Information on Merchant Accounts,
Ecommerce and Credit Card Processing

October 11th, 2006 by Jamie Estep

Visa is going public

Filed in: Industry News | 2 comments

Following the lead of MasterCard, Visa announced today that they are restructuring their company on a global scale including an IPO for the American branch of Visa.

Visa announced today that it intends to restructure its organization in order to create a new public global corporation called Visa Inc. As a part of this restructuring, Visa Europe will remain a membership association, owned and governed by its European member banks, and become a licensee of Visa Inc. Visa expects the proposed restructuring will best position the company to meet the evolving needs of its customers and will accelerate its growth by improving organizational efficiency, addressing certain legal claims that exist in some markets, and increasing access to capital.

MasterCard’s IPO was extremely successful, more than anyone thought, and Visa has the ability to make a lot of money with a public offering. This money will definitely be partly used as padding for a plethora of major upcoming lawsuits, that could cost Visa hundreds of millions.

Subsequently, MasterCard reported a drop in their stock almost immediately after Visa announced its new plan. MasterCard stock has been assumed to be high above its actual value, and this could trigger the beginning of a slump for MasterCard. – Visa Announces Global Restructuring

October 4th, 2006 by Jamie Estep

A list of payment gateways

Filed in: Ecommerce | 3 comments

I just compiled a list of commonly used payment gateways.

I added my recommendation and a quick price comparison for the more popular payment gateways. Check it out, and let me know if I missed any major gateways.

October 2nd, 2006 by Jamie Estep

Google Checkout vs. Everything else…

Filed in: 3rd Party Processors, Ecommerce | 6 comments

Google recently released their payment systems called Google checkout. Google checkout is a fairly easy to use merchant account alternative for businesses and individuals. Google checkout offers very low fees for use, and can be completely free, if a business advertises using Google AdWords. For every $10 a business spends in AdWords advertising, they get $1 free in processing fees.

Google Checkout Implementation:
Despite what Google would like everyone to think, Google checkout is not easy for websites to implement. With the exception of a few very simple and limited uses, it is not easy to get Google checkout into an existing website, especially if the website is using a custom shopping cart system. The Google checkout API is an XML based system and is not something that most beginning programmers could easily tackle. Google does provide a handful of good scripts, but even with these, integrating Google checkout can be a daunting task. The integration scripts can be obtained by signing up for an account with the Google sandbox.

The current requirements to be eligible for the Google checkout program are a US bank account. Google is planning on making Google checkout available to more countries, but for the time being US is the only country allowed. This single fact is probably one of the biggest reasons that Google checkout isn’t more popular.

The benefits of Google checkout:
The biggest benefit right now that I see with Google checkout is for AdWords advertisers. AdWords advertisers get to display a small Google Checkout Badge next to their AdWords listings. This small image could definitely help distinguish a particular AdWords ad from the others, creating a high click through rate. Since most web users have no idea what Google checkout is, this could be taken as an unfair advertising advantage to Google Checkout customers.

The use of Google checkout on a consumer level is very limited. It is slowing growing in usage, but at this time is not a widely adopted payment method. Expect the number of consumers using Google checkout to grow over time, but unless Google really makes it beneficial for consumers, it is unlikely that Google checkout will ever compete with Paypal or Credit Cards.

I am a firm believer in making the online shopping experience as easy as possible for website shoppers and this includes making all popular payment methods available to website visitors.

The negatives of Google checkout:
The biggest complaint that I have, apart from the difficult integration, is that Google requires website’s using Google checkout to display Google checkout buttons all over the website. There are also a ton of regulations that are simple unnecessary.

Display a Google Checkout button immediately beside, above, or below every existing checkout button or link on your website.

Lets be honest here. Google is really turning off the desire to use Google checkout by forcing Google checkout users to place large Google buttons all over a website. It’s also against policy to host the Google checkout images yourself, and it is against policy to alter the images (including resizing) in any way.

Google needs to have some consideration for website owners wanting to maintain the integrity of the look of their websites. Not many respectable websites want to have Google checkout buttons all over the place. Obviously Google doesn’t care about this, because they just want more users at this time. Another deterrent to putting Google checkout on your site.

The other major problem with Google checkout, is that it is not an accepted or allowed payment method with eBay. This means that it is against eBay policy to pay or offer to accept Google checkout on an eBay auction, and doing so can result in getting suspended, or banned. Any Google checkout purchase made on an eBay auction, immediately removes all eBay buyer and seller protection. If you get ripped off as a buyer or seller, there is no recourse.

If you are an AdWords customer, and you sell products, then Google checkout is a good system. You can get that little Google Checkout Badge next to all your AdWords listings, and this is bound to help your AdWords click rate.

As for businesses just looking to accept Google checkout from their customers, my vote goes for hold off. There are simply not many people wanting to pay with Google checkout. The amount of purchases from Google checkout customers isn’t going to be worth the trouble to integrate it into your website, and wont be worth clogging up your website with a bunch of ugly Google checkout buttons designed to circumvent your existing checkout process. Anyone that uses Google checkout also has a credit card, and most likely has a paypal account. If you’re going to add another payment option for your customers, go with paypal. Wait until Google gets some people using it, wait for them to relax on their rules, and wait for it to be allowed on eBay.

The Google Checkout Blog has some good information about the Google checkout program, but expect it to be extremely biased as it is a Google blog.

Related Posts:
Google Checkout Sign-up Open
Google Payments, Update

September 19th, 2006 by Jamie Estep

Visa Security Alert Released

Filed in: Industry News |

Visa has just issued a security alert relating to the storage of magnetic stripe data.

Visa is aware of compromises of credit and debit card account information resulting from the improper storage of magnetic stripe data (“track data”) after transaction authorization is completed. Track data refers to the information encoded in Track 1 and 2 contained within the magnetic stripe on the back of a payment card.

This information is received by a merchant’s point-of-sale (“POS”) system when a payment card is swiped through a terminal. Some merchant POS systems improperly store this data post authorization in violation of longstanding Visa USA Operating Regulations. Hackers are aware of this vulnerability and are targeting vulnerable POS systems to steal this information.

Download the security report on the download page or here.

September 14th, 2006 by Jamie Estep

A credit card terminal from First Data (FD-100)

Filed in: Credit Card Equipment, Merchant Accounts | 22 comments

FDMS recently came out with their own credit card terminal called the FD-100.

The FD 100 Credit card terminalThe FD-100 is a small simple credit card terminal that is poised to become a major competitor on the counter top of companies processing on First Data platforms. First Data is by far the largest processor in the US, making this terminal available for a large number of businesses.

What sets the FD-100 apart from the competitors is the advanced features at a very low price (Most likely around $200). While it is lacking an internal pinpad, it has a touch screen, and comes with the ability to process over the internet (IP capable) right out of the box, with a seperate WiFi module available for WiFi wireless processing. The printer is a quick 15 lines per second thermal printer, using a standard paper size. The terminal itself supports recurring billing, has a built-in function to process corporate cards, automatically prompting for the extra required information. The terminal is compatible with gift card and check service programs, including telecheck. The terminal has tip applications for restaurants, can be setup with automatic gratuity, has a open/close tab option for bars or restaurants, and can be programmed with gratuity recommendation lines for customer receipts. The memory will store up to 450 credit transactions, and the terminal stores the previous 8 batch information for quick reference.

The FD-100 is currently supported on the FDMS Nashville platform, and will be certified on the FDMS Omaha platform in a few weeks (FDMS Platform information).

September 13th, 2006 by Jamie Estep

Technological Progression of Payment Processing – Not any time soon!!!

Filed in: Credit Card Equipment, Merchant Accounts | 3 comments

Old TechnologyIf you know much about payment processing or have paid attention to the credit card terminals that businesses use where you shop, you would quickly realize that technology in credit cards and processing equipment has barely changed in the last 20 years.

The first Verifone Zon series terminal was introduced by Verifone in 1983. Some of those terminals, manufactured in 1983 are still being used today. Most new terminals still use the same, relatively simple technology found in the original Zon terminals.

In an age where the average person can construct a near-super computer, why have we not adopted better technology into paying for merchandise?

Much like the military, credit card processing relies on reliability and consistency. However, many of the newer technologies that we see are very reliable. The older technologies are also more expensive to manufacture because they are outdated.

With this is mind, the major hold on advancing payment technologies lies in consumers. Payment processing is a 100% consumer driven industry. Merchant account providers, ISO’s, Processing Banks, and Credit Card Companies exist because businesses want an easy way to accept payments, but more importantly and ultimately the deciding factor: consumers want an easy way to pay.

Credit cards offer that simple, cheap, fast, and convenient method of paying for something. The new technologies that exist, smart cards and contact-less payments, which are intended to make paying even quicker and simpler, are great ideas but they share one fatal flaw hindering their widespread adoption.

These technologies are derived from the needs of large corporations and not consumers. How many consumers care if McDonald’s can save thirty million dollars per month if each person they serve can pay for their food 2 seconds quicker?


Eventually these technologies will be pushed on to consumers, but it is definitely going to take time. There is great expense for businesses to adopt new systems and the act replacing a billion credit cards with something that costs 10 times as much is no desirable task for any bank.

Between smart cards and contact-less payments, I would place my bet on contact-less becoming the next thing for payment processing. But, it’s still not going to happen any time soon.

Related Posts:
The history of credit card terminals.

September 7th, 2006 by Jamie Estep

Magazines for small business owners

Filed in: Ecommerce, Guides, Merchant Accounts | 2 comments

I like reading small business magazines. I have a few favorites that I always read, and there are others that are good, but are just not as interesting to me.

Small business magazines can provide some good ideas for business owners, and usually give some good insight to upcoming products, services, and anything of interest to business owners, and entrepreneurs. They can be a good place to advertise, but you can also lose a lot of money buying big ads in these publications.

My Favorites:
Entrepreneur Magazine
Fast Company
Ecommerce Times

General Business Related:
Entrepreneur Magazine
Fast Company
Business 2.0
Fortune Small Business
Business Week
Inc Magazine
Red Herring

Ecommerce and Online Related:
Practical Ecommerce (Online and Print)
Internet Week
Ecommerce Times (Online)
.NET Magazine (UK Based)

Payment Processing Related:
The Green Sheet
Transaction World

Most of these magazines offer a lot of great content on their websites and you don’t need a subscription for it.

Let me know if I’m missing any good ones.

September 6th, 2006 by Jamie Estep

Mastercard to publish interchange rates

Filed in: Industry News | 3 comments

Mastercard has been going through some internal changes since its IPO a few months ago. Just yesterday they released a press release titled: MasterCard Announces Interchange Initiatives Aimed At Maximizing the Value of MasterCard Card Acceptance.

Purchase, NY, September 05, 2006 – MasterCard Worldwide announced today that it will soon implement significant interchange initiatives aimed at addressing concerns that have been raised by the merchant community, and helping them maximize the benefits and value of accepting MasterCard cards.

Now while this may seem like a genuine act of goodwill to the businesses that accept Mastercard, I can only see a negative affect from this new policy.

Why would publishing interchange be negative?

Essentially what Mastercard is doing by publishing interchange is placing all of the weight of high processing fees on the Merchant Service Providers, or even more appropriately they are attempting to remove the blame from themselves. Even though merchant service providers only take home about 5% of the fees that businesses pay to accept credit cards, it is the common belief that they are getting the whole check. See the post: Merchant Account Fees, Credit Card Interchange – Who are you really paying?, for more information on where the money is going.

Now a business sees the credit card interchange fee schedule for their business type. It states something like: 1.39%, and they think, oh, why am I paying 1.71% if they only have to charge 1.39%? The business doesn’t fully understand the industry and as a result, they think they are being ripped off. The next thing that happens is a huge surge in complaints and negative feedback against the merchant service providers, ISOs, and banks who actually have to charge 1.68% just to break even. Since interchange is the same for everyone, this percentage is pretty much the same across the board. Mastercard has effectively removed their own accountability for high processing fees, and placed it on the businesses that provide services for them. Even though they are the deciding factor in credit card interchange, they place the blame on the companies that are reselling their services. In no way are they fixing any problem. They aren’t going to lower interchange, and as a result, nothing at all is going to change except consumer satisfaction.

Now, I know that this sounds completely biased but the simple fact is, unless Mastercard decides to lower interchange, nothing at all is going to change. I would absolutely love to be able to provide merchant accounts at .1% or lower. But as long as interchange is where it is, businesses will never see prices drop.

The humor that I see in this situation is that Mastercard interchange is about .09 – .1% higher than Visa for just about every business type. They have by far the highest interchange fees, and they are the ones who are going to show everyone. Mastercard is providing a perfect example of what not to do when your company goes public!

Related Posts:
Merchant Account Fees, Credit Card Interchange – Who are you really paying?

Other websites that are talking about this:
Payments News
MasterCard Blinks On Interchange Fees

September 1st, 2006 by Jamie Estep

Just Launched – The Ecommerce Blog

Filed in: Industry News | 1 comment

I recently launched the Ecommerce Blog: The goal is to provide information and discussion on topics relating to non-payment related ecommerce.

I added a Tab to the top of this blog for easy navigation. Check out The Ecommerce Blog!

August 30th, 2006 by Jamie Estep

Payment Gateways and SSL Certificates (API vs. Simple)

Filed in: Ecommerce | 3 comments

I have been very busy lately, which has resulted in a reduced quantity / quality of posts. The site just got switched to a new server and everything should run much more smoothly now.

I often run into website owners that are confused about the SSL requirements a website must have to process payments. Specifically, why would a SSL certificate be required if a website is using a payment gateway.

The answer to this is simple. Payment gateways are independent of SSL certificates and do nothing themselves to make a website secure. However, some Payment Gateways do not use an API (Application Program Interface) method to integrate with a website. A SSL certificate is normally not required if a website is not using an API method and not processing a customer’s credit card on their own site. Instead, the website’s visitor is redirected to a secure checkout page on the domain of the payment gateway. I think this redirection is where the main confusion is created.

Types of payment gateway integration:
Basic Integration – A website visitor browses and adds products to a shopping cart on a website. When they go to pay for their selected merchandise, they are redirected to a secure web page that is hosted with the payment gateway.

API Integration – This is a more advanced and better integration. The website is connected securely to the payment gateway. The visitors shops on the website, and makes payment on the same website. This is a completely seamless integration, and the website must have the ability to provide a secure connection between the user, in addition to a secure connection between the website and the payment gateway.

API vs Simple Integration Methods

Which method is better:
There are benefits to both integration methods, but I think that the API integration method is much better that the simple method. API integration keeps a visitor on the same website that they are shopping with, it allows for easier visitor and order tracking, and is generally a much better practice for usability concerns. If you look at any major ecommerce website out there, you will find that they use the API version of whichever payment gateway they are using.

The simple method is easier to implement, and doesn’t require a SSL certificate. The drawbacks are mainly the loss of control of website visitors when they go to make a purchase, difficulty in tracking user behavior on a website since they leave it before a conversion is completed, lack of control over the payment abilities of a website, and poor website usability.

Many websites start out using a simple method of integration, but will later want the added capabilities of the API version.

I recommend using the payment gateway using the AIM API integration method for any business.