Information on Merchant Accounts,
Ecommerce and Credit Card Processing

May 1st, 2006 by Jamie Estep

Scan Alert PCI / CISP

Filed in: Ecommerce, Fraud |

About a day after I published the article about PCI and CISP compliance, Nigel Ravenhill, the Marketing Director for Scan Alert contacted me about the article.

A Little about Scan Alert:
Scan Alert is by far the leader in PCI / CISP scanning. They offer PCI / CISP scanning for just about every type of online business imaginable. Scan Alert serves 72 countries and offers packages for anything from non-profit, to mega websites. Scan alert customers also get to display a hacker-safe logo on their websites letting visitors know that their website is scanned daily and the transfer of information is secure.

Nigel also sent me last years Digital Window Shopping Report, which is a study involving shopping cart abandonment on ecommerce websites.

I have personally heard positives and negatives to using any Scan Alert like program, but their Digital Window Shopping Report has some great statistics about visitor behaviors and website usability.

Download the Digital Window Shopping Report

This is last years report. This years is scheduled to be released any day as I have been told.


April 29th, 2006 by Jamie Estep

Wikipedia Merchant Account Updated

Filed in: Industry News | 1 comment

The merchant account service of the wikipedia was finally updated. The section was severely lacking in a quality definition of what a merchant account is, and has now been updated. I took a look at the article and it is incomparably better than it was before. I personally dislike the entire concept of the wikipedia, but as long as there is going to be something about merchant accounts in there, it may as well be accurate.

The owners of http://www.merchant-account-services.org/ are the responsible party for the update. Well done…

A link to the merchant account page: http://en.wikipedia.org/wiki/Merchant_account


April 28th, 2006 by Jamie Estep

Do you pay for refunding customers?

Filed in: Merchant Accounts | 3 comments

Having a good payment processor is a paramount requirement to having your merchant account run efficiently and as low cost as possible.

The reason I say this, is that there are a number of payment processing companies that charge businesses for processing a transaction and for refunding a transaction. To me this sounds absolutely absurd. A business has to pay to process a credit card. Lets just say it costs 2% to process that card. Sometimes customers make returns. Its just a simple fact of business. Now, when you go and refund your customer’s card, its bad enough that the original 2% is not refunded to you, but to pay an additional 2% to send the money back to the customer is insane.

I’m not referring to a transaction fee for this. A transaction fee has to be charged on transactions in either direction. Transaction fees are fees for accessing processing networks, they are charged both directions because the processing networks are queried on charges and returns. I’m referring to processing fees, that % per transaction being charged both directions.

This is bad service plain and simple.


April 21st, 2006 by Jamie Estep

Verifone to acquire Lipman

Filed in: Credit Card Equipment, Industry News | 1 comment

This is probably the biggest news in many years relating to the credit card processing equipment industry. Verifone Holdings Inc. is set to acquire Lipman Electronic Engineering Ltd in a merger of 2 of the largest processing equipment manufacturers in the world.

Lipman is the 3rd largest processing equipment manufacturer in the World, while Verifone is the largest. Lipman manufacturers the popular Nurit line of processing terminals, and while Lipman is only the 3rd largest market holder in land-line processing equipment, they are the undisputed leader in wireless processing equipment having a 90%+ market share in wireless terminals. Verifone’s wireless terminals have been accepted in other countries but are very limited in their use in the US. This appears to be a very smart and well founded acquisition for Verifone.

Hypercom who is the 2nd largest equipment manufacturer in the world, will look dwarfed by the size and market share in every area of Verifone. Hypercom’s terminals are very easy to use, reliable and low cost, so they appear to be in little danger for the time being.


April 21st, 2006 by Jamie Estep

Shopping Cart Software

Filed in: Ecommerce |

I have made a list of available shopping cart software. The list is broken into free and paid, and separated further by the programming language that the cart is written in. Please let me know if you have a good shopping cart program that isn’t listed.

Ecommerce Shopping Cart Software


April 18th, 2006 by Jamie Estep

Processing Equipment Lease Cost Calculator

Filed in: Credit Card Equipment, Merchant Accounts, Tools |

I finally got around to programming another simple tool.

The lease cost calculator will show how much the total cost of leasing processing equipment will cost, and will also show you how much money you save by buying equipment outright. There are about 25 common terminals programmed into it, and the price for those terminals was obtained from the equipment that we sell or one of our competitors sell. This way, I know that the piece of equipment is readily available at the listed price.

Processing Equipment Lease Cost Calculator


April 17th, 2006 by Jamie Estep

The History of Credit Cards

Filed in: History, Merchant Accounts |

Credit card history can be traced as far back as the 1890’s in Europe. Credit itself historically dates back to 1700’s.

Texaco CardCredit cards were first used in the 1920’s in the United States where individual companies such as oil firms and hotel chains began issuing them to their customers. These cards were proprietary, and were more similar to what we would now call a loyalty card. The great depression, followed by world war two, created an enormous setback in the advancement of the credit card industry. This industry did pick back up when the country was back in a more stable condition at the end of world war two.

The first issued credit card appeared in the 1946 when Diners Club issued the Diners Club card in the United States. Diners Club cards were targeted at the restaurant industry, where patrons could pay with their card which was billed by Diners Club. Unlike the proprietary cards of the 1920’s, Diners Club cards could be used at any restaurant that accepted them. Diners Club cards are still used today, although the number of people using Diners Club cards has greatly depreciated over the years.

BankAmericardIn 1958, Bank of America and American Express both issued credit cards. These credit cards, The American Express Card, and the BankAmericard were the first bank issued cards, and their success was apparent almost overnight. In 1966, Bank of America allowed licensing of the BankAmericard card to help spread the BankAmericard, and settle and collect on a widespread basis. BankAmericard was later changed to the Visa card to separate the name Bank of America from the name of the card.

MasterCharge CardAlso in 1966, fourteen US banks formed an alliance called Interlink which enabled the ability to exchange information on credit card transactions. BankAmericard had virtually an exclusive market share until 1967. In 1967, MasterCharge, now known as MasterCard was a created as a collaboration in response to the success the BankAmericard. MasterCharge was made by 4 California banks, called the Western States BankCard Association.

Interestingly, both Visa and MasterCard were started as non-profit organizations. Visa and MasterCard issue credit cards through participating banks, which are for-profit. Visa and MasterCard board members were run by high ranking bank executives and were the governing bodies over the issuing of cards to their respective customers. BankAmericard was changed to Visa in 1976, and MasterCharge was changed to MasterCard in 1979.

In 1979, magnetic strips were added to the back of credit cards, in response to the creation of the electronic credit card terminal. The ability to process transactions electronically was another turning point in the evolution of the credit card industry.

See -> History of the Credit Card Terminal

By the mid 1970’s, banks had an unchecked power over issuing credit cards, and sending active cards through the mail was not an uncommon practice. During this time the government was forced to step in and regulate the issuing and collecting of credit cards. Again in 1995, the government was needed to regulate the amount and quantity of fees that banks could charge their customers. Banks changed penalty fees from $5 – $10 to $30 or more without precedence. Several court cases including the Smiley vs. Citibank case which went to the supreme court, caused the government to look closer at the practices of banks and their assessment of fees on their customers. Fees are interest rates which are still rising today, are watched very closely by the government to help protect consumers.

Credit card issuing, collecting, and acceptance are now regulated by several government bodies including the FCC (Federal Communications Commission ) and the FTC (Federal Trade Commission).

From the 1970’s through today, credit card issuing and acceptance have seen massive growth across the globe. Nearly every person in America has a credit or debit card of some form. Additionally in 2004, the use of credit and debit cards surpassed cash and checks as the most commonly used form of payment in the US.


April 12th, 2006 by Jamie Estep

The History of Credit Card Terminals

Filed in: Credit Card Equipment, History, Merchant Accounts | 4 comments

I have been searching around for several days now, and I cant seem to find a decent resource as to history pertaining to credit card acceptance and the bankcard business. The next few posts will be a series of history related articles.

Credit card terminals which have a place on the counter of millions of businesses have a very short history. This would most likely explain why the terminals that are most common today are using technology that is 20 years old. Much like the military, credit card terminals base their technology on reliability and security. While new technologies can offer great security, these technologies have not been time tested and are slow to make their way into payment processing.

  1. Manual Imprinters
    • Manual Imprinters have been around since the beginning of a wide acceptance of credit cards. They are still as widely used and are considered a great backup processing method when a businesses primary method is unavailable. Originally, merchants would imprint their customers cards and then mail their slips into their bank. This process was time consuming and did not offer the speed or instant transfer capabilities that are standard today. Using a manual imprinter now, merchants can call in transactions for instant approval. The transactions are now electronically deposited into a businesses bank account.
  2. Electronic Authorizations
    • The first electronic credit card authorizations were done over the phone, and often took upward of 5 minutes. Merchants had the choice of imprinting their transactions or calling in for an authorization. Because of the long waiting time for authorizing a transaction over the phone, many businesses opted for voice authorization only on larger transactions.
  3. Point of Sale Terminals
    • Point of sale terminals emerged in 1979, when Visa introduced a bulky electronic data capturing terminal. This was the first of credit card terminals as we know them today, and greatly reduced the time required to process a credit card. In the same year, MasterCharge became MasterCard and credit cards were replaced to include a magnetic information stripe.
      1979 was a turning point in the credit card processing industry.

    • Verifone:
      In 1981 a small electronics company started in Hawaii that we now know as Verifone. Verifone’s first contract was a 200 terminal order from Tymshare. In 1983 Verifone introduced the ZON terminal which was the first terminal that could be considered modern. The ZON series terminals set the standard for all credit card terminals, and are still being used by many merchants today. ZON terminals led the way for the Tranz series terminals and later the Omni series terminals from Verifone. To this day, Verifone has maintained their line of best selling terminals in the world. Verifone is the largest manufacturer of processing terminals in the world.
    • Hypercom:
      Hypercom is the number 2 market leader in processing terminals, and since its change to payment processing technologies in 1982, has been the main global competitor of Verifone. Hypercom through the years has manufactured a long line of reliable processing terminals, both in printer and printer-less form. The Hypercom T7P has been on of the best selling terminals in history, and the newer Hypercom T7 Plus, is a steady competitor to any comparable terminal. Hypercom also manufacturers the ICE series terminals which are highly advanced and made to handle large customer processing applications, which are being replaced by the Optimum series terminals. Hypercom’s Optimum T4100 is already competing as a worthy high-end terminal.
    • Lipman:
      In 1994 Lipman Electronic Engineering, Ltd. was established in Israel. Lipman quickly grew, and now has offices and distributors in nearly every country in the world. Lipman is the manufacturer of the Nurit line of processing terminals. Because of Verifone’s already firm place in the payment processing industry when Lipman was established, Lipman targeted an untapped niche in the processing industry. While, Lipman holds about a 10% share in wired credit card terminals, they are the undisputed leader with more than 95% share in wireless processing terminals. Lipman has produced a variety of terminals since its creation, starting with the Nurit 2070. The most current models are the Nurit 8100 and the Nurit 8000. Of all processing equipment manufacturers, Lipman is the quickest to adapt new technologies into their processing equipment. Although Lipman is know widely for their wireless terminals, their land-line terminals also are some of the most popular and reliable terminals available. The Nurit 2085 is one of the widely used terminals in the US, and offers exceptional ease of use and reliability.
  4. Other Equipment Manufacturers:
    • Verifone, Hypercom, and Lipman are the big three equipment manufacturers, but there are other important companies that manufacturer processing equipment. Thales, Ingenico, Schlumberger, and Linkpoint are a few of the larger companies. Apriva, Comstar, and eProcessingNetwork are a few of the smaller companies that specialize in wireless technologies.
  5. The Future:
    • Credit card processing technology has a lot of room for advancement. Increasing processing speed, reliability and security are driving forces behind processing technology advancement. While IP and WiFi based processing are just emerging, contact-less payments, biotechnology, and smart cards are just around the corner. The processing industry has a lot to look forward to, and will definitely be adapting new technologies in the near future.

References:
Visa History
MasterCard History
Verifone Time-line
Hypercom History
Lipman History

Updated***

We have compiled a timeline of credit card terminal history.


April 10th, 2006 by Jamie Estep

How to safely Purchase a Wireless Credit Card Terminal

Filed in: Credit Card Equipment, Merchant Accounts | 8 comments

Nurit 8000
Wireless credit card machines hold the future of credit card processing. Wireless credit card machines offer businesses the ability to process credit and debit card at virtually any location. There are several common pitfalls not found with traditional credit card terminals that a potential buyer can fall into if not careful when looking to purchase a wireless credit card terminal. Over priced equipment, wireless coverage availability, and outdated equipment top the list for the most common problems found when purchasing a wireless credit card machine.

Common Pitfalls

Pitfall – 1, Over Priced Equipment
The most common wireless terminals in use in the US are the Nurit 3010, the Nurit 8000, and the Nurit 8000 GPRS. The manufacturer Lipman, only makes 1 version of each terminal. The price for any of these terminals should fall into the $700 – $900 range for a new terminal. Anything higher and you are being ripped off. No matter what your provider tells you, this is how much you can buy these terminals for. There are no other versions of these terminals, so don’t be talked into an overpriced terminal.

Pitfall – 2, Outdated Equipment, Outdated Networks
It is often very easy to find a ‘very low’ priced wireless credit card terminal on ebay or at other marketplaces. Many of these terminals use outdated processing networks, and what was a wireless terminal, will no longer work for wireless processing. Many Nurit 3010, and Nurit 2090 wireless terminals use a network called the CDPD network. This wireless network is all but abandoned for credit card processing and you will not be able to use this terminal for wireless processing.

Make absolutely sure that the wireless terminal that you are buying is not one made for the CDPD network. If the seller does not know, or will not disclose what network the terminal is programmed for, then do not buy the terminal. In general, if the offer just sounds too good to be true, then it probably is. Also, many merchants that are selling their used terminals may have no idea what network the terminal operates on. Whatever the case, you need to make sure the terminal is not programmed for the CDPD network.

Pitfall – 3, Wireless Processing, Wireless Service Coverage
The ability of being able to process anywhere at any time is a great asset for many mobile businesses. But, don’t confuse the coverage area that your cellular phone gets with what is available for wireless processing. Wireless credit card terminals currently operate on three wireless networks; the Motient, Mobitex, and GPRS Edge networks. All three of these networks are considered business class networks that have much better data, speed, and security than traditional cellular networks. Wireless processing networks also have much lower cellular coverage availability than cellular phone networks.

(more…)


April 7th, 2006 by Jamie Estep

Accepting other payments on Ebay

Filed in: Ecommerce, Merchant Accounts |

Ebay and Paypal now seem like they were a match made in heaven. Paypal and Ebay started out as two different companies. Both Ebay and Paypal have grown very rapidly. After both Ebay and Paypal became well established, Ebay saw huge potential in Paypal and several other smaller 3rd party processing companies. Ebay did what any other corporate monster would do. They bought all of them.

Even though Ebay and Paypal work seamlessly together and Paypal is widely accepted, it is important for Ebay sellers to look at accepting other payment methods for their Ebay sales.

Why?…

I have done a significant amount of research in my selling on Ebay. I have three Ebay accounts, one personal and two business, all three are power seller accounts. In my experience, if you accept ‘only Paypal’ on Ebay, you are loosing between 20% and 30% of your potential customers from Ebay. If you sell primarily business to business, you are probably loosing a lot more than that.

Paypal is notorious for some of the worst customer service and poorest user experience of any online service, ever…

There is a huge population of people who absolutely refuse to use Paypal, under any circumstance. There is no middle line. Whether these people have gotten ripped off through Paypal, had their account held, or just don’t like Paypal, is irrelevant. The fact is that these people may want to buy from you, and while you may have the best prices or best service ever, you cant have their business.

My personal belief in business, is that making the buying process for your customers easy and trouble free, is absolutely key to gaining new and keeping current customers. This extends into online sales and any other channel of sales and marketing that your company uses.

Give customers another option for payment:
Accepting credit cards is the best alternative to Paypal for Ebay sellers. Checks are also a good fit, but only if a business is able to accept the checks electronically over the phone or online. Cash is the least convenient method of paying online, and I wouldn’t even consider it as widely used on Ebay. Mailing in checks or money orders is time consuming, and offers very little protection from fraud. From time to time I still see sellers that only accept checks or money orders by mail, and I personally will not buy from them. If you only accept payment by mail, I pretty much guarantee that you will see a jump in sales if you switch to electronic payment. Apart from this, many people don’t factor in the time it takes to go to the bank, make a deposit, wait for it to clear, hope it clears for checks. Time is the most valuable resource, and I know that everyone has better things to do than go to the bank, especially for business owners.

Even if you need to have your Ebay customers call when they want to pay with a credit card or check, you are still providing your customers with the method of payment that they chose. Whether you believe the customer is always right or not, it is un-arguable that customers make business possible. Make your customers happy by giving them the options that they want, and they will reward you for it.

There are of course integrated solutions that will allow your website to integrate your Ebay sales into it, and 3rd party checkout systems. While these systems are often very high quality, this often comes at a price that is too high for smaller Ebay sellers. For this reason, accepting Ebay payments over the phone is one of the cheapest and easiest methods available.

Paypal is so much cheaper:
Paypal is cheaper only when a business does an enormous volume of transactions. Otherwise, the fees for Paypal and the fees for a merchant account are very similar. Accepting checks electronically is normally cheaper than credit cards, and therefor cheaper than Paypal as well.

Paypal also does their best to remove customer and business owner’s rights when a disagreement does happen. Merchants on Paypal often have their accounts frozen for high sales volumes, and both sellers and buyers often lose as a result of fraud. This is another of the numerous reason why people dislike Paypal.

Conclusion:
20% – 30% seems like a lot to me. That could easily be the difference between a successful business and a failure. These numbers may not prove exact for every person that sells on Ebay because of the vast difference in buyer trends with each type of product, but having tested loosing 20% of business when credit cards are not an option is enough proof for myself.