My Merchant Account Blog

Relying on Recurring Billing

Friday, April 17, 2009

A recurring monthly payment from customers can be a good source of income.  There are thousands of businesses that could thrive on using an electronic payment gateway to do recurring billing for them.  The electronic payment gateway would store the consumer's credit card number for you and complete the transaction at a set interval that you determine.

LinkPoint / First Data Global Gateway

The LinkPoint Gateway (also known as YourPay, but now known as the First Data Global Gateway) has their feature that is called periodic billing.  Through their API, you can set up a recurring monthly payment.  By doing this, you do not need to worry about storing credit card numbers and a possible breach.  You also save the Address Verification Service (AVS) fee on each recurring transaction, since the gateway has performed the service already. 

The LinkPoint Gateway however is somewhat limiting on its features.  For example, if the recurring transaction fails the next month, you are sent an email.  Unfortunately, it is then up to you to either contact the consumer to get a new credit card and possibly suspend the consumer's account.  However, you can also set up the recurring transaction to try for a couple of days - just in case the consumer was close to his limit and a payment was received to the card association.  Keep in mind though, each transaction will cost - a transaction fee, and this is usually $.15 - $.30, depending on your monthly volume and transactions.  On the plus side, the periodic billing feature is free and is available to all merchants that use the LinkPoint / First Data Global Gateway.

Quantum Gateway

The Quantum Electronic Payment Gateway is a fairly new product from CDG Commerce.  The gateway seems to pick up where a lot of the electronic payment gateways stop when it comes to recurring billing.  With their API, you can store the customer's credit card number on Quantum's secure web server and bill the credit card at a later time.  This comes as the e-commerce industry is trying to be more secure.

Developers can also apply for a test account to help mimic real world transactions.  For any new business that is considering a safe and secure method for securing credit card numbers, they should look at the Quantum Gateway.  However, this does not make you exempt from the Payment Card Industry Data Security Standard (PCI DSS).  With the API from the Quantum Gateway, there is no need for merchants to store the credit card number on their web server - all the information needed for the transaction is stored securely in the Quantum Vault.

The other electronic payment gateways and Internet Payment Service Providers (IPSPs) all offer some version of recurring billing but I don't think you will find one that is comparable to the Quantum Gateway.  As the Internet grows and more business models are online, most of the electronic payment gateways have grown stagnant as far as development.

IRS Seeks Data from Payment Processor

Thursday, April 16, 2009

U.S. District Judge Robert Blackburn granted a request from the Internal Revenue Service (IRS) on April 15, 2009.  In this request, the IRS is seeking records as part of investigation of taxpayers whose businesses directly deposit income from credit, debit, and other payment cards into foreign accounts to avoid paying U.S. taxes.  I have not had a chance to read the court documents, but right now it looks like the IRS is targeting merchants who have the payment processor deposit funds into an offshore account.  This comes as the Swiss banking giant UBS agreed to turn over dozens of names suspected of concealing income from the IRS a couple of months ago.

I imagine though that other payment processors that support these types of accounts will be next, i.e. Paypal.  You can always at least find a few messages a week in the message boards asking if Paypal (or other payment processors) report the earnings to the IRS.  And most of these posters tend to have their website in their signature.  Now to me, this just seems to invite the IRS to review your business and personal income tax reporting - but I could be wrong.  Of course, if you are reporting everything to the IRS, you have nothing to worry about. 

Usually we see a lot of merchants that are not based in the United States and they are wanting a merchant account from a U.S. transaction processor.  Most transaction processors in the United States can only support U.S. based merchants due to their underwriters and policies.

So, if you are a United States merchant with a bank account not located in the United States - be warned, especially if you are using Cardservice International (dba First Data Independent Sales) - the IRS is looking for monies owed.

Using and Accepting Gift Cards

Thursday, April 09, 2009

Just a few years ago, you bought a gift card for a specific company, i.e. BlockBuster, Best Buy, even Wal-Mart.  Then the card associations allowed issuing banks to issue gift cards with the card association logos on them.  this allowed the person who was receiving the gift to use the card almost anywhere. 

Let's say you received a gift card that had the American Express logo on it.  This means that you could use the gift card anywhere that was displaying the American Expression logo - from buying groceries at your favorite shopping market or buying music from the online e-commerce store.  This made it easier on the giver - he / she could easily buy a gift card with a card association logo on it, eliminating the need to force the recipient to go to a specific location.

Using the Gift Card as a Consumer

These gift cards though do come with some more responsibility though.  On the back of the card, you should find a toll free number.  For American Express gift cards, the toll free number (in the United States) is 877-297-4438.  Once you enter the 15-digit credit card number, along with the 4-digit Card Identification Number (CID) found in the upper right corner on the front of the card, you will be told your balance.

After you are told the balance, listen for the other information.  Option 5 should be for all other questions.  This will direct you to a customer service representative.  At this point, you can give the representative your name and address.  This will then help you use the card on websites that use Address Verification Service (AVS) as a starting point as a way to prevent online fraud.  Merchants rely on AVS to help check the validity of the transaction.

The next thing, you as the consumer needs to know, is the balance on the gift card.  If your balance is $9.81 but you are at the store buying goods that total $18.76, you need to let the cashier know to authorize $9.81 on the card.  Once that sale is complete, the cashier will then ask you for $8.95 - which you should be able to pay with cash, a credit card, or another gift card.

Accepting the Gift Card as a Merchant

As a merchant, you should not need to do too much to accept the gift card from from one of the card associations.  Your shopping cart should allow the option for the consumer to enter an amount to authorize.  If this amount is lower than the total, that amount should be displayed once the first amount is authorized, allowing the consumer to complete the sale.

If you rely on AVS as a stepping stone to help prevent online fraud, you might want to contact your electronic payment gateway and merchant account provider to see what they support.  I know that I have always stressed using AVS as the first step to help prevent online fraud, unfortunately though, unless the consumer has registered the gift card with the issuing bank, you might be unable to rely on this service.