Well, the blog has finally started to rank in the search engines. It has been drawing traffic from small obscure search terms for a while, and I just found it climbing the ranks for a much more competitive search term, ‘merchant account’ and ‘merchant accounts’. Looks like its ranking 45 and 66 right now, and since it was nowhere a month ago, that’s a huge improvement. Anyway, thank you to anyone who is linking here, and thank you to anyone who stops by the blog.

As always, let me know if there are any topics you would like to see on the blog.

Thanks
Jamie

There are so many merchant service providing companies in the US, that searching for a good one can seem like an overwhelming task. Nearly every provider you encounter will be offering their version (or the same version) of what they can do for your business. In the world of merchant services, there are a few good companies and there are a lot of bad companies. A bad company is what I would define as a company that is looking to rip off unsuspecting businesses. New business owners are often so busy planning the other parts of their business, they become an easy target.

How do you find out if the company that you are going to trust your money to is a good company?

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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.

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

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.

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.

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

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

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

Credit 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.

In 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.

Also 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.

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.