My Merchant Account Blog

First Data and The Future

Friday, August 28, 2009

Back in June 2009, Charles Fote announced he was going to start a new, "complete package" of payment product.  Mr. Fote was the CEO of First Data from 2002 to 2006.  One first has to wonder if starting another company will be worth it.  He has a management team already and some private investors.  I am sure the management team consists of individuals who were laid off from First Data.

Changing merchant account providers and electronic payment gateways can be very difficult for some merchants.  For others, it can be as simple as changing a few lines during the checkout process. 

For years, First Data was a giant in the industry - able to withstand a buyout and usually the ability to buy any company it wanted.  But in 2005, the LinkPoint gateway was moved from Burbank, CA to Denver, CO.  Unfortunately, First Data decided to basically build the LinkPoint gateway from scratch.  This caused a strain on a lot of merchants.  The development team built the gateway, basing it on LinkPoint's features.  However, most of those features were deprecated.  The only fraud prevention LinkPoint had to offer was Address Verification Service (AVS) and CAV2 / CVC2 / CID / CVV2 verification.  They did have a product called LinkShield™, but neglected to develop a billing procedure, so they don't offer it.  However, if you want something very similar (but better), the Quantum Gateway offers MaxMind at no additional charge.

In 2008, First Data decided to re-brand the LinkPoint gateway as First Data Global Gateway.  Nothing was changed then, the gateway was still the same. 

If Mr. Fote is successful, First Data might have to re-consider its business plan.  When the LinkPoint gateway was first developed, it provided merchant with fantastic tools.  Years later, most of those tools are standard with most electronic payment gateways.  For a merchant to switch, the merchant account provider and the electronic payment gateway, must be able to provide the merchant with tools to help prevent chargebacks and fraudulent transactions.

Mr. Fote might have approached a few electronic payment gateway companies to buy them out.  Or he took his knowledge to build another electronic payment gateway.  He will probably vie for Wal-Mart, since Wal-Mart paid over $1 billion last year for credit card transaction costs.  If Wal-Mart's discontent continues, I am sure it would be easy for Mr. Fote or another provider to make a case to Wal-Mart to consider switching.  Plus, there might be another contender for that business already.

Switching Merchant Account Providers

For merchants to switch to another merchant account provider, the provider must make a case why their company is better.  Usually this is done by telling the merchant how much money they can save.  If the merchant does make the switch but keeps the same gateway, usually the switch will be easier.

However, switching to another electronic payment gateway is a bit more involved.  The above though is true - they must explain to the merchant why their service is better.  Most gateways are somewhat the same, but the Quantum Gateway does stand out. 

Besides offering the "basics", the Quantum Gateway offers merchants extra tools at no extra charge.  As a matter of fact, the Quantum Gateway is free.  Unlike other electronic payment gateways that charge from $10.00 to $100.00 a month, Quantum Gateway does not have a monthly fee or transaction costs.

The Quantum Gateway goes above the other gateways by providing the merchant numerous tools to help reduce chargebacks and fraudulent transactions.

So one has to wonder if First Data can keep up with the times?  They had a great opportunity in 2005 to add extra fraud prevention tools but did not use it.  Will merchants keep waiting or will chargebacks make merchants re-consider another electronic payment gateway?

Internet Payment Service Providers

Wednesday, August 19, 2009

Internet Payment Service Providers (IPSP) or Third Party Payor (3PP) is another option for some merchants.  Most of the IPSPs require the merchant to direct the customer over to its secure webserver to handle the transaction.  The IPSP will scrub the transaction for you, since it is their merchant account you are using.  Probably one of the more well known IPSPs is Paypal (owned by eBay).  Depending on the country the business owner is in, he might qualify for their "Website Payments Standard" which will allow the merchant to process the transaction on his secure web server, allowing the consistency during the checkout process.

Paypal's fees vary per country and per type of account.  For the most part, the fees are similar to Checkout by Amazon and Google Checkout.

There are a number of IPSPs available to merchants worldwide.  Some are reputable and some might not be.  Do your homework before enlisting in any of these services, and make sure you understand their terms of use and acceptable use policy.  For example, most IPSPs will not support a Ponzi / MLM scheme.  If you sign up with an IPSP that does not support a Ponzi scheme, sooner or later the IPSP will find out.  When they do, your agreement will be suspended or terminated.  Any funds that are in your account with the IPSP will be frozen.

Other Internet Payment Service Providers

I will take the time and list out a few other third party payors in this section.  Keep in mind that we do not support any one service listed.

Checkout by Amazon

Checkout by Amazon was founded in 2007 and headquartered in Washington, United States.  Checkout by Amazon has a varying price structure.  For payments under $10.00, the discount rate is 5.0% and the transaction rate is 5¢.  In most cases, the transaction rate (fixed rate) is higher and the discount rate (percentage) is lower.  A $5.00 transaction would cost the merchant about 30¢.  If you have a merchant account / electronic payment gateway, the transaction would cost about 41¢.  For transactions more than $10.00, the discount rate is 2.9% and the transaction rate is 30¢.  A $20.00 transaction would cost about 90¢ with Checkout by Amazon and about 74¢ with a merchant account / electronic payment gateway.

Checkout by Amazon also offers volume discounts.  If you are processing between $3,000 and $10,000 a month, the discount rate lowers to 2.5% and the transaction rate stays the same at 30¢.  For volume between $10,000 to $100,000 a month, the discount rate lowers to 2.2% and the transaction rate is still 30¢.  If you are processing more than $100,000 a month, the discount rate lowers to 1.9% and the transaction rate is still 30¢.  While this might seem to be a good deal, you can get a merchant account in the United States for probably the same and maybe even a lower transaction rate.

Bill Me Later

Bill Me Later is another option available to some owned by eBay, its headquarters are in Maryland, United States.  It offers customers the opportunity to get the merchandise but billed in installments.  Bill Me Later underwrites each purchase at the time of the transaction.  The line of credit is not revolving - it's for that purchase.  The customer might be able to purchase your goods and not make a payment for 90 days, or maybe no interest for six months.

Click and Buy

Click and Buy was founded in 2000 and is located in London.  For United States merchants, there is a $19.95 registration / set-up fee and $19.95 monthly service fee.  The discount rate is 2.9% and the transaction rate is 35¢.  So if you only had one transaction that month, let's say $100.00, your monthly bill would be about $23.29.

Google Checkout

Google Checkout was founded in 2006 and based in California, United States.  Their rates seem to be comparable to Checkout by Amazon.  If your monthly volume less than $3,000 a month, the discount rate is 2.9% and the transaction rate is 30¢.  If the monthly volume is between $3,000 and $9,999.99, the discount rate is 2.5% and 30¢ per transaction.   Volume between $10,000 and $99,999.99 will lower your discount rate to 2.2%, while keeping the transaction rate at 30¢.  If your volume is over $100,000.00, the discount rate is lowered to 1.9%, but the transaction rate is still at 30¢.

Some merchants who were using Google Checkout from the start were not happy when Google Checkout raised their rates (discount rate was 2.2% and the transaction fee was 20¢.  Some even wondered if Google would keep this business model, but their post back in March 2009 (Google Checkout Fees in 2009) let's the readers know that upcoming enhancements are to be expected.

Revolution Money

Revolution Money was founded in 2007 and headquartered in Florida, United States.  One of the founders is Steve Case (American Online Founder).  It offers several payment products: RevolutionCard, RevolutionGift prepaid card, and Revolution MoneyExchange.  The RevolutionCard is an alternative to Visa / MasterCard brands.  The interchange rate is low (.5%), compared to the discount rate of an Internet Merchant Account. 

The card is accepted by about 650,000 merchants currently.  Right now, the RevolutionCard is supported by the merchant account providers:

• Chase / Paymentech
• RBS WorldPay
• Fifth Third Processing Solutions
• Cardinal Commerce
• Keystone (Petroleum Processing-Pay at the Pump)
• Auric Systems

Share-It / Digital River

Share*It! is a service of Digital River, established to help merchants sell their digital goods online.  It offers two plans: share-it! VALUE and share-it! FLEX.  While the discount rate is a bit higher, ranging from 4.9% - 8.9%, its services should be considered if you are selling software / scripts online.  Share*it! will complete the transaction on its secure web server.  They will scrub the transaction for you, even offering the consumer the chance to create an account with them.

They also can manage the downloads, registration sign-ups, backups, and licensing.  Selling downloadable goods can be very high risk, but share*it! assumes that responsibility so you don't have to. 

Obopay

Obopay was founded in 2005, located in California, United States.  Obopay is a bit different in that it focuses more on mobile payments.  You can buy, transfer money, or pay with any mobile phone using Obopay's mobile application or through text messaging.  You can also access Obopay's website through a PC or on your Internet ready mobile device.  You can fund your Obopay account with a credit card or a bank account.

Paymate

Paymate was established in 2000 and they are based in New South Wales, Australia.  Their services are available in 57 countries.  In the United States, buyers pay 3% plus 50¢.  There is also a $15.00 chargeback fee imposed on the merchant if you lose dispute.  Paymate will first respond to the initial inquiry from the bank when a chargeback happens.  You do not need to register with Paymate to make a purchase.  The seller though will be put through a process before he / she can use Paymate to accept payments and should be able to project a least $36,000 in volume for the next 12 months.

Merchant Accounts and Electronic Payment Gateways

When starting a business on the Internet, usually that business wants to make money.  It's up to the business owner to consider varying methods to collect payments from their customers.  If the business owner is based in the United States, he will usually have more options available to choose from (as compared to owners in other countries).

Merchant Accounts and Electronic Payment Gateways

Most owners will probably consider a merchant account, while others will look for an Internet Payment Service Provider (IPSP).  Simply put, the merchant account will allow the merchant to accept credit cards (Visa, MasterCard, Discover, American Express, JCB, etc).  However, if the business is online, it needs a way to communicate with the website and a transaction processor.  This is called an electronic payment gateway.  This could be compared to a POS terminal for a brick and mortar merchant account (aka swiped merchant account).  Some merchant account providers, like CDGCommerce, have developed their own gateway (Quantum Gateway) while some merchant account providers outsource this to other companies.

Having your own merchant account can be very beneficial to the merchant.  Most electronic payment gateways offer an API to process the credit card transaction on the merchant's website.  This helps to maintain a consistent checkout process without re-directing the customer over to another URL.  Usually, the timeframe to get the money from the transaction is two to three business days.  This time can be critical to some businesses depending on the cash flow.  The name of the merchant will also appear on the customer's credit card statement.

Merchant Account Fees

Some merchants might think it is too expensive to get a merchant account.  Some companies do charge more for about the same type of services.  Some will require a contract, a termination fee (even if the contract has been met), a set-up fee, or an application fee.  However, one merchant account provider, CDGCommerce, charges $10.00.  This includes the Quantum Gateway.  There is no monthly fee, customer service fee, or monthly minimums.  Most merchant account providers will charge $10.00 - $50.00 a month for a monthly fee or customer service fee.  Some might even charge a monthly minimum.

Electronic Payment Gateway Fees

The fees for an electronic payment gateway can vary, ranging from $10.00 to $100.00 or more a month, depending on the "extras" you choose.  For example, Authorize.net / Cybersource might charge 10¢ for each transaction.  Some resellers are able to get you 250 free transactions a month, and then charge a fee for each transaction.

The Quantum Gateway however does not charge for any transactions, periodic billing, or its QuantumVault (which allows the merchant to store credit card numbers in a secure environment - on Quantum's servers, allowing the merchant to charge it's repeat customers the same amount, or varying amounts each billing cycle.

One of the larger advantages to using the Quantum Gateway is its security and fraud prevention features built right into the gateway to help merchants reduce chargebacks.  Unlike most other gateways which might charge extra for each service, the Quantum Gateway does not charge extra for the features.  Compared to the LinkPoint / YourPay Gateway, (aka First Data Global Gateway - they renamed the gateway but did nothing to improve it), the Quantum Gateway is far superior.  First Data had a chance a few years ago to improve on its services when the gateway was completely rebuilt, but unfortunately First Data did not take advantage of this and merchants still have problems preventing fraud online.  Built right into the Quantum Gateway is MaxMind, DialVerify, and Verified by Visa / MasterCard Secure Code (VBV / MSC).  Unlike before, where you would need to have a developer integrate these extra features, all you need to do is integrate with the Quantum Gateway.  The gateway will then scrub (vet) the transaction before it hits the Quantum Gateway.  This saves the merchant a transaction fee (imposed by the merchant account provider) if it fails the process.

The Quantum Gateway

Tuesday, August 11, 2009

There are many different gateways being offered by merchant account providers today.  Most offer a few security features, starting from Address Verification Service (AVS) and CAV2 / CVC2 / CID / CVV2.  Unfortunately these are very archaic but still required by the providers and card associations as the first steps in preventing online fraud.

Probably one of the gateways that has been lacking in keeping up-to-date is the LinkPoint Gateway (also known as the First Data Global Gateway).  They renamed it sometime last year but unfortunately did nothing to upgrade its services.  A few years ago, they even rebuilt the gateway from scratch, but neglected to add any fraud prevention tools.

The Quantum Gateway is offered by CDGCommerce.  In addition to AVS and CAV2 / CVC2 / CID / CVV2 tools, it also incorporates other fraud prevention techniques at no extra charge to help the merchant reduce fraud and chargebacks.  This will save the merchant those extra fees usually imposed my merchant account providers/ gateways and fees from chargebacks, and the loss of money and time that it takes to fight those chargebacks.

Extra Fraud Prevention Tools at No Charge

Usually when the merchant decides to add extra fraud prevention, he has to purchase those tools and then pay a developer to integrate them in the checkout process.  However, these tools are built into the Quantum Gateway, making it easier than ever to add them to the checkout process.  All the merchant needs to do is to integrate the Quantum Gateway into their shopping cart and activate the extra fraud prevention tools into the virtual terminal - the Quantum Gateway will handle the rest.

One of the tools is from MaxMind, which includes Geographical IP address location checking, Proxy checking, (Free) E-Mail and Login Checks, Issuing BIN (Bank Identification Number Checks), Address and Phone Number Checks, and Fraud / Risk Scoring.  Even before the transaction hits the gateway, these checks are done - saving you that transaction charge.

Another vetting / scrub technique is DialVerify - this feature will actually call your customer, asking him to enter the code that appears on the screen, up to ten digits.  You can also upload your own recording.  This helps to verify the phone number, saving you time if you call your customers to verify the order.

And unlike most other providers, Verified by Visa / MasterCard Secure Code (VBV / MSC) is free. 

Other Value Added Services

Other fantastic services offered by the Quantum Gateway include batch processing, a virtual terminal, access to the virtual terminal via a handheld device (that can access the Internet), and a toll-free number to charge your customers if you do not have access to the Internet (10¢ per minute).

Recurring Billing

Recurring Billing is another free option offered by the Quantum Gateway.  This feature can be automatic - allowing the gateway to process credit card transactions at the interval you set.  If your fees change weekly or monthly, you can use the QuantumVault.  This will store the credit card securely in the Quantum Gateway, and you can charge the proper amount via batch processing, the virtual terminal, or through your web application at no charge. 

If you have varying amounts, you might be charging the credit card monthly, but storing the credit card in your web application / database.  You know this is very dangerous and if you have a breach, that data might be compromised.  The Quantum Gateway takes this into consideration, helping the merchant collect his money while protecting the customer's credit card data.

Stores and Carts Master

	coreybryant

Experts Exchange is a collaboration of experts and IT professionals from around world helping to solve problems and share knowledge. Experts Exchange has over 900 zones currently. They recognize the experts on a point-based system. One of the writers on this blog, Corey Bryant, has achieved master status for Stores and Carts category.