I recently saw this ad posted June 23, 2009 on the Orange County Craigslist touting "Wholesale rates for your Merchant Account!"

The ad reads:

"Wholesale rates for your Merchant Account!
We meet or Beat any offer: Are you currently processing credit cards with another processor? SAVE thousands of dollars with us by cutting out the middleman.
Chase Paymentech Solutions is the Number One Bank Card Acquirer in the World with lowest rates guaranteed at over $500 Billion Visa MasterCard Sales Volume.
Call me Now at 949..xxx...xxxx to take advantage of this limited time offer.
a JPMorgan Chase ISO/MSP"

How familiar does this pitch sound to you?  I would like to hear your thoughts on this style of advertisement and its effectiveness.   

• Are "wholesale rates" really available?
• Can merchants really save by "cutting out the middle man"?
• Do they really have the "lowest rates guaranteed"?
• Why is this a "limited time offer"?
• Does the "me" in the ad work for "Chase Paymentech" or "a JPMorgan Chase ISO/MSP"? 
• And isn't an "ISO/MSP" the same as a middle man?

Please conduct further research before entertaining offers like this.  Read The Middle Man Myth and study the wealth of additional information available before making a decision.  We strongly recommend broad decision criteria to include rates, service, terms, solutions, incentives and testimonials.   The business model, history, stability and ethics of the processing partner you select should also be considered.

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Wholesale Rates for your Merchant Account

Medical professionals should be aware of a scam currently being perpetrated by unethical merchant account providers. Outbound calls are being placed to medical practices accepting credit cards claiming that they must reprogram their credit card terminal to be HIPAA compliant.

Vantage has received numerous calls over the last few days from our healthcare clients inquiring about these calls and asking, “Are credit card transactions covered under HIPAA?”

According to the U.S. Department of Health and Human Services website, transactions conducted between subscribers or patients and health plans or health care providers are not transactions for which the Secretary of Health and Human Services has adopted standards.

If an individual (i.e., a subscriber or a patient) uses his or her credit or debit card to pay for premiums, deductibles and/or co-payments, is that “transaction” considered a HIPAA standard, and must it be in a HIPAA compliant format with HIPAA compliant content?

The HIPAA standards do not apply to individuals, unless they are acting in some capacity on behalf of a covered entity, and not on behalf of themselves as, for example, subscribers or patients. An individual, acting on behalf of himself or herself, is not a covered entity, and is therefore not subject to the HIPAA standards. Therefore, if an individual uses a personal credit card or debit card to pay either a premium, co-payment and/or deductible to a health plan or a health care provider, the individuals are not covered entities, they are not conducting covered transactions, and the transactions being conducted need not be in the standard format.

Reference:
http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=2350&p_created=1065195887

It is very important that all medical offices warn their office staff and provide best practices to prevent reprogramming payment card terminals or other POS systems under these conditions.

If you are unsure of calls you receive regarding your merchant account, please call Vantage first at 800-397-2380 before taking action.

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Healthcare Merchant Account Scam Alert

Companies have long benefited from outsourcing.  Popular trends in outsourcing include the business services of payroll, accounting, tax, data entry, human resources, help desk, customer service, lead generation, IT and software development.  A strategic decision to outsource can increase efficiency and allow companies to focus on their core competencies.  Outsourcing can lower costs, make more efficient use of time, labor, capital, technology and specialized resources. 

Retailers long ago discovered the benefits of outsourcing consumer store credit.  Card companies like MasterCard and Visa have built payment systems with economies of scale that deliver effeciencies and costs savings.  By accepting card payments, sellers do not have to worry about the credit of the buyer, nor does the seller have to incur the costs associated with administering the account or bad debt - all of this work is done, for a fee, by the card issuers.   As a result, 95% of all consumer retailers have outsourced their accounts receivable and credit administration function by accepting credit and debit cards.

Accounts receivable (A/R), sometimes called trade receivables or trade credit, is the amount that customers owe a company for goods and services that have been provided.  Traditionally, businesses to business (B2B) transactions are conducted using seller financed trade credit.  Trade credit provides the ability for buyers to purchase goods and services now and pay later.  Typically, the seller sends an invoice requesting payment in a pre-determined number of days.  Essentially, it’s a free short term loan from the seller to the buyer.

B2B buyers depend on trade credit as one of their largest sources of capital  The reasons are simple: trade credit is free (interest is rarely charged), it is flexible (terms are regularly abused) and it is easy to get (if one vendor doesn't provide, the next vendor will). Business buyers will seek out vendors that give the longest payment terms because it is the easiest and least expensive way to fund their business.

Outsourcing accounts receivable for a B2B seller is similar to a consumer retailer accepting a credit card for payment—it enables the seller to immediately receive payment while offering extended payment options to the buyer. This option allows companies to access working capital and lower expenses associated with their credit administration.   Outsourcing accounts receivable also provides a competitive advantage by allowing sellers to offer the best trade credit terms possible to aquire and retain customers. 

Given the current economic conditions, businesses are finding it difficult to increase revenue (due to restricted consumer and business spending) or secure bank funding (due to stricter credit requirements).   Outsourcing has distinct advantages over "factoring" including lower advance rates and greater value by more efficiently handling trade credit functions to reduce administration expenses.   Most small and mid sized businesses don't have the scale to operate trade credit operations cost effectively.   As businesses become familiar with the simplicity of trade credit outsourcing, it will be the model by which virtually all B2B transactions will be conducted.

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Outsourcing Credit

We receive calls daily from agents inquiring about the Vantage program. Many of these calls have the same common theme. They go something like this recent paraphrased email exchange…

Prospective Agent

I have recently been recruited by a merchant services provider to become a sales person for them. 

I'm writing to you because this provider does everything you tell your customers on your web site not to do...we lease our equipment to merchants; we have qualified and non-qualified rates and we charge fees to get everything set up. 

I want to be sure that I'm with the "right" company.  I would appreciate your guidance.

Vantage Card Services

Thanks for writing. We applaud your research. 

The leasing commitment, monthly payments and buy-out clause means merchants are upside down immediately out of the box and the problem is compounded when merchants are sold leases on proprietary equipment that cannot be reprogrammed by other providers.   If you could purchase an open source terminal for a couple hundred dollars and make 3 monthly payments, what would you choose?

A non-qualified bucket pricing scheme means merchants cannot manage Interchange qualifications.   If you are going serve your clients long-term, I highly recommend you learn Interchange.

At the end of the day, if you knew that a month-to-month agreement (without early termination fee), and Interchange pricing without a terminal lease was available, which merchant services program would you choose?

Prospective Agent

With our program, they're not upside down if they are paying a $50/month lease and we are cutting their rates to the point that they are saving money every month including the lease fees. We also guarantee compliance with the payment card industry rules as part of the lease.

I don't think our equipment is proprietary; that is, I do believe it can be reprogrammed.  But, of course the customer is in a lease that is with a finance company so they would still be responsible for the lease even if they wanted another company to take over their processing.

I currently can offer three rate programs. One is a low qualified rate and a higher non-qualified rate, another is a low non-qualified rate and a higher qualified rate and the third is an Interchange rate, but I’ve not learned how to explain it very well to merchants. I would like to be better educated on Interchange, and will do some research on my own. 

I guess the answer to your final question is that I would pick whatever plan allows me to process payment cards at the lowest cost to me, while making sure that I'm in compliance with the processing rules of Visa or MasterCard.

Vantage Card Services

The merchant is upside down on the lease.  Paying $2,400 + for a terminal that is worth $240 once they open the box is upside down. Merchants could save more by not leasing regardless of the rates you quote. And you could still offer the better rates without the lease, right?  When you tie your rate quote to a long term lease, what happens when those rates go up?  What if the service provided is poor, what if the merchant does not get funding on time, etc.? As you pointed out, merchants are still stuck in the lease. Last, service providers are not allowed to sell, lease or reprogram any card processing terminal that is not PA DSS (meets the Payment Application Data Security Standard) so this is NOT a sales feature of a lease.

Find out the make and model of the equipment you are leasing. Proprietary lock-in from selling terminals that are only certified on a single processing network means the merchant is unable to use another vendor without substantial switching costs. Research what networks have certified the specific make/model you are selling and any restrictions you should make merchants aware of during the sales process. Full disclosure is needed if you are going to become a trusted advisor.

If you are serious about understanding what you are selling, read the fine print of the merchant agreement for terms / terminology. Read the merchant services agreement cover to cover and look for a few key points: 

• Can rates go up for any reason at any time?
• What is the contract term? 
• What is the termination penalty?  Who has the authority to waive terms? 
• Does the application reference the terms?  Do you provide the fine print with the application?

Last, let me ask you this…How much of your income is from the ongoing processing of payments (residual income) and how much from selling leases?

There is a way to "service" clients and earn a professional income consulting in the payments business.  It's not a get rich quick program and without the "lease factor" payout or other upfront fees it may not pay the bills month one.  This is something you will have to decide.  But what we find is that eventually your industry experience will make you wise to the various programs in the market place.  There are agents that enjoy longevity serving loyal clients in this industry and those with short term get rich quick schemes that come and go.

Prospective Agent

I do understand what you are saying, and you are technically correct, but one thing I have learned in sales is that people pay for what they perceive is valuable.  Still, everything you are writing and what I've read on your website is really challenging my sense of fairness.

I also met with a guy I know from the church I go to who works for a different merchant services company. It seems like every company has different ways of approaching the market, with a twist on some of the common themes we’ve discussed.

I’m really not comfortable with the approach of selling leases and non-cancelable contracts.  I really am intrigued by the industry, but I know what I would agree to if I was a business owner, and I would not agree to the terms I’m selling now.

I like your company’s approach much better, and I guess the information on your website has helped open my eyes to what’s good and what’s not so good in the industry. 

Vantage Card Services

Most merchants don't do the in-depth research that you are doing.  But if they knew the whole story they would perceive things differently.

Experience the Vantage Program

Rates: Today’s merchant clients require more than a generic “qualified rate as low as” quote. You need to deliver a detailed proposal with a custom rate structure based on specific industry Interchange using the latest payment technology and best practices acceptance methods. Partnering with a company that can help you manage Interchange qualification is very important.

Service: Service, good or bad, impacts your bottom line and ability to do your job. Vantage is a full service payment provider focused on high quality personal service. By far, most of the people and companies you talk to are going to be strictly sales oriented. At Vantage, we are merchant SERVICE providers. We process applications in house including credit underwriting, data entry, terminal deployment, implementations and one-on-one personal service with our clients after the sale is made, all under one roof. It makes a difference in the quality of service.

Terms: Pay close attention to the fine print of the terms and conditions of the merchant agreement you represent. Don't lock your clients into long-term contracts with steep early termination fee penalties and add-on hidden fees. Vantage has a true month-to-month contract with no hidden fees.

Solutions: Selecting the payment processing solution that best meets your clients’ needs is critical. From terminals and software to wireless, contactless and ecommerce payment gateways, we support the technology today’s businesses require to accept payment. Vantage provides comprehensive business-to-business (B2B) and business-to-government (B2G) payment solutions including Level 3 payment solutions and a trade credit payment platform. We represent emerging market payment systems and work with businesses to implement trade credit A/R outsourcing solutions.

Incentives: Retention is the key if you are to build a large profitable residual income. “Vantage Points” is a merchant loyalty rewards program. Help your clients earn great rewards from distinguished Vantage Points program partners like: American Airlines, Marriott, Hyatt, Staples, The Home Depot®, Starbucks Coffee and hundreds more. Vantage adds value beyond what's available with your standard merchant account provider. With Vantage, reward your best clients with a unique incentive program you won't find anywhere else.

In Conclusion

Throughout this story, you could replace terminal “leasing” with “free equipment” offers. Similar points apply. And if you are selling introductory rates so you can lock merchants into long-term contracts with early termination fees in an attempt to qualify for an upfront signing bonus -- well it’s not likely you will build a career under this type of program either. The reason is that gimmicks don’t work long term. To earn referrals and become a respected payment industry professional, you will need to graduate to a different approach; one that puts the best interest of your merchant client first.

If you are an agent in the payments industry, looking for a better program to represent, send us your resume. If you are a fit for our organization, we would welcome the opportunity to partner with you.

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Not all merchant service providers are created equal

myRealRate is making news on the official Microsoft Silverlight site http://silverlight.net/.

A showcase of next generation experiences using Silverlight, myRealRate allows you to compare your real rate with other merchants and discover your true costs for accepting credit cards. 

http://myRealRate.com uses Silverlight, a rich internet application development environment, to deliver peer-to-peer knowledge sharing, which helps business owners better evaluate their merchant services.

What is the average cost for accepting card payments in your industry? Are your merchant card processing fees above average or below average?  How can you lower your Real rate?  Find the answers here.

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myRealRate featured by Microsoft

Recently we’ve heard from more and more merchants that their processor has billed them some kind of PCI compliance fee.  Compliance with the Payment Card Industry Data Security Standards (PCI DSS) is very important to protect your business, but merchants should question the need to pay a monthly fee or annual fee on their merchant account statement.  Find out exactly what services you are being provided for this fee and make sure you were properly notified under the terms of your agreement that such a fee would be charged. 

Spend a few minutes on the Internet searching blogs and forums and you will find merchant complaints.  A common merchant post goes like this “Did anyone get a letter from your credit card processor about an annual fee to validate the security of their CC transactions. They are going to charge me $145.00 annually to make sure no one steals info from my machine. If I don't comply, they will charge me $27.00 a month.”

The fees being charged for so called PCI Compliance are not uniform.  Some merchant account providers don’t charge anything.  Others charge monthly, some annually and some both.  According to the Visa web site on compliance validation, merchants fall into categories based on their size with Level 4 merchants being the smallest.  Level 4 merchants processing less than 20,000 e-commerce transactions annually and all other merchants processing up to 1 million Visa transactions annually have the following validation requirements:

• Annual Self-Assessment Questionnaire (SAQ) recommended
• Quarterly network scan by Approved Scan Vendor (ASV) if applicable
• Compliance validation requirements set by acquirer (set by your merchant services provider)

The majority of the merchants being charged compliance fees on their merchant account are small Level 4 merchants.  If you are processing using a credit card terminal, your provider must provide you with a secure, compliant payment application for the terminal before they can board your account, provide service and charge processing fees.  If you are using a payment gateway or POS register system, you should verify with your POS reseller that you are using the latest version of their software that has been certified as PCI compliant.  For most businesses using a POS register system integrated with payment processing capabilities, a service contract is in place for support.  Make certain that you have a comfort level with your POS service contract to keep your system up to date, encrypting data, with a firewall and other appropriate measures in accordance with PCI standards.   

While some merchants may incur fees for validation, these are normally paid to third parties such as to an Approved Scan Vendor.  However if you are not passing, transmitting, storing or receiving full cardholder data on your PC then a quarterly scan is unnecessary and not applicable.  

PCI insurance is another reason some merchant account providers use for charging PCI fees.  Before you opt-in to pay for such an insurance policy, you should make sure you understand the coverage and exemptions as well as assess the likelihood of your systems being hacked.  For example, if you are a small merchant processing a few transactions a week using Touch Tone Capture service to authorize and settle transactions over the telephone or using a credit card terminal (which does not store mag-stripe data electronically), then paying for PCI insurance is not a good value.  Also, you should check your existing business insurance policies to see if you have coverage for data compromises before you pay additional premiums. 

Bottom line, if you are charged a PCI compliance fee, our advice: 

• Immediately inquire as to the specific reason with your merchant account provider. Ask for a refund.
• Start shopping for a new service provider who does not charge a PCI compliance fee.  (Of course, if you are in a long-term contract with early termination fee, you may be stuck.  So when you shop, read the fine print this time and insist on a month-to-month agreement.)

For additional PCI DSS info visit: http://www.vantagecard.com/resources/PCI_Data_Security.html

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The PCI Compliance Fee Gouge

The MasterCard Academy of Risk Management has introduced a complimentary initiative to raise awareness and promote the adoption of PCI. The program provides a holistic and informative platform for participants to increase their understanding of PCI DSS through sessions led by payment industry and data security experts.

The PCI Merchant Education Program provides a complete view of the PCI DSS through a series of on-demand webinars designed for merchants. These events are designed to:

• Gain the knowledge needed to become PCI compliant
• Learn directly from industry security experts
• View recorded webcasts on your own time
• Take advantage of materials to educate your team and new employees  

The current course curriculum includes:

• PCI Perspectives: A Payment Application Vendor
• 2009 - An Update on the PCI Data Security Council
• Data Storage 
• PCI DSS Requirements Update - Version 1.2 
• Maximize Internal Preparation for PCI DSS
• Network Segmentation
• Data Encryption: Understanding Encryption and PCI DSS
• A Detailed Look at PCI DSS Requirements
• A look into the new Self Assessment Questionnaire
• A Merchant's Journey towards PCI Compliance
• Understanding Account Data Compromise
• Preparing for a Successful PCI Assessment, Lessons from the Field
• Reducing Your Risk: A Look Into PCI Vulnerability Scanning

To register visit: http://www.iian.ibeam.com/events/mast001/24008/

For additional PCI DSS info visit: http://www.vantagecard.com/resources/PCI_Data_Security.html

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PCI 360 Education Program

Two-thirds of the world’s Internet population visit social networking or blogging sites, according to a new Nielsen report. Social Media is changing how we interact with each other and is shifting the power to the community.

One of the most powerful social network tools are peer comparisons. New financial web portals like Mint, Geezeo and ING’s CompareMe allow consumers to see how similar people are managing their finances and investments. These online anonymous peer comparisons are demonstrating that there is strength in numbers.

Now business owners can use myRealRate.com to anonymously compare payment card processing expenses with what others are paying for merchant services within their industry. myRealRate is a rich internet application delivering peer-to-peer knowledge sharing with a nationwide database of the real costs to accept credit and debit cards.

New businesses can use myRealRate to gain insight about the average costs of card acceptance based on their projected sales volume and transaction size within a specific industry category. Existing businesses now have an authoritative resource for comparing their rate and to find out if their merchant card processing fees are higher or low than the industry average. Previously the sources of information about merchant rates were those selling merchant services. Sharing with your peers is one of the keys to lower cost of accepting credit and debit card payments.

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The growing power of peer comparisons in finance

According to The Washington Post, The Credit Card Accountability, Responsibility and Disclosure Act that President Obama recently signed into law includes a provision to investigate the fees that businesses pay to allow their customers to use credit.

The The Government Accountability Office (GAO) is supposed to report its findings to Congress in six months, along with any recommendations for legislation. The agency is charged with examining whether merchants are restricted from revealing the fees to customers and to what extent merchants are permitted to discount for cash purchases.  It will investigate the ability of merchants of varying sizes to negotiate interchange fees and exactly what costs are incorporated into the fees.

The GAO issued a report last year on the impact that interchange fees have on the federal government. Consumers increasingly use credit and debit cards to make payments to federal, state and local governments for such things as park admission fees, driver's licenses and income taxes. The investigative arm of Congress found that by accepting credit card payments, federal agencies realized some significant benefits despite having to pay interchange fees. The benefits included fewer bad checks and cash thefts.

The GAO also said that when it examined data from other countries where authorities have successfully rolled back interchange fees to less than 1 percent of transactions, consumers didn't necessarily reap the benefits. "No conclusive evidence exists that lower interchange fees led merchants to reduce retail prices for goods," the GAO reported. "Further, some costs for card users, such as annual and other fees, have increased."

Reader comments suggest that consumers understand the value that merchants provide by accepting their credit card:
(http://www.washingtonpost.com/wp-dyn/content/article/2009/05/27/AR2009052703245_Comments.html).

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GAO to Investigate Merchant Interchange Fees