Information on Merchant Accounts,
Ecommerce and Credit Card Processing

November 19th, 2010 by Jamie Estep

Merchants finally getting a chargeback break?

Filed in: Merchant Accounts | 1 comment

Friendly fraud is one of the most frustrating expenses a business owner will ever deal with. Friendly fraud is when a customer utilizes the credit card chargeback system to get a refund on a completely legitimate and honest purchase. It most often occurs in online business as it is very difficult for a business to win chargebacks, especially chargeback codes 53 and 4853, item not as described. “Item not as described” is such an ambiguous reason that a customer can request a chargeback, it’s simply unfair and often abused.

Traditionally, merchants receive zero benefit-of-the-doubt from card issuers when it comes to chargebacks, mainly because issuers make much more money from their card holding customers than from the merchants that accept them.

MSN’s red tape chronicles recently outlined a changing landscape for cardholders that stands to greatly benefit merchants. Banks are finally starting to crack down on friendly fraud type chargebacks. Banks aren’t doing it specifically for the benefit of merchants, as they found that customers whom initiate a large number of possible friendly fraud chargebacks are also those often in financial trouble, it will nevertheless benefit merchants.

In a recent survey, it was found that more than 1/5 of fraud loses come from friendly fraud scenarios. Reducing fraud loses by even 5% overall would be a huge achievement, and would account for almost $7 billion dollars per year in recovered revenue for merchants.


November 17th, 2010 by Jamie Estep

The credit card terminal monopoly is official

Filed in: Credit Card Equipment, Industry News | 2 comments

It just goes to show that US government anti-trust regulations do not apply to B2B organizations!

Verifone just acquired Hypercom corporation. This effectively removes all legitimate competition from the US credit card terminal market. Verifone’s own products have suffered a decline in reliability and quality starting 5 or 6 years ago, so naturally Verifone began purchasing competitors. They started with wireless leader Lipman, and then acquired Way Systems, and now have taken down the last barrier, Hypercom. Verifone stated that this acquisition was to expand their presence in the European market, but make no mistake it removed their last competition from the US market completely.

I don’t want to forget Ingenico whom is one of the worlds largest terminal manufacturers, however they are a mere drop in the bucket in the US and sell almost exclusively to large chains and direct placement deals that normal mom and pop merchants will never see.

I’m personally appalled that the government allowed this transaction to take place. On the bright side, if Verifone cannot produce a higher quality product, there’s several smaller manufacturers that are already gaining serious ground, most notably Dejavoo, ready to replace Hypercom. This will provide the perfect avenue for Dejavoo and others to become much larger terminal brands (until Verifone purchases them of course). Dejavoo’s product is far superior to Verifone or Hypercom and is cheaper than either.

I’m seriously holding back words on writing this. The impact of this on the credit card terminal industry would be comparable to Walmart purchasing Target or Microsoft purchasing Apple. This sort of acquisition is the reason that anti-trust laws exist. It’s unfortunate that the government’s priorities are so far removed from the B2B industries of the country.


October 27th, 2010 by Jamie Estep

What a POS!

Filed in: Credit Card Equipment, Merchant Accounts | 2 comments

Small retail businesses and restaurants are often faced with a tough decision when it comes to their method of customer checkout and the processing of customer credit cards. There are essentially 2 methods that can be used to ring up, and accept payments from customers. The first is the traditional cash register and credit card terminal, and the second is the all-in-one point-of-sale (POS) system. Many times a business owner will jump toward either side without fully understanding their business and their unique requirements.

Why use a POS system?

POS systems can greatly increase a business’s operational efficiency. They allow fast checkout at the counter, and can be used to manage inventory, priced, sales, and everything else a retail business would need with respect to the checkout process. Many of the more advanced models can integrate with a database that also controls an ecommerce website for unified inventory and ordering control. They can be self contained units, with an attached credit card reader and printer, which can make for a much cleaner and more organized counter-top. For restaurants, a POS system holds the entire menu, and often uses a fast touch-screen interface. This can reduce wait staff / kitchen errors, add and calculate gratuity, and make the entire payment process significantly smoother. POS systems can save lost sales and handle sales better than the fastest cash register operator. POS systems can truly alter the speed and efficiency that a business operates.

Why not use a POS system?

The point of this article is not to discredit POS systems, as they are absolutely essential for many retail businesses. It is rather to get business owners to look at every aspect of the system before making their decision. This will hopefully relieve some of the upgrade and support shock that is commonly experienced with POS systems down the road.

Cost, cost, cost…

The increased convenience that comes with a POS system often comes at a very high price. Not to say this price is never offset by increased sales and customer satisfaction, but there are real costs in purchasing and owning a POS system. First, there’s the actual monetary price to purchase or lease a POS system which is can be very high, up to $5000 per checkout lane in some cases. There’s often additional fees for each transaction you process because the POS system has to use special connections with processing networks. There’s the cost of programming and maintaining the POS system. The initial setup is usually done by a supporting company that comes on-site to install the system. However, just like a computer network, there must be someone on-staff or on-call or on-contract that can manage the POS system. Managing a POS would include making changes to prices, adding inventory, training, etc., but also includes managing the system in case of errors, power failure, hardware failures, and every other failure scenario a computer, credit card terminal and computer network might run into. If the business owner or manager is not technically-savvy, which is commonplace, it means hiring a person or company to manage the system.

Whether you are going to do it yourself, hire a dedicated employee, or hire a support company to manage and maintain your system, make sure you understand the potential costs and the potential pitfalls of every method.

Upgrades

The upgrades that POS systems require are not always free or even cheap. When you purchase a POS system, it usually comes with a support contract. Depending on the support contract, it may include updates for the life of the POS system, or it may not include major updates, or may not include updates past a certain time period, or may not include any updates at all. It may not include adding new peripherals to the system. You need to add a second bar code scanner? $500 please!

When security regulations change, or when a bug or flaw in the system is discovered and the whole application needs an overhaul, you may end up shelling out a few thousand dollars per lane for upgrades that you have no choice in installing! If you decide to change credit card processors, I’ve seen multi-thousand dollar fees just to update the system with the new credit card processors information.

The point is, POS systems have costs that go well beyond the initial purchase of the system. Make sure you understand all setup costs, upgrade terms and costs, adding or changing peripherals, adding or changing credit card processors, and any other recurring or unanticipated fees that might be required in the future.

Security

PCI-DSS is a constantly evolving guideline for security, and POS systems are often at the sharp end of the regulations. When business owners purchase a POS system, they often assume that the provider is responsible for the security of the system. What we have found in the past 2 years is that this is often not the case, or at least not entirely the case. Even if you have no idea how to manage a POS system, let alone make sure it is secure, you may be responsible and fully liable in the event that someone steals data from your company. Security should be the #1 factor in your decision to purchase a POS system, even before making sure it has all of the features that you need. Neither consumers nor card issuers give a pass for ignorance. Do your homework and make sure that the system is secure now (and PCI compliant) and will be secure, or at least able to upgrade as security policies change, over the next 10 years. Also make sure you understand whom is responsible for the security of the system, most likely it will be you.

Proprietary

Some of the POS systems out there have requirements to process with them or with a certain company. While this can work for some businesses, I am always against merchants being tied down to any single provider. If you’re using a proprietary POS system, and your credit card processor is terrible or is ripping you off, it doesn’t matter. You’ve already made the huge investment in money, time, and training, and you’re not going anywhere. The POS provider and the credit card processor know this as well. If you use a product or service that has effectively eliminated competition due to contractual obligations and / or proprietary equipment, expect them to act that way!

Overkill

The final reason not to use a POS system, is that is it simply overkill for many businesses. Because the price for a POS system requires a great deal of thought and money for a business owner, it’s not common that I see businesses with a POS system that don’t need one, but it does happen. For very small retail and restaurants, a cash register and credit card terminal are often completely sufficient, and can save the business owner thousands of dollars and hours of headaches. Only you can decide this, but don’t chose a multi-thousand dollar POS system just because you think you need it. Don’t chose a credit card terminal just because you think you’ll never need a POS.

These are things that should be well understood before deciding on any method for checkout and payment processing. POS systems are one of the best ways to help a retail business, but if not understood or poorly planned, they can be the biggest money drain you ever experience.

Finally, always have a backup!

No matter what method you choose for your business, make sure you have a backup method of checking out customers and accepting payments. This could mean a calculator and a low cost credit card terminal for some, or just a manual imprinter for others. An outage of your POS system shouldn’t compromise your business.


October 14th, 2010 by Jamie Estep

Mobile wallets will change retail business, some day…

Filed in: 3rd Party Processors, Mobile | 3 comments

When I blogged about mobile payments last week, I brought up the concept of a mobile wallet. Mobile wallets are the future of retail payments, but you wont get to use one any time soon!

Why mobile wallets?

The idea behind a mobile wallet is that a customer will pay for their purchase at the point of sale with the cellular phone, rather than a credit card. Because over 90% of the US population uses a mobile phone, arguably a higher percentage than people whom even own a credit card, a mobile wallet solution boasts a potential existing user base of nearly everyone. Unlike trying to invent some payment technology from the ground up, which has worked fewer times than I have fingers on 1 hand, a mobile wallet will capitalize on existing technologies and existing products that are widely in use.

How a mobile wallet should work:

This is one area there are going to be many answers for. I will take a purely consumer approach to it. The mobile wallet must work as follows:

  • Must allow me to use any payment method I chose (Credit card, bank account, paypal, etc.)
  • Must allow me to use my existing card and bank account.
  • Must work with my existing phone (1 software installation is acceptable).
  • Must be just as fast or faster than using my credit card.
  • Must provide me additional security in the event I lose my phone.

This is the bare minimum for a functional mobile wallet. Note that the first 3 features stress independence from the company that supports the mobile wallet, and being able to use multiple methods to pay. This is extremely important, as there’s no chance in getting me or anyone to change card issuers, banks or anything else just because your company offers a mobile wallet. The mobile wallet must be independent of any requirement to use a specific card issuer, bank, or other service provider.

Where’s my mobile wallet?

As of writing this article, no company has come close to implementing a working mobile wallet solution. We’re going to hear stories from a number of companies on how close their mobile wallet solutions are, but realistically there is an enormous amount of work before these become reality. Not only does a very intuitive software program need to be created for a person to load onto their phone, but retailers must have software / hardware that allows them to interact with the phone, and retailers must have some connection to the wallet platform through their credit card or other payment processor, more on this later…

One idea that is beginning to rear its ugly head, is that cellular phone companies can bypass credit card companies and banks and simply add a charge to a customer’s phone bill. While this is a fantastic idea that would eliminate one of the biggest hurdles in the entire system, there’s no possible way it’s going to work given the current customer sentiment towards cellular carriers and cellular infrastructure. Cellular companies are neither operating under a business model to grant revolving credit like a bank, nor one that would allow them to underwrite and manage businesses whom accept payments on their platform. Personally, I wouldn’t even entertain the idea of my cellular carrier becoming my bank or credit issuer! Lastly, the SMS billing systems have already shown merchants what the cellular companies think their billing service is worth, which is nearly 50% of the transaction amount. For retail merchants, 5% let alone the current 50%, is simply not acceptable. It’s going to take policy and operating changes that would rival a country switching from socialism to democracy for cellular carriers to successfully become mobile wallets providers. Being some of the largest companies on earth, I just can’t see them moving quick enough with the amount of interested that this technology has developed in a short amount of time. Consumers may drive the payment industry, but no amount of consumers is going to force retailers to pay 50% to accept a mobile payment!

The real hurdles

Throwing my cellular provider’s mobile wallet out the window, there are several areas that major hurdles must be overcome before mobile wallets are close to becoming reality.

Customer software

The first hurdle, and the easiest to overcome will be creating software that works on a variety of mobile phones. This software is what will interface with a merchant’s POS system or other payment capturing device. It will act as the bridge between the merchant and the customer’s payment method. Realistically this isn’t an extremely difficult technical feat considering that a vast number of mobile phones supporting Bluetooth and other communication protocols. It will simply be a matter of allowing the wallet application access to the internet and the Bluetooth or communication capabilities of the phone.

Merchant software / hardware

Merchant based software and hardware on the other hand will be a huge problem. The easiest path for merchant to interface with the software on a phone will be some sort of 3rd party peripheral. This could easily be something the size of a PINpad and would ideally use existing connection options on the POS or terminal to communicate with the customer’s phone. The difficult part comes in trying to get the authorization through the mobile wallet platform. Many POS systems and terminal use dial or proprietary methods to connect to processor or the internet… There are 3rd party companies like gift card providers that interface with POS systems and credit card terminals, but they are very limited in the systems that can use them. While I think that this burden will be on the shoulders of the POS companies and the credit card terminal manufacturers, it’s no less daunting tank in the overall picture. Based on what I’ve observed of POS and terminal manufacturers over the past 10 years, particularly with regard to the speed that new technologies are adopted, I believe that this will end up being the final piece of the mobile wallet puzzle.

Credit card processors

The biggest hurdle for mobile wallets to work is there has to be a mechanism that would link a customers credit card and/or bank account with their phone (This hurdle is due to the bureaucracy of Visa/MC not the actual implementation). This doesn’t sound a particularly daunting task, but if you’ve worked with Visa and MasterCard and their books of regulations and operating procedures, you would know how difficult it is to go against the grain on anything related to their systems. The “grain” that I am referring to is not allowing a business to accept a payment for another business (also called factoring). In short, this means that the mobile wallet provider cannot accept the customer’s payment and then pay the merchant. The payment must go directly from customer to merchant. For the payment to go from customer to merchant, through the mobile wallet, there has to be a lot of back-end integrations and agreements between processors and platforms, card issuers, and communication platforms. The complexity of integrating with multiple processors across multiple processing platforms is well beyond the scope of any article that I can write, but it would take years to perform even by someone who knows what they are doing.

A realistic outlook

If I were to bet on when we see the first mobile wallet, I think we could safely say 5 years before anything exists at all, and 10 years before it is common. This is my best case scenario based on a mobile wallet working relatively close to the above description. The exception is if Paypal makes a mobile-retail platform, which could probably exist in a few years for select retailers. This would be much simpler to implement since Paypal doesn’t have to adhere to the Visa/MC regulations as described above and they have their own platform, which would bypass the bureaucratic mess that everyone else is going to run into. However, Paypal is in its infancy in the retail world, and still has many of its own hurdles to clear. We will most likely see mobile wallets progress in steps. I would bet that we will first see Visa or MasterCard apps that link your credit card to your phone. From there we can probably expect to see 3rd parties pushing for more independent services and banks should be joining in soon after. Eventually we will need to end up with mobile wallet providers that can handle all cards and bank accounts without having to use multiple companies. Only then will we truly have a mobile wallet.


October 5th, 2010 by Jamie Estep

What the heck is a mobile payment?

Filed in: Merchant Accounts, Mobile |

Mobile payments seem to be the talk of the processing and tech industries these days. Visa, MasterCard, Paypal, a million startup companies, and just about every major player in anything related to payment processing, is working on some sort of mobile payment mechanism. So what exactly is a mobile payment?

The term mobile payment is a fairly ambiguous term that could relate to a number of payment technologies. It’s thrown around so much for the buzz effect, that when looking at any announcement about mobile payments, there’s really no way to understand what they’re talking about.

Types of mobile payments

  • Wireless / Mobile Credit Card Terminal and Mobile Phones (Merchant based)
  • SMS Payments (Merchant and customer based text messaging payments)
  • Mobile Wallets (Replaces credit cards with a phone)
  • Probably more…

Wireless Credit Card Terminals and Merchant Based Mobile Phones

Starting with what currently works, wireless credit cards terminals are the most used type of mobile payment. These are merchant based credit card terminals that process over a cellular or WiFi connection. They work just like a credit card terminal you would see on a counter, but they can be carried around.

Merchants can also use a variety of mobile phone based terminals like the Way Systems terminals, or the more recent Iphone or blackberry card swipers. These turn a cell phone into a mobile credit card terminal, and often allow the merchant to use their existing phone for processing. Mobile phone based terminals can offer considerable savings over all-in-one mobile credit card terminals. For merchants not needing to swipe their customers cards, the setup cost is essentially nothing, they just key transactions into their phone.

With the exception of some of the new smart phone and iPhone swipers and applications, these systems aren’t new and not particularly exciting, so let’s move onto the more innovative mobile payments.

SMS Payments

Have you ever seen a commercial or advertisement that told you to text “SOME MESSAGE” to 555-555-5555 and a $5 charge will be on your next bill?

This is a SMS payment. The company you are paying has a relationship with cellular carriers that allow them to collect payments from customers through the carrier. These types of services exist with both merchant initiated (they text you first) and customer initiated (you text them) text messages. SMS billing is best suited for very small ticket, and usually phone related items like ringtones.

While a useful and very promising system to select business types, SMS billing has one huge drawback. SMS billing is extremely expensive. In my research I failed to find a single SMS billing company that charges under 50% per transaction! Yes, 50%, and you thought credit card payments were expensive.

Until SMS billing costs can be reduced to a reasonable sub-5% per transaction, they are simply cost prohibitive for the majority of business models.

Mobile Wallets

Mobile wallets are the future of mobile payments and are actually something exciting in the payments industry, believe me this doesn’t happen more than once every 5 years or so. The idea behind a mobile wallet is that you can use your cell phone to pay for a product in a retail store, just like you would using a credit card. Your cell phone would be linked to the payment method of your choice, credit card, bank account, paypal, etc… Since almost everyone has a mobile phone, it seems a natural evolution to be able to pay for something with it. No need to carry a credit card, just swipe your phone and your transaction is complete.

Despite the immediate appeal, mobile wallets have some enormous hurdles to clear before they can even get a set foundation. If it were easy, we would have had this convenience 5 or 10 years ago. Just about every major company with any connection to payment processing is trying to figure out a mobile wallet solution. Next week, I’ll go into the ideas, technology, and hurdles that need to be covered before mobile wallets become a reality.


August 13th, 2010 by Jamie Estep

Paypal has nothing to worry about

Filed in: 3rd Party Processors, Merchant Accounts |

Paypal has long withstood scores of competitors, trying their hand at dethroning the king of online payments. It seems like every time a new payment service pops up, someone, myself included, once again brings up the end of Paypal question.

Just a few months ago, MasterCard announced they would open up their API’s to developers. Just before MasterCard, Visa purchased Cybersource, the company that owns Authorize.net. Amazon.com and Google, 2 of the largest presences on the internet, have their own payment systems, priced identically to Paypal, already with millions of users. And yet, Paypal continues to dominate the alternative payment market. Just imagine if 4 of the largest, and most powerful companies on earth put your business in their cross-hairs…

So how is it that a company like Paypal can withstand competitors, despite their own fallacies, and still maintain near-unchecked dominance over online payments?

Let’s start at the beginning…

In the beginning there was eBay. eBay revolutionized online shopping and person-to-person sales, and not just on the internet. eBay was truly the first, very-successful, online auction and marketplace. No auction site to this day has even put a challenge to eBay’s huge user base. The primary competitors now, are Craigslist and Amazon.com, both operating on entirely different business models, and only 1 with their own payment system. In 2002 eBay purchased the already successful Paypal to replace their failing Billpoint service. Both were payment options that buyers and sellers could use for eBay transactions. Paypal at the time was beating eBay’s Billpoint in popularity, so the acquisition was obvious and well overdue. Eliminating all competition from eBay payments allowed Paypal to gain complete dominance over alternative payments. There were a few others out there, but since eBay was the place to sell stuff, and Paypal was virtually built-in, Paypal became the only choice. eBay’s structure has always made it difficult for traditional merchant accounts and payment gateways to be used, so Paypal was almost always chosen by businesses if not for any reason but convenience. All the while, Paypal continuously advanced on a second front which consisted of a simple shopping cart, customer invoicing and person-to-person payments. This allowed anyone to send and receive money from other people, and allowed just about anyone to sell products on a website. Through these 2 channels, Paypal quickly became the one and only online payment provider.

Paypal has also greatly expanded its website integration methods, allowing for very customized and efficient buying experiences, enticing large ecommerce sites to use them as well.

Paypal plagued with problems

Paypal as a service provider is not without problems. Since their inception, they have been plagued by their poor quality of customer service, virtually non-existent human support, and draconian risk management procedures.

Paypal has one of the poorest track records of customer service anywhere and I believe it rivals any company on earth. I can’t think of a single aspect of Paypal’s business that I haven’t heard major complaints about. Additionally, it’s not just the fact that Paypal has complaints, but the poor manner in which they address, or fail to address, their customer’s problems. There’s over 7,000 complaints with the BBB alone in the past 3 years. There’s millions of angry buyers and sellers that have lost money through Paypal, many of these while following Paypal’s policies to a T. To be quite honest, there’s probably few companies, that could survive with the amount of negative experiences and negative press as Paypal.

Many people, probably the majority, never have problems with Paypal, but many of those who do, often end up abandoning their service altogether.

Onto the answer

Paypal will continue to dominate payments despite complaints, problems, and time, for these reasons.

  1. They’re already accepted and used everywhere.
  2. They are available where merchant accounts are not.
  3. They offer P2P payments.
  4. There’s no other option!

They’re already accepted and used everywhere

Paypal’s user base is currently over 100 Million (the number of active accounts is substantially lower). With the sheer number of web users that have a paypal account, and the number of businesses that accept it, it is going to be a daunting task to try and move people away from it.

They are available where merchant accounts are not

As someone who runs a merchant account provider, I can tell you that Paypal has an enormous advantage in that they are not restricted to the people they can service. Paypal is available in most countries in the world. Merchant account provides and most processors are restricted to a few countries. There’s no contracts with Paypal, no terms, monthly fees or termination fees. Lastly, Paypal can facilitate Person to person payments. Merchant account providers cannot do this, neither in principle nor the actual mechanism to facilitate them.

There’s no other option

Realistically, until there’s a huge Paypal abandonment, there’s no other option than Paypal. Payment services are a consumer driven industry. Until consumers want to pay with something else, they will continue to use Paypal. The catch 22 is that merchants accept what their customers use for payment and consumers wont switch until merchants accept it.

For a quick example of how slow payment technologies move, just look at contactless payments. They’ve been around for many years yet only a small percentage of card holders have contactless cards, and an even smaller percentage of merchants accept it. Nothing I have seen in the past 5 years offers compelling evidence that contactless or smart cards or mobile or any other technology will make a move any time soon. There’s often a lot of press and noise on these new technologies, but very little actual implementation.

They offer P2P payments

Paypal offers P2P (person-to-person) payments, allowing any person with an email address to send money to another person. This has 2 competitive advantages. It first gives Paypal the massive user base that’s not restricted just to businesses. Second, it gives them an enormous cost advantage over merchant account providers. Since roughly 50% of Paypal’s payments are funded from an account and not a credit card, Paypal isn’t charged any fee for these. They do however charge the merchant the fee. When you put this into their own cost/revenue breakdown, it effectively reducing their internal cost by 50%.

Visa and MasterCard have made it so difficult to create the type of business (Called an aggregator or 3rd party processor), there’s little chance of anyone being able to successfully do it. Just try to find a relevant accurate guide on how to set up a payment aggregator or 3rd party processor. It doesn’t exist because it’s only been done a few times, and of those that have succeeded, even fewer have survived. In the research I’ve done and helped others with on this type of business, it would take tens of millions of dollars just to get established. A business like this would need to have an enormous user base or some very good reason to people to start using their service or they would simply fade away like the many that have tried.

Where the competitors are going wrong.

The key mistake that Visa, MasterCard, Google, and Amazon are making is that unless they can answer the P2P payment issue, they will never pose a real threat to Paypal. Paypal is just as innovative on everything from mobile payments to ecommerce as anyone out there. They created their X-platform and are opening it up to developers, which allows for very advanced development like 3rd part payments, aggregating, and mobile or retail integration. Visa and MasterCard have no chance by themselves, it’s absurd for them to think that their brand is important enough without the other issuers to make in this space. I can’t see all of the issuers joining forces to create a massive P2P payment system any time soon, not to mention they would have more antitrust lawsuits flying than has ever been seen.

Realistically, these Paypal challengers are only banking on Paypal’s poor customer service reputation to try and gain a market share, and Paypal users aren’t jumping ship.

I would say that right now, Google and Amazon are the only ones with a shot, and based on their user base, they have a good one. Aside from the lack of P2P payments, they are still failing in getting consumers to switch their payment systems, and until they do, they will not pose a real challenge.


August 3rd, 2010 by Jamie Estep

Merchant Account Blog’s 5 Year Anniversary

Filed in: Merchant Accounts |

I have been so busy the past few weeks that I didn’t notice that the merchant account blog’s 5 year anniversary just passed, July 27th. With several hundred posts related to merchant accounts it’s often difficult to find positive and informative topics to write about. However, with major changes in regulation, mobile, contact-less and alternative payments, I anticipate the next year to be eventful. I am also hoping to add guest bloggers as I’ve been getting increasing interest from other bloggers and business owners in making guest posts here.

Thanks to everyone who reads the blog, and to those who email me their questions, which is currently 5 – 10 non spam questions every day. I do apologize if I am unable to answer everything that gets sent to me, and I will do my best in the future.

As always, if you have any questions or suggestions, please let me know.

Thanks
Jamie


July 19th, 2010 by Jamie Estep

Credit card terminal timeline

Filed in: Credit Card Equipment | 1 comment

We’ve compiled a time-line history of credit card terminals in the US.

So far we’ve added most terminals from major manufacturers over the past 30 years, and more will be added as we figure out when they were released. It’s quite difficult to get information on the release of many terminals as most manufacturers don’t publish historical information such as this. This is especially difficult for many of the pre-2000 terminals.

Related posts:
Brief history of credit card terminals in the US


July 15th, 2010 by Jamie Estep

1 minute guide to PCI Compliance

Filed in: Data Security, Merchant Accounts |

PCI-DSS has been around for several years now, and ignorance is less tolerated when it comes to data security. In case you are just learning about PCI, here’s the 1 minute breakdown on PCI compliance.

  1. PCI is a security framework created to help prevent/curb the loss of credit card data. It covers some of the more basic aspects of data security, but is not security itself.
    PCI compliance ≠ Security
    .
  2. If you accept credit cards, you must be PCI compliant. No ifs, ands, or buts.
  3. Most data breaches occur at small to medium size retail businesses. You are a soft target and thieves know it! This is especially true if you have a POS computer system.
  4. Being PCI compliant does not remove liability in case you still suffer a data breach. It “may” reduce or eliminate fines but will not eliminate actual costs resulting from a data breach.
  5. With respect to the actual process, gaining PCI compliance requires you to fill out a self assessment questionnaire (SAQ), and scan your networks periodically using an approved scanning vendor (ASV). Your exact requirements depend on which PCI level your business is.
  6. You can find a list of ASV’s here. Most ASV’s can also assist in helping you fill out the correct SAQ.
  7. If you are doing it yourself, you can get the SAQ here.
  8. If you store credit card numbers electronically, you must fill out SAQ – D. Have fun…
  9. If you are PCI compliant, it does not mean that your networks and data are secure. Security is something that requires constant administration and vigilance, and requires far more than what PCI outlines.
  10. If you don’t have the ability or expertise to be secure, hire or outsource to someone that does.

July 9th, 2010 by Jamie Estep

Dejavoo credit card terminals

Filed in: Credit Card Equipment, Merchant Accounts, Review | 1 comment

In the US, there are 2 credit card equipment manufacturers that basically own the entire terminal market, Verifone and Hypercom. Lipman USA is another major player however, Verifone purchased Lipman several years ago effectively creating 2 major brands. Another major company Ingenico, has a larger global presence, but their usage in the US in minimal at least in the independent sales markets.

A few years ago a new terminal company named Dejavoo was established. Dejavoo was founded by the original founder of Lipman USA, and seems to be founded on the same principles that Lipman was:  rock-solid products that are easy to use and very reliable. In my opinion Lipman’s Nurit 2085 is the most reliable and best land-line terminal to date. It isn’t very small, and it doesn’t look particularly classy, but it works well, it’s cheap, and it’s easy to use. Having watched the reliability of credit card terminals diminish over the past 10 years, I would love to see a highly-reliable brand emerge. Since the terminal market is monopolized by a few behemoths, it’s equally good to see a new competitor with a strong history of success in this specific industry.

Dejavoo currently offers several terminals which should meet the requirements of most merchants, whether retail or mobile. One of the coolest  things about the Dejavoo terminals, is that they all (except the C5 and M3) support a USB WiFi adapter, allowing a merchant with a secure WiFi network to eliminate an extra cord on their counter-top.

All Dejavoo terminals have quick thermal printers, and have internal PINpads. Dejavoo terminals meet the newer PCI-PED requirements for PINpads. Lastly, all Dejavoo terminals are at the lower end, if not the lowest, of cost for comparable terminals from other manufacturers.

Wired Dejavoo Terminals

Dejavoo C5 – The C5 is the entry level terminal from Dejavoo. It is dial only, and does not support USB components like the X series. It is the lowest cost terminal from Dejavoo. It is PCI certified and would be a comparable replacement for Nurit 2085, Hypercom T7 Plus, and similar products. The C5 looks to be the most durable of the Dejavoo terminals, and is slightly larger than the X or M lines. Most merchants will probably want the additional features of the X line, as the entry X5 terminal is a significant improvement to the C5 without a significant price increase.

Dejavoo X5 – The X5 is the first terminal in the X-line. It uses a custom Linux operating system, dual processors, and supports USB peripherals including the USB WiFi adapter. It features a compact, well styled design, and supports a multitude of features all for a low price. It is a dial-only terminal, but has more memory than current Verifone or Hypercom terminals. It is PCI compliant, and features a smart card reader and internal PINpad.

Dejavoo X8 – The X8 is almost the same as the X5 except that it supports processing over an 10/100 IP/Ethernet connection in addition to a dial-connection, and has an additional USB port. It is currently the lowest cost Ethernet terminal that we know of, just edging out the Hypercom T4220.

Wireless Dejavoo Terminals

Dejavoo M3, M5 and M8

The Dejavoo M series, are PCI certified, GPRS, wireless terminals. They are all based on the same M3 platform. The M5 has a base which includes a charging station. The M8 includes a base with an Ethernet port. The M5 and the M8 support the WiFi module, but the M3 does not.

The GPRS wireless network is normally used with ATT Wireless and is currently the most used network for credit card processing. So far I have not heard of development on the CDMA networks which would include Verizon and Sprint, but I imagine that there are plans in the future.

The M series terminals all include internal PINpads and thermal printers. They are compact, and use the same dual-processor system as the X terminals. Like X terminals, M series terminals accept normal credit cards as well as smart cards. The M series terminals aren’t the most elegant terminals out there, but it looks like Dejavoo traded fashion for a more robust and durable platform, which is far more important for wireless terminals.

Dejavoo WiFi Module

The Dejavoo WiFi module is an inexpensive USB WiFi stick that allows most Dejavoo terminals to process on a secure WiFi network. It theoretically works with the M3, M5, X5 and X8 terminals (We’ve personally only tested it with the X8, but Dejavoo has assured us that it works with the rest). We’ve been playing with one for the past week and despite some minor issues in initially getting the connection to work, it seems like this is the best only WiFi processing option available. The Verifone VX 610 is completely unusable because it’s support for WPA security is horrendous. The VX 670 is equally bad because it requires an expensive base, pushing the price above $800.

A note on wireless security and processing – WEP security is completely prohibited by PCI so do not under any circumstance use WEP or a non-secure connection to process using WiFi. Businesses should use WPA or WPA2 preferable and use a strong password like “4p%n&1GiJF$*nK8n”.

Conclusion

Based on our initial experience with Dejavoo terminals, they look to be the most promising brand of terminals we’ve seen in a long time, especially with regard to their wireless M-series wireless terminals. Several processors have made Dejavoo their preferred brand. I would like to see their performance over the next year or two before making a commitment. In any case, if I were Verifone or Hypercom, I would probably be concerned.  The Dejavoo terminals appear to be superior to both brands in just about every way including price, and only time will tell if they live up to their founder’s reputation.


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