-commerce
< 1MM annual transactions

21. Header
April 17
Trustwave Confidential-Page
Top Targets
Explain the idea of “It wont happen to me.” and “it is only an ecommmerce problem”.
Industries
Non-traditional targets made up more than 50% of the 2009 cases.

22. Investigative Conclusions
Header
April 17
Trustwave Confidential-Page
Investigative Conclusions
Criminal want MONEY.
Explain what track data is and how it is used for fraud.
Explain Chip and PIN -> iCVV problem with issuers not following the rules
Types of Data at Risk
Payment Card Data is a target for criminals looking to turn data into cash quickly.

23. Investigative Conclusions
Header
April 17
Trustwave Confidential-Page
Investigative Conclusions
Flows from the target data
Where there is data in the systems, attackers will target
Explain each item:
Software
Ecommerce
Payment Switch
ATM
Hardware Terminal Hacking – readers/bluetooth, GMS
Types of Target Assets
While many POS vendors have patched their systems to support security controls, many companies are still running very old software.

24. Wholesale Merchant Solutions
Electronic Payment Trends
&
Payment Gateways

25. Electronic Payment Growth
Dramatic increase in E-Payments
Dramatic decrease in use of paper

26. Card Payment Growth

27. Questions to Ask Are we offering multiple payment options?
This slide is used to summarize our solution and the value of WFPG to customer’s needs assessment.
Are we offering multiple payment options?
Are we driving payers to our website?
Are we PCI Compliant and reducing the possibility of data theft?
How soon are our funds available? Next Business Day?
How are we posting card payments to our AR system?
Are we using the tools available to reduce Days Outstanding?

28. Wells Fargo Payment Gateway® service
*Single platform
*Multiple integration and payment options
Let me tell you about one of our e-commerce solutions, the Wells Fargo Payment Gateway service.
If you’re not familiar with it, the Wells Fargo Payment Gateway service is a secure and flexible payment-processing environment for all your electronic sales channels:
• Your web transactions.
• Orders through your call center.
• Payments through your lockbox.
The Wells Fargo Payment Gateway service accepts all these transactions through a single platform, and integrates the data into your back-end financial system for comprehensive information reporting, streamlined reconciliation and industry-leading fraud control.
One of the biggest benefits of the Wells Fargo Payment Gateway service is how it improves reconciliation. For every transaction, we assign a unique identification number, and that number stays with the transaction from: inception; through authorization; to settlement; to funding; through reporting; and even charge-backs.
Whether it’s a credit or debit card charge, an ACH – no matter what type of electronic payment – you can always reconcile the transaction quickly and accurately, and produce an audit trail (as required for Sarbanes-Oxley compliance). The Wells Fargo Payment Gateway service is also PCI-compliant.
It’s a service our customers are really excited about.
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. 28 28

29. Payment Options & Funding
Note: Merchant must have WF DDA for next business day funding.
Visa, MasterCard, Discover full service and AMEX One point: 9pm PT
eCheck (ACH debit/credit): 2pm PT.
Note: Merchant must have PayPal account or PayPal Express checkout to accept PayPal payment types. PayPal handles their own funding.
Next business day funds availability for card and eCheck transactions
PayPal
PayPal Express Checkout
eCheck (ACH) debits and credits
Visa
MasterCard
American Express
Discover

30. Virtual Terminal (VT)
Simple to use Virtual Terminal capabilities allow transaction processing from any PC with Internet access
Multi-level User Access
Credit Card or electronic check/ACH payments
Create payment profiles
Print or receipt capabilities
Source: Javelin Research Strategy 2008

31. Web Payments Hosted Order Page (HOP)
Simple way to accept payments online
Customize the content and the look of the Hosted Order Page
Supports Secure Storage and recurring billing
Commercial card usage is estimated to continue to grow by as much as 25% in the coming years.

32. Secure Storage / Tokenization32 32

33. Automatic Posting / Enhanced Reporting
Reports available online, CSV export or XML ( for system to system integration)
Enhanced “matched reporting”
Unique Order ID
Chargebacks & Retrievals
Interchange

34. Wholesale Merchant Solutions
Questions?