First, you need to do some research.  There are many schools of thought when it comes to setting up a gift card merchant account so you really need to consider your options before moving forward.  Many Acquirers in Canada are able to offer a gift card program that is added onto your existing merchant account.  These are typically off the shelf programs with preprinted cards designed to get you started quickly with giftcards.  There are also Acquirers who specialize in gift cards, doing customized card designs and offering extensive reporting and balancing features that are necessary for larger merchants with multi locations.  So how do you decide how you should set up your gift card account?

Many advisors will tell you not to set up your gift card merchant account with your Acquirer.  The reason being, it ties to you that Acquirer and should you ever decide to leave because you are not happy with the service or your pricing has changed, you will need to also change your giftcard program.  But, if you’re a small retailer, setting up a custom gift card only account can be quite costly so the preset package might be more attractive.  Before doing that, be sure to read the following to help you protect yourself.

While changing Acquirers is somewhat easy, changing gift card programs is not so easy.   If you change gift card programs while you have cards in the market that have not been redeemed, you will need to transfer those accounts over to the new gift card program, otherwise, you run the risk of having some angry customers who will try to come and redeem their cards only to be told they are no longer valid.   What needs to happen is you need to provide your new gift card processor all the outstanding and existing cards in market information to have them load it into their systems.

While this does seem cumbersome, the good news is that electronic reporting for all merchant transactions have come a long way.  While you still may be getting a merchant statement at the end of every month, most large acquirers will also offer an online reporting solution for their merchants to do their own reconciliation.  Most of these online reporting solutions have the ability to store and maintain records for up to 18 months.  These reports are easily accessed and can be downloaded by the merchants when they need them.

Online reporting not only gives you access to the transactions you’ve processed through your terminal, but if you have a gift card program set up, it will show you the transactions going through your gift cards as well.  Therefore, if you do decide to change Acquirers, you can simply download an “outstanding redemptions” report which should show all outstanding cards and amounts in market and provide them to your new gift card program.  Essentially what your new gift card program will need to do is carry over these amounts onto their system so that your customers won’t lose the amounts currently still remaining on their cards.

Therefore, if you do decide to merge your merchant account with your giftcard account, be sure to ask your Acquirer to be signed up for online reporting.  There may be additional fees to setting up this reporting but it will save you a lot of headache in the end.

The claim follows closely to the filing done by the Competition Bureau of Canada back in December which sought to disable Visa and MasterCards “accept all cards“ policy while allowing merchants to surcharge on credit card transactions.  The claim alleges that both Visa and MasterCard are participating in a conspiracy to force merchants to drive up costs to consumers.

If you remember, we`ve talked about the introduction of premium cards into the Canadian market along with the changing of pricing structures for both Visa and MasterCard in several previous posts.  A couple of years ago, Visa and MasterCard both changed their pricing structure to one where different cards carry different costs.  So corporate cards and manually keyed in transactions are more expensive to process that those of regular credit cards.  But the most damaging was the introduction of premium credit cards.  These cards were to be issued to only a select group of card holders that held a high spend status and as such, cost almost twice as much to process.  The justification, these card holders have a tendency to spend more and therefore are making larger purchases at the merchants locations.  Only a small fraction of the credit card companies` portfolio of cardholders were to have held this status.  If this were actually the case, it may have been easier to swallow for merchants. However, the reality is, when these cards were introduced, they were issued to any cardholder who requested it and even sometimes to those who didn’t.  Merchants promptly saw a rise to almost 40% of their total credit card transactions being processed over a so called premium credit card.  This caused the dramatic increase in the cost of processing credit card transactions.

Ward Branch, partner at Branch MacMaster LLP said “The lawsuit alleges that merchants are forced to raise prices for all customers to cover the cost of transactions with premium cards.  Our research suggests that these fees cost Canadian merchants $5 billion in 2009 alone.  The system is bad for Canadian merchants, Canadian consumers, and for the Canadian economy as a whole.“

Along with Visa and MasterCard, the following financial institutions were also named in the suit: BMO Financial Group, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Desjardins, National Bank of Canada, Royal Bank of Canada, Toronto Dominion Bank, Bank of America, Capital One and Citygroup Inc. as defendants.

This lawsuit is a clear indication that merchants are no longer idly standing by and allowing the credit card companies to call the shots.  For more information on the class action or to read the Notice of Civil Claim, please visit www.creditcardclassaction.com.  You can also provide your name as a potential merchant class member at this site as well.

The devastating earthquake and tsunami that hit Japan a couple of weeks ago have left the country in ruins while the rest of us here in West stare in disbelieve and amazement.  But many financial institutions have stepped up to give towards this worthy cause.

Moneris Solutions, the country’s largest merchant acquirer was the first to rise to this challenge.  They announced last week that they will be waiving all processing costs for the following Canadian charities providing disaster relief efforts for Japan:

• Canadian Red Cross
• Care Canada
• Humanitarian Coalition
• Oxfam
• Save the Children Canada
• UNICEF
• World Vision

“Canadians have always been compassionate in helping others, and we are confident that this time will be no exception,” said Jim Baumgartner, President and CEO of Moneris Solutions. “By waiving processing fees for Canadian charities involved in this cause, we hope to give every donor an extra reach to those affected by the disaster.”

The Red Cross was also pleased to announce that 10 financial institutions were participating by accepting cash donations. 

These banks are:

1. BMO Financial Group
2. Canadian Western Bank
3. CIBC
4. HSBC Bank Canada
5. ING DIRECT
6. Laurentian Bank of Canada
7. National Bank Financial Group
8. RBC 
9. Scotiabank
10. TD Canada Trust

But it goes without saying that it would appear that Moneris’ gesture is the most telling and most generous at this point.  And it’s also prudent to note that Moneris is only able to waive their processing fees for those charities.  This does not mean that these charities will not have any fees charged to them as there will still be the Visa, MasterCard and American Express interchange fees.  And the reality is, the interchange fee makes up the bulk of the total fees charged to merchants.  Therefore, this act of generosity could go far in helping to provide additional transparency for Moneris and their pricing.  When these organizations actually see what portion of the total fees the Acquirer is getting, this could be more beneficial for Moneris’ public relations than anything else.  In addition, Moneris has also announced that it will be matching dollar for dollar all employee donations. 

As of right now, no other Acquirer has stepped up to announce similar plans to aid the charities providing disaster relief.

And there has been no sign of Visa or MasterCard announcing the waiving of any of their fees, which would be a truly charitable act.  But as we all know, we rely on the compassion we feel for one another as human beings and that’s big business. 

So when thinking choosing of an Acquirer… perhaps another point to consider is how compassionate they are for others in need.  It may dictate how they treat you as a customer.

“Tim Wilson has left Visa to pursue other opportunities. We thank Tim for his contributions to growing Visa’s business in the Canadian marketplace, and wish him well,”

You can’t get a more generic response than that.

Mr. Wilson joined the company in 2006 as senior vice-president of strategy, finance and administration.  He was later appointed the head of Visa Canada in May 2008.

And of course, with a dramatic exit like this, you can expect a lot of speculation.  Although… if you take a look at the turmoil Visa has endured over the last couple of months, there could have been some signs to indicate this could have been coming.

The departure comes merely months after the Competition Bureau launched its legal investigation against Visa and MasterCard.  The Competition Bureau alleges that both Visa and MC are being anti-competitive by forcing merchants to accept all cards within their portfolio and by disallowing surcharging on credit card transactions.  The Bureau believes that with the advent of new premium cards in the market, the cost to merchants and consumers will increase.  By allowing merchants to choose which cards they wish to receive and by allowing surcharging on these premium cards, the Bureau believes this will help to alleviate some of the costs that are associated with accepting these cards.

Visa is also currently being investigated by the Federal Consumer Agency of Canada over a potential breach in the voluntary Code of Conduct.  The FCAC are looking into whether or not CIBC’s new Visa debit card breaches any of the elements of the Code.  The Code specifically says that there shall not be any competing payments methods housed on a single card.  Meaning, if CIBC wanted to launch a Visa debit card that would be accepted at card present retailers, they were supposed to issue a separate debit card.  Instead, what they did was reissue their existing debit card with the INTERAC network for card present transactions and the Visa network could be used for online debit purchases.  Clear as mud?

With little to no notification to any merchants or Acquirers, CIBC and Visa together quietly set this product launch in motion.  The introduction of this new card caused great confusion at the checkouts of many merchants.  And the advertising associated with the card caused even greater confusion for the cardholders.  The reality, no merchant currently accept Visa debit at the point of sale and there may be one or two merchants that accept it online.  None of this was properly communicated and Visa is now being accused of misrepresenting information on their new card.

Visa has indicated that they expect to fill the position very shortly and it will be interesting to see what direction the new head will move the company in.

Merchant Account Services in Canada

In recent years, the emergence of point of sale terminals in the industry has changed the face of business as we know it.  It is now highly unlikely that a merchant who does not offer their customer the capability of paying for goods and services with their debit or credit cards, will be more likely to fail in their business overall.  Especially retail driven companies who depend on a high volume of sales.  The banks deregulated years ago, creating a free market for providers to compete and drive the industry.  The result of this is a many number of providers, and manufacturers to fill the need for these physical machines. 

Though the technological change in transaction processing has been astronomical, the change in the physical pos machine itself has not been.  Actually, since their inception in the early 80’s, nothing other than aesthetic preferences has altered the terminals themselves.  Yes, there are a variety of colors and styles, but the software, the basic function of swiping a card to initiate a payment has remained unchanged….until now.

Credit Card Processing Security

We all have debit and credit cards with the “black stripe” on them.  This has been the security information and up to now, has been an essential part of transaction processing.  Basically, this is how the machines read the account information.  But just as the truth is with all technology, for every new convenience and method there is a “hacker” trying to debug someone’s information for criminal intent.  So the security measure of the black stripe has been compromised in the past.  Chalk it up to the cost of doing business….but at the same time, industry thrives on necessity, and if there is a need to make these methods more secure, then the industry will respond.

EMV Certified – Chip Cards

This brings us to our newly incepted, modern day Chip or IC cards!  Now, instead of the black stripe, the cards themselves are out fitted with the tiniest of micro chips that again, doubles as the security and information processor on the card itself.  So, for the first time in 20 or so years, the merchants now have a reason to update or upgrade their physical terminals.

Now, the technical terminology for Chip Cards is linked to the definition above…in order for the terminal to be able to accept the chip card and “dip” the card instead of swiping it, the terminal and provider needs to be EMV certified.  This allows the system to read the chip and utilize its security and information function so the merchant can now accept the transactions by dipping the card, not swiping.

EMV Certified – How Secure is It?

The security is not yet 100%.  As mentioned above, with every new emergence of technology, a way to undo it closely follows, so dipping cards exclusively will probably not take over industry wide for another 4-5 years or so, by which time it will be the standard and cards with the black stripe will no longer be issued.

Yup, merchant services are not protected from the growth and improvement of technology, quiet the opposite; considering the sensitive nature of their functions, POS terminals and machines have to be at the fore front by using the most secure technology: EMV Certified POS Terminals.

Cash can easily be stolen, and it is non traceable so it is the most sought after thing to steal from somebody.  It has instant value and is coveted by criminals.  Often the only payment method acceptable for all criminal activity!  All kidding aside, there is no lack of evidence that people being robbed of their cash happens daily and this can sometimes lead to very violent means.

Credit Cards’ however, and debit cards too, are virtually inaccessible to criminals.  The good thing about cards is that by the time the person who stole the card has a chance to utilize it in a retail environment; the bank has probably already been notified.  The Credit card companies have huge support networks that can cancel a card for a customer immediately, and in the instance where there may be a little bit more time between point of purchase and cutting off the card, they can lead an investigation to save those funds as well.

The security measures already inherit in the credit card as well will slow down a thief.  For examples, although it doesn’t always happen, the merchant or employee accepting the credit card as a method of payment should be looking for the signature to match another piece of identification that the customer must present.

The Credit Card companies also flag their customer’s activity.  Any purchase or activity that is “out of habit” will raise a flag on the processing end.  For example: I never use my credit card to purchase gas ever.  One day I received a call from Visa asking about a fuel transaction, and a ton of security questions.  We’d discovered my card was stolen and used right away to buy Gas, a product I have never before processed.  Just by this simple inconsistency, they new to alert me and glad they did!  This kind of attention to detail is standard for the card companies to implement, as they need to provide their customers with the up most sense of security.

Credit Card processing is safer not only for the consumer’s but for merchant’s as well.  Again with regards to being robbed, a merchant who is accepting a majority of their business by credit card with have less loose cash available, so even if a merchant is robbed, the majority of the days’ profit’s are protected!  There is far less risk of having to be caught carrying (and loosing) large amounts of cash business.

A set up fee. Almost all Acquirers will charge you a fee to set up a merchant account.  This one-time fee can range anywhere from $35 to $250, depending on the type of business you run.  A card not present business (online or telephone orders) can expect to pay in the higher range for set up fees because these businesses are considered as a higher risk.  This fee goes towards processing your application and having credit checks done on the owners and the business itself.

A rental fee. Should you decide to rent your point of sale, you can expect a monthly rental fee.  Terminal rentals can range from stand alone devices that can run around $50 a month up to over $100 a month for wireless terminals.  If your business travels (like being present at trade shows) or you deliver  your products, you’ll definitely want to consider a wireless terminal.  These terminals will travel with you and enable you to accept payments where ever you go.  If you have an online business you will need a virtual terminal to install on your website.  This virtual terminal connects to your shopping cart software and sends the transaction information through to your Acquirer.  With virtual terminals, you can expect to pay a monthly fee along with a per transaction fee.

Deposit fees. Acquirers may charge monthly deposit fees to settle your funds to your bank account.  If you do see this fee, ensure that it a set monthly fee as opposed to a “per deposit” fee.  Also, be sure to check with your financial institution on whether or not they will also charge you a fee to accept the deposit.

Account service fees. Acquirers now offer additional services like online reporting and reconciling.  These tools can be very helpful in allowing merchants to view their statements online and verifying that deposits have gone through successfully.  Not only do these services allow you to reconcile online but they can save you time from having to call into the Acquirer call centre to validate information.

Merchant Discount Rates and Transaction fees. This is the big one.  These are processing fees you pay your Acquirer for processing credit and debit cards.  Merchants are charged a Discount Rate for accepting credit cards (Visa, MasterCard, American Express, JCB, Discover, Diners, etc.), this rate is set at a percentage of the total transaction.  The card brands will charge the Acquirer an interchange rate which is passed through to the merchant along with the Acquirer’s processing fee.  Your merchant discount rate will be the rate charge for regular electronic transactions.  But be aware, premium cards (like the Visa Infinite card or MasterCard Highspend cards), corporate cards and manually entered cards carry a different and higher interchange rate than those regular consumer cards.  This higher rate will be passed onto you by the Acquirer.  So while you may have a low “sticker merchant discount rate”, if your business accepts a lot of premium or corporate cards, you can expect that your actual effective merchant discount rate to be a lot higher.  Be sure to ask your Acquirer what the incremental difference is for each type of card and if possible, have them outline these fees in your contract.  Also, see if you’re being charged a transaction fee for refunds.  Acquirers will sometimes charge a flat transaction fee for refund transactions on top of not returning the merchant discount rate that was charged on the original transaction.  INTERAC debit transactions should be set at a flat transaction fee.  This means, regardless of the transaction size, the fee will always be the same.  This fee can range from 8 to 15 cents per transaction.

Chargeback fees. For every dispute that is unsuccessfully resolved in the merchant’s favour, typically a $10 processing fee is charged.  For each lost dispute, you will lose the amount for the original transaction and also be charged the processing fee.  Make sure you protect yourself against chargebacks.

Get familiar with your merchant account and know what to expect when you get your monthly statement.  This will ensure fewer unpleasant surprises when the fees are debited from your account.

A chargeback is a dispute that can be initiated by either your customer or an issuing bank.  The first step to protecting yourself is against disputes is knowing what they are.

There are two types of disputes, Retrievals and Chargebacks. Typically, a dispute will start as a retrieval  request.  In this scenario,  a customer sees a charge on their credit card statement that they either do not agree with or would like more information on.  They will contact their issuing bank and the issuing bank will issue a Retrieval Request to the Acquirer.  The money for this transaction at this point has NOT been debited from your bank account.  These disputes could be for reasons such as the cardholder not remembering the transaction or they believe that they have not received the goods for the transaction.  Your Acquirer will then contact you looking for a sales slip of that transaction.  What is key to remember is that in order to successfully win any retrieval or chargeback, you must have three items.

1. A swipe or imprint of the card showing that the card was present at the time of the transactions.
2. An authorization number showing that the card was properly authorized at the time of the transaction
3. A signature showing that the cardholder was present at the time of the transaction.

Absence of any of these three items and it will be up to the issuing bank to decide who will win the case.  You will have a limited amount of time to respond to the Acquirer, typically 14 days, and you must return as much information as you can so that your Acquirer can properly dispute any legitimate transactions on your behalf.  If you do not respond or do not respond in time, the retrieval will then become a Chargeback and at this point, the money will be debited from your account.  Typically, depending on the reason code of the dispute, you will still have an opportunity to dispute a chargeback but once the limited time has lapsed for a Chargeback, the case is deemed closed and the money will remain with the cardholder.

Certain disputes start as Chargebacks which means that the money is debited immediately and while you still have the opportunity to dispute, the time available to provide this information back is much shorter.  Be sure to respond to these right away.

Issuing banks can also initiate Chargebacks.  These are typically transactions completed on fraudulent credit cards.  Currently, if you can prove that you did your due diligence as a merchant and obtained all three of the above mentioned requirements, the likelihood of the transaction being returned to you is very high and the Issuer will be responsible for the transaction.  However, after the Liability shift in the spring of 2011, if you are not EMV enabled, the liability for these fraudulent chargebacks will shift to you, the merchant and you will not have the opportunity to dispute these chargebacks.

A cardholder will always have the opportunity to dispute a transaction.  Make sure you have the information to properly defend yourself and if you aren’t already, ensure that your Acquirer has a plan to get your EMV enabled.

I have worked in Customer Service for many years. I have also worked in sales and both tasks require the same logistics and tools to be successful.  A good merchant account sales agent, just like a good  merchant services customer service agent has to LISTEN TO THE CUSTOMER’S NEEDS.  Seems a simple task, but dealing with peoples emotions can be very hard at times to say the least! So I wanted to take a few moments to review some of the most common “Merchant Account Customer Support Issues” or really what become merchant account FAQ’s.

1. Merchant Account Technical Issues: As it relates to Merchant Services, the number one customer service call is a merchant who is having issues with the software or physical machine itself.  Weather it’s a “sticky key” or an error message of some kind is occurring as they are attempting transactions, these most common complaints are usually resolved with general technical support protocol and are usually easy to diffuse as you are dealing with the workings of the physical machine itself.

2. Merchant Account Billing: Second most common complaints are anything to do with what the merchant is being charged for.  It may be miscommunication, confusion as to how the info is represented or a general misunderstanding as to what they are paying for.  More emotionally charged than our previous example, solving a billing grievance will usually require the agent to look closely at the original agreement and negotiate some type of term to leave the merchant happy.

3. Merchant Account Fees (MDR’s): An extension or result of our number two example here, generally a lot of calls come in with regards to specific fees that the merchant is being charged.  Maybe a transaction that was billed twice, or a fee that is reoccurring and was never agreed upon, this dispute can sometimes be a result of terminal misuse so resolving these issues again, takes a careful look into both the physical machine and the billing structure to resolve the issue.

4. Merchant Account Contract Discrepancies: Often, a merchant signs and agrees to the initial contract to put together their Merchant Services package.  This is the ideal time to resolve anything that requires changing.  However, my number 4 example relates directly and specifically to those changes that a merchant may face in the future, that was never studied or changed upon signing the original contract.  For example:  after a year of service, you are changing locations, you call your provider and they bill you 100.00 for reprogramming your terminal for the new info.  Although it is a completely realistic fee, that was laid out somewhere in the initial contract, it was a fee that one never thought to think of or ask about in the beginning of the process, this can lead to the merchant getting very angry.  We have all had to hear from the merchant well “you never told me” although we did, in the contract, these small issues that may surface at a later time may result in having to deal with this sort of call.

5. Merchant Account Needs and Wants: Sometimes a customer service call, a good percentage of the ones we receive, are in relation to the merchant needing something.  Hopefully they are opening new locations or requesting additional terminals because their business is growing.  Other times, they may require some changes to the programming of the terminal.  Whatever the issue is, the most important aspect of any business is being able to respond quickly and efficiently to your customer’s needs.  Merchant Services are no exception, it is very important to these providers that their merchants are happy and processing!

In the past, people paid using cash.  There is no lending or credit taking place when using cash.  The funds must be available in order for a purchase to immediately clear.  It is simple and probably the best way to live: if you can’t pay for it, don’t buy it.

On this note, debit or interact payments are always favourable as the user does not enquer any debt in the process.  The money to pay for the transaction is immediately transferred from your account into the merchant’s system.  If there is no money in the account, the transaction will not clear, so debit transactions are the equivalent to a cash transaction.

Checks have been used for a long time as well.  Just like the debit transaction if there are not any funds available to clear the payment, it will be denied.  There is however a far greater risk for the merchant to accept checks as payment.  Checks are so risky; they are no longer the standard protocol for payment in any business, certainly not retail or any kind of business where product/ service fulfillment is immediate.  The only place for checks in today’s business world is where invoicing and po’s are concerned, it is no longer a standard method of pay and is rarely accepted.

The most powerful and most common method of payment today is Credit Card.  And this is strongly advertised and encouraged as the best method of payment for all and any products and services.  It is also the most dangerous for the consumer.  Credit Cards, unlike the past payment methods discussed here do NOT require any real money in order to purchase.  You can use as much as your limit is, and owe the credit card company that money, in some cases plus interest.  The encouragement in today’s media to “enjoy now pay later” can be harmful.  Consumer debit if not carefully managed, can turn your lights out.  The credit card companies stand to profit from this behaviour.

Credit Cards are generally unprofitable for the merchant’s accepting it, the only profitability and the reason merchant’s do accept it is because it has become the Standard method of payment among consumers.  To not accept credit cards in your business is statistically denying yourself 25% incoming business that you do not even know you have lost.

The most benefit of this type of payment goes to the credit card companies themselves.  On any one transaction between a customer and a merchant, the credit card companies profit about three times: 1. profit from interchange for providing the service itself.  2. Profit from the transaction fee’s that consumer’s are paying. 3. Profit from the merchant’s paying a percentage of each sale back to the credit card companies for being able to accept the cards.

Credit Card and the whole concept and existence of this method are also responsible for allot of good, and progress among humanity as a whole.  If properly managed and carefully controlled! Cedit is essential now for all business and consumers to operate.