What the Difference is Between an ISO and Bank Related Merchant Account?
August 16, 2010 by Admin · Comments Off
When considering where to obtain merchant services, there is no shortage of providers to choose from now a days that’s for sure! There is no doubt that processing has become a lucrative business. Over time, the service has been de-regulated, so merchant’s have much more choice as to who they want their provider to be. There are two major conglomerates to choose from. One can choose to have their Bank (member Bank – which means they are certified to process Visa and MC) process their transactions, or an ISO (Independent Sales Organization). Iso’s were developed after the de-regulation of merchant services.
There are some major differences between having an ISO process your transactions in comparison to the bank.
Direct Processing is a little bit faster from a bank hosted account, only because they have a direct link to the merchant’s banking info, where as with an ISO, the timing for deposits maybe anywhere from 24-48 hours after settlement. This difference exists because the branch would have a direct link to the deposit account, where the Iso’s deposit has to be cleared by Iso, then the member bank.
The Member Banks will also be more accepting of high risk merchant processing because of this link to the merchant’s account. Often times a merchant will have a business account with their bank, as well as other savings and credit accounts. Because of this “direct access” the branch has immediate security in the form of the entire merchant’s investments act to draw upon should there be any faulty transactions.
This high risk processing has advantages with Iso’s that the member banks cannot compete with at the same time….often times Iso’s are eager to obtain business, and, with the appropriated security in place, maybe more accepting of high risk accounts.
Service levels are another major difference. Banks are not as fast to provide comfortable “one stop” customer service in the same way that an Iso may be. Again Iso’s are more customer driven and as a result often provide better, faster more specific and personal customer service. As one may deduce, part of this improved service has allot to do with Hours of Service, Iso’s often have their own customer service and help desks working around the clock, where as a bank has very pre determined hours of operation, which are regulated and often not convenient for when a merchant may require additional services.
Pricing is a standard issue for any merchant seeking out services. This is where we see another major difference, in that, the Iso’s will compete and drive their prices down in order to obtain one’s business, the member banks are less competitive and often do not respond to competitive pricing quotes.
The best aspect of all of the differences mentioned here is that with the existence of both Bank’s and Iso’s being able to process merchant services, it offers a competitive edge to merchants. Just like any monopoly the more players on the board, the more fierce the competition which, in relation to merchant services, leads to the potential for better more competitive pricing and increase in the quality of service for merchants.
The Critical Payment Processing Guide for Canadian Merchants
March 30, 2010 by Admin · Leave a Comment
The Critical Payment Processing Guide for Canadian Merchants
Discover how this Guide has helped 100’s & 100’s of Canadian business owners cut their payment processing fees by 10-30% and sometimes much, much more. If you are brand new to merchant account services, then this is the perfect guide for you… it’s takes most people about 15-20 minutes to read.
In this guide you will learn…
- What a Merchant Account is & Why Essential You Know How Your Business Will Transact Before Applying for Merchant Services
- How Not to Be Fooled by Ethically Questionable Merchant Account Companies’ Marketing Tactics
- How to Avoid the 3 Most Common Mistakes Merchants Make When Choosing a Payment Processing Provider
- The 18 Essential Questions That Will Protect You from Costly Hidden Fees
- How to Become a Seasoned “Pro” at Understanding How Credit Card Processing Rates Work Through Real Life Case Studies
- How to Save On Merchant Processing Fees with These 3 Insider Tips
- Learn How to Find the Perfect Payment Processing Solution for Your Business Needs Without Having Any Remorse Buying
Ready to get started on the guide…? Click here to become a merchant service pro.
Where is the CVV # on Credit Cards?
July 8, 2009 by Admin · Leave a Comment
I have had a few merchants recently not understand what the CVV # is on credit cards and how they can use it to protect themselves from potential fraud and/or chargebacks. In the image (the left) shows you where to find the CVV number on credit cards.
It is a three or four digit security code on your credit card. If your customer is prompted to enter that and it matches the security code on file the transaction goes forward, if it doesn’t match it is flagged and the transaction is halted. It’s important to match this up on mail-order and telephone-order businesses. I’d also incorporate it into my e-commerce shopping cart too. It’s not a 100% fool-proof, but it is just one more measure that enables Merchants to protect them selves from credit card fraud.
Canadian Credit Card Processing Wars
April 28, 2009 by Admin · Leave a Comment
Tim Wilson at the NationalPost wrote yesterday an interesting piece on Canada’s Credit Card Wars over regulating interchange and allowing Visa to introduce debit cards in Canada.
Tim states, “While we respect businesses’ desire to manage their expenses, government intervention is not the right solution in a functioning industry.”
I know many Merchants who would be as fast as a wild cat and pounce on this statement. However, after reading more of what Tim had said in his article reminded me how important credit cards are to a business. Tim states:
“Retailers benefit from the speed, efficiency and reliability that only electronic payments can bring. They also receive guaranteed payment and can avoid the need to extend credit directly to their own customers. According to the economics firm Global Insight, over the past two decades, electronic payments have contributed $122-billion to the Canadian economy, which represents nearly 20% of our total GDP growth over the same period.”
In reality, without credit cards businesses would not be able to be as profitable as they are. Just try and imagine how a website would be able to transact without the ability to accept credit cards or even by phone. How would your business sales be without credit cards…?
The REAL ISSUE (if you read between the lines) that merchants are really complaining about is they feel they are paying too much in fees. It always comes down to the “$”.
Now I am all for keeping Merchant processing fees as low as possible. The issue really isn’t Visa and/or Mastercard with their Interchange rates because the interchange rates are not that high. If you have really high rates it’s usually due to your credit card processing company. This is Moneris, Global Payments, Chase-Paymentech, Elavon, First Data, TD Merchant Services, and other sub ISO’s who also broker credit card processing services. They make their money by marking up on top of the interchange rates and they really understand interchange.
Let’s use Tim’s example of:
“Visa Canada’s premium product, the Visa Infinite card, is available to a small subset of cardholders and its interchange rate, which is the small amount of money transferred from one financial institution to another each time a Visa product is used, is one fifth of one percent (0.2%) higher than other card products.”
What merchants don’t understand is how interchange really works and how the Merchant Account companies that sell/set-up merchants are the ones who can sometimes mark-up those rates big time. So if the card present buy rate for a non-reward card is approximately 1.6% for most categories of business and then the infinite card is 0.2% higher that would make the buy rate 1.8%.
Now many Merchant Account Companies will offer those card present cards at almost cost (let’s say 1.7% – only 10 basis points higher than cost) but they’ll mark all infinite cards by a full 1% higher making the Merchant pay 2.8% on those transactions. Now this could be good or bad for your business, it’ll depend on how many of your customers will pay using an infinite card – which you will not know until you are processing.
The question again is do you really understand how your customers transact with you…? If not you will want to figure it out.
This is where it is important that the Merchants understand how interchange works for their type of business category and/or the way their business will transact. By understanding this they will have a better chance at securing competitive rates because they can then look at the interchange tables and understand what the buy rates are from their type of business. However, as long as the Merchant remains uneducated on how all this merchant processing really works they will continue feel confused, alienated and over charged.
Now there have been some major shifts in the industry that have compounded these issues.
“In 2008, Visa introduced the first significant change to its interchange rate structure in 30 years, which resulted in some transactions attracting a higher interchange rate and others attracting a lower rate. Even with the change in structure and the introduction of the Visa Infinite cards, Visa Canada’s effective interchange rate has remained relatively flat at 1.6%. Interchange rates for Visa Canada are transparent and are available on our Web site.”
What people don’t realize is the change in the interchange structure is not really the problem. The REAL challenge is in educating merchants on how all the fees work. They are really just upset because they don’t understand why they are being charge more for some cards and how all their fees have change so much over the last year. The transparency has not been there and so they feel lied to or even like they have been swindle.
And sending a merchant in fine print 60 days before the change that their rates are going to change is NOT being transparent nor is that any kind of education on how it all works.
I don’t blame Merchants – I’d feel the same way if I were in their shoes. Again, as usual with anything in life – it breaks down to poor communication between the card processors and merchants. Which is fine with me – because it’s this type of poor communication that keeps me in business. 
I take the time to explain and help merchants understand how all these complex merchant MDR’s work and how to structure an application that is competitive and fair to both the merchants and the card processors.
Regardless, of what I think…what do you think…? Let me know in the comments below.
15 Ways to Prevent Chargebacks
April 9, 2009 by Admin · Leave a Comment
Merchant Account providers DO NOT like chargebacks, getting a lot of chargebacks can cause you to have your merchant account terminated or even worse end up on the TMF List. Some chargeback situations can’t be helped, but many can if you understand how to protect your self. Here are 15 ways to help prevent chargebacks.
- Here is the most obvious way to prevent a chargeback – Do not complete a transaction if the authorization request was declined. Do not repeat the authorization request after receiving a decline. Be sure if you want to get a second verification then phone it in.
- If you receive a “Call” message in response to an authorization request, call your authorization center. Be prepared to answer questions. The operator may ask to speak with the cardholder. If approved, write the authorization code on the sales receipt. If declined, ask the cardholder for another Visa card.
- Make an imprint for all card-present transactions. If you have a point-of-sale terminal with a magnetic-stripe reader, swipe the card through the reader for every face-to-face transaction. If the terminal isn’t working or a card’s magnetic stripe cannot be read, key-enter the account information and make an imprint of the embossed information onto the sales receipt using a manual imprinter. Even if the transaction is authorized and the cardholder signs the receipt, if the receipt does not have an imprint of the embossed account number and expiration date, the transaction may be charged back to you for “no imprint” if the cardholder later denies participating the transaction. This is why having a manual imprinter is essential and make sure staff is trained on how to handle situations like this too. The number one reason merchants end up with chargebacks is due to untrained staff.
- Obtain cardholder signature. The cardholder’s signature on card-present transactions is required. Failure to obtain the cardholder’s signature could result in a chargeback for “no signature” if the cardholder denies authorizing or participating in the transaction. You should also look at the signature to make sure it somewhat matches what you see on the back of the credit card. If doesn’t ask for I.D.
- Stay organized. Make only one imprint of the card for each transaction. Making more than one imprint can lead to duplicate deposits and increase the chance of a chargeback. If you need to redo a sales receipt because of an error, write “VOID” across the incorrect sales receipt, inform the cardholder, and tear up the incorrect sales receipt in view of the customer.
- Ensure that transactions are entered into point-of-sale terminals only once—and deposited only once. Entering the same transaction into a terminal more than once, or depositing both the merchant copy and the bank copy of the sales receipt with your acquirer, or depositing the same transaction with more than one merchant bank can all result in “duplicate transaction” chargebacks. And chargebacks can be anywhere from $10-$50. You end up with 5-7 of these every month and you’ll feel it.
- Ensure that incorrect sale receipts are voided and that transactions are processed only once.
- Be clear about your policies at check-out. If your establishment has policies regarding merchandise returns, refunds, or service cancellation, disclose these policies to the cardholder at the time of the transaction. Your policy should be pre-printed on your sales receipts; if not, write or stamp your refund/return policy information on the sales receipt near the customer signature line before the customer signs (be sure the policy shows clearly on all copies of the sales receipt). Failure to disclose such policies at the time of the transaction will be to your disadvantage should the customer return the merchandise. This is a tough one, but it’s always the Merchant’s burden of proof to show that policies are clear.
- Do your batch closes or sometimes known as settlements daily. Deposit sales receipts with your merchant bank as quickly as possible, preferably within one to five days of the transaction date—do not hold on to them. Failure to deposit in a timely manner can result in chargebacks for “late presentment.” It can also result in higher discount rates or cause your transactions to fall under the higher Non-Qualified MDR rates with some providers.
- Deposit credit receipts with your acquirer as quickly as possible, preferably the same day as the credit transaction is generated. Failure to process credits in a timely manner can result in chargebacks for “credit not issued.”
- If a customer requests cancellation of a recurring transaction which is billed periodically (monthly, quarterly, annually), always respond to the request and cancel the transaction immediately or as specified by the customer. As a customer service, advise the customer in writing that the service, subscription, or membership has been cancelled and state the effective date of the cancellation. Failure to respond to customer cancellation requests almost always leads to chargebacks.
- Keep customers informed on the status of their transactions.
- If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
- This one is common sense for most Merchants, but there are always a few creative individuals out that who decide to conduct business in an interesting manner. If the merchandise ordered by the cardholder is out of stock and delivery will be delayed or this item is no longer available, advise the cardholder in writing and offer the cardholder the option of purchasing a similar item or canceling the transaction. Do not substitute another item unless the customer agrees to accept it. By giving the customer notice and the option to cancel, you may help avoid a customer dispute regarding the merchandise and a possible chargeback.
- Know your shipping time lines. Ship merchandise before depositing transaction. Don’t deposit transactions with your merchant bank until you have shipped the related merchandise. If customers see a transaction on their monthly Visa statement before they receive the merchandise, it could lead to a preventable chargeback.
Is Your Business Going to Ottawa This Week?
March 25, 2009 by Admin · Leave a Comment
The “Stop Sticking It To Us” Coalition, representing over 200,000 Canadian businesses, small, mid and large, says it is gathering in Ottawa this week to combat overcharging by VISA and MasterCard.
The reason why is because the U.S.-based credit card companies have been pushing worldwide to take over the debit card business and increase service charges on credit card transactions. For or example, currently in the U.S. Visa and MasterCard now control over 75% of the debit card market. U.S. merchants and customers pay heavily for the card company’s dominance of that market. Debit transaction fees are (on average) anywhere from 20-50 cents in the U.S. In contrast, most Canadian Merchants pay from 8-15cents on average for a debit transaction – that’s a huge percentage increase!
My question to you is will your business be in Ottawa this week…?
Is protecting our Made-in-Canada, not-for-profit debit card system (Interac) a key objective for your business…?
Love to hear the thoughts directly from the Merchants. Add you comments below.
Did Your Merchant Account Provider Send You This Letter?
March 20, 2009 by Admin · Leave a Comment
It is almost April 1st 2009 which means most providers will be adjusting their (MDR’s) Merchant Discount Rates in Canada because Visa adjusts their interchange rates. Look through your statements over the last 2 months and see if you received anything like you saw in the video above. If you did, this is a good sign that you might want to get a cost analysis on your current MDR’s to make sure you are capturing competitive rates for your business. I offer free merchant account comparison quotes or you can do it yourself using our free merchant account calculator.
Visa, Mastercard Offering Debit in Canada…?
March 2, 2009 by Admin · Leave a Comment
I found a link on Interac News that lead me to article recently published by
Canadians have a had a sweet deal with Interac pricing on debit transactions. If Visa and Mastercard are able to break into the debit processing industry in Canada, then Merchants will most likely have to expect an increase in debit transaction fees. This will most likely also affect consumers too because small business owners will need to raise their pricing to cover the additional costs.
Currently most merchants in Canada pay anywhere from 8 cents-15 cents per transaction when it comes to debit, however our southern neighbors (where Visa and Mastercard offer debit processing services) the average transaction fees on debit are 15 cents-30 cents. That’s quite the increase. We are talking billions of dollars more in fees to Merchants.
What can Merchants do about…?
Not sure.
But I wanted you to be away of this looming payment processing news. It should be interesting to see how this will play out. My guess is that Visa and Mastercard will break into the Canadian debit processing marketplace sooner than later.
Why do Different Payment Processors Have Different Rate Structures?
January 9, 2009 by Admin · Comments Off
Many different processors are out there who offer merchant services. Weather the services are provided through a Member Bank or ISO, every application is subject to a very similar adjudication from Visa and Mastercard. Different processors do however, have different rate structures. There are a few reasons as to why these differences exist.
Let’s look at two of North America’s top two providers of merchant services, Elavon and First Data Merchant Services.
Elavon broke through the industry by offering rates that are closer to interchange than any other provider. How were they able to do this?? Well, they came into the market through Costco, a very big business buyers club who deal exclusively with Business to Business retail. As Costco was already dealing with a customer base made up solely of business owner’s, they saw the potential for their entire customer base to utilize their own Merchant Services program. Costco was able to ensure Elavon a certain volume of processing annually, so in turn, Elavon was able to offer rates lower than competitors at the time. This is one of the factors that will cause a major difference in a rate structure: the very volume of customer’s the processor has, will allow them to be more competitive. When providers host these buying clubs, they can charge a different rate structure as again, the volume is guaranteed to make them money.
On the opposite side of the spectrum, some providers like, First Data Merchant Services, have higher rates. This is a result of a few different factors, the most prominent being the RISK involved in hosting an account. When the risk of loosing money on processing for a merchant is evident, the provider will charge a higher rate right at the point of transaction, to ensure that they cover any assumed losses. The riskier the business, the higher the rate; To protect the provider from loosing money right from the point of purchase. Allot of merchant services will not provide credit card processing at all for potentially high risk accounts and restricted business types, so merchant’s will pay the higher rate just to be able to offer the services.
The way in which the processors present their rate can sometimes be different as well. Right now in the industry, processors have Interchange, the basic “cost” handed down from Visa and Mc. Sometime, processors will have “tiered” transaction pricing, meaning that for qualified cards you pay one rate, and for specialty, club, corporate or points cards, there is additional rate structure. Other processor lump everything together, for one base rate. So depending on how the processor’s presentation of the rates, you will see a difference.
At the end of the day, the differences between what the processors provide are minimal. Every processor is victim of interchange and the rates will only differ depending on the processor’s customer base, the risk involved in boarding the account and the way in which they present the different levels of card processing costs. It is best to do research when looking for a provider and remember that the differences in the rate are subject to negotiation as well.
The Critical Canadian Merchant Services Guide – Part 8
September 26, 2008 by Admin · Leave a Comment
Three Insider Money Saving Tips for Merchant Accounts
Tip number one: If you run a business where you need to take a deposit (like a motel) or pre-authorization (as in a car rental biz) over the phone, then do the pre-authorization, but don’t close it out as a pre-auth because you will then be charged the “non-qualified” rate-which is usually substantially higher then the “card present rate.” Just leave the pre-authorization and then when it is time for payment and the customer is present, swipe the card in the machine, allowing you to end up with the “qualified rate.”
Tip number two: If you have a business where you have multiple check-out stations or a business that has a dedicated line for each terminal, then you may want to use a high-speed internet connection, because you can use multiple Point-of-Sale Terminals through one IP connection. This can potentially save you $40-$70 for each additional phone line you are paying for to connect to your Point-of-Sale.
Tip number three: If your business requires a lot of MO/TO ordering then you really should use a Virtual Product because the rates will be less on the Non’s. A terminal’s keyed transaction rates can be as high as 3-4% and yet the same Non-qualified rates used on a completely different solution (a solution designed) for MO/TO order can be half the costs. It is very important that you chose the right solution for your business needs.
Choosing the Perfect Processing Solution for Your Business Needs
You have a choice between four types of solutions.
1. Retail
A) Dial-up Machine
B) IP Machine
C) Wireless/Cellular
2. MO/TO 1-800 number
3. MO/TO Virtual
4. E-commerce
Retail Solutions are obvious for a business that will process most of its transactions face-to-face with its customers. You can have your Point-of-Sale Terminal connect via phone line, high-speed internet, or on the cellular network.
MO/TO 1 800 # Solutions are for businesses that have very few transactions, that are on the go. You can call into a 1-800 number for authorization regardless of where you are.
MO/TO Virtual Solutions are for businesses that take orders via: phone, mail-order, email, etc. and process those transactions by logging onto a website with a user name and password.
E-commerce Solutions are for businesses that want to have processing on their websites, where the customer or client clicks through and checks themselves out online. There are many other important factors that pertain to internet merchant accounts.
This concludes ‘The Critical Canadian Merchant Services Guide’
What You Need to Do Next?
Now, I believe we made an agreement together at the beginning of this guide. Our agreement was that I would tell “the whole truth and nothing but the truth” when it comes to Canadian merchant accounts. In turn, you would fill out your application through my merchant account brokerage. Ready to keep your end of the bargain? I am sure you expect the same from your clients and customers! All I ask is for you to follow through with the type of actions you would expect from your clients after giving them all the tools for success!
