Effective immediately, registration is no longer required for merchants that accept MasterCard who choose to accept Debit MasterCard Cards only, Other Cards only, or both Debit MasterCard Cards and Other Cards. At this time, Visa still requires registration of merchants who wish to limit acceptance to debit or credit only.

In an examiner.com article yesterday titled “Merchant service providers are the real winners under new debit fee caps”, Michael Conticelli highlights that processors are not required to pass on the lower Fed regulated debit Interchange rates – and because of this small businesses are not realizing the benefits of this legislation.

Thanks Michael for helping call attention to this small business issue. Ever since this debit Interchange debate started we have been advocating for small businesses because we knew that while they were held up as the face of this legislation by mega retailer lobbyist, that the system was rigged against them.

In October 2011 when the Fed debit rules went into effect, we posted "Durbin’s Debit a Trick or Treat for Small Merchants". Michael writes “Some banks and processors have tried to trick their business customers into thinking they are getting the savings passed on by lowering rates at only a fraction of the full savings.” To avoid the tricks, Michael advises “The only way a business can be sure you are getting ALL of the savings passed through is through the Interchange pass through pricing model.”

Two years before, in October 2009, Vantage wrote More Intelligent Merchant Rates, calling for all merchants to move to Interchange pass through pricing. The bottom line we posted “is that while the lawyers, lobbyist and politicians earn their living arguing over Interchange, merchants should take more immediate action on the things they can control today. Shop smart and choose your payment partner wisely.” In fact, since 2005, Vantage has monitored, recorded and reported on Interchange changes impacting merchants. All merchants, large and small, can get Interchange pass through pricing. And Vantage is passing all the Regulated Debit savings on to our clients (and released a study of the results by industry).

To receive a customized merchant Interchange rate quote instantly delivered to your inbox go to http://merchantrates.com.

A recent article “Why Banks Shun 30 Million Americans” makes the case that banks are uninterested in the unbanked and underbanked customer and that mega-retailers don’t offer much long-term value.

New federal regulations have impacted the banking industry’s business model of subsidizing once “free” services, driving banks to focus on “profitable” customers while discouraging others with higher fees on basic banking services.

Big retailers have stepped in to profit on the unbanked by charging fees to cash checks and by selling prepaid debit cards. Retail fees charged for these services, when added up over time, can be just as high as maintaining a checking account.

Yet one of the best solutions for the unbanked and underbanked was not discussed at all: Employer paycards. Unlike retail prepaid cards that carry load and usage fees that make it profitable for retailers to sell them, employer paycard programs offer all the benefits with much lower costs.

For example, our employer paycard program is a completely free service to employers, with no contracts; no set up fees; no card fees and no minimum number of cardholders. Employers can lower expenses associated with “paper” payroll and mandate direct deposit while complying with all "pay without discount" regulations. Our full deployment program meets state regulations and provides cardholders with a Visa paycard with:

• No Monthly Fee
• 1-Free Teller Withdrawal per Pay Period (true pay to the penny compliance)
• Toll Free Balance given automatically when calling the number on the back of the card

In fact, our cardholders can realize all the benefits of having a paycard and not incur any fees.

• Free Payroll Card Enrollment
• Free Signature Purchases
• Free Online or Phone Purchases
• Free Debit Purchases
• Free Debit Purchases with Cash Back
• Free Online Access

Given that every legal US resident qualifies - banked, unbanked and credit-challenged employees are starting to take the initiative to find and introduce paycards to their employer.

We encourage employers and employees alike to pilot our Visa paycard.

It’s what all merchants are looking for; who doesn't want the “best merchant rates”? The real question for merchants is how to go about achieving this while avoiding the pitfalls of selecting a poor service provider.

To be the best, can you just claim it or buy the best domain name? The Best Merchant Rates may be an SEO search term, but a company name? Isn't that like naming your company “the best cola” instead of Coke or Pepsi? Do you trust a financial services company with a generic company name like “Merchant Services” or do you go with brand names like Bank of America or Costco?

For small businesses looking for the best merchant rates, turning to mega-banks and mega-retailers is not their best choice. For example, Bank of America Merchant Services advertises heavily with an asterisk. Interestingly this same bank, until public pressure forced it to change course, wanted to charge customers $5 a month to use a debit card. The Ellen Show posted this hilarious message from Bank of America. It would be funny if it wasn’t true of the mega bank approach to payment services. And Bank of America has been running commercials touting its "cash rewards" credit card “offering no annual fee, a $50 sign-up bonus, then a 1 to 3 percent cash refund on your spending”. Mega banks are trying to steer your customers to pay with credit cards over debit cards with the result that merchants will end up paying more in Interchange fees when accepting card payments. Sounds like a conflict of interest to us. Alternatively, will you turn to a mega retailer, who fought for lower Interchange for themselves but oddly isn’t passing the regulated debit Interchange on to the small businesses it’s marketing to? Costco’s fine print for its “rate-as-low-as” offer is followed by an asterisk that reads in part: “Rates listed are for qualified transactions. Reward cards process at a higher rate. A monthly minimum charge applies when qualified transaction fees and per-item charges are less than $20 per month… Rates and fees may change without notice...” etc. with even more fine print terms and conditions.

Does your search turn to the internet? What keyword phrase do you enter into your favorite search engine? Are you searching for the “best” merchant account or perhaps the “best” merchant service? And how will you know the best when you see it? To complete this task you will likely begin to get offers and compare discount rates and fees. In a merchant account comparison, how do you choose the best merchant services vendor for your business? Do you make a decision solely on the best merchant rate quote or do you take other factors into consideration?

Here is our best practice recommendation for all merchants to consider when shopping for merchant services:

1. Insist on an Interchange pass through pricing model (keyword search: “merchant Interchange rate quote”).
2. Insist on a month-to-month term (keyword search “month to month merchant account”).
3. Insist on open platforms verses proprietary processing systems designed to lock you into not being able to easily move to another vendor. Many providers sell (or worse…lease) proprietary bankcard terminals that will only work if you continue to process with them. Others follow this same model with payment gateways that once integrated into your point of sale or ecommerce platform leave you with a single processing choice (and we all know what happens to prices when there are no competitive pressures and no other choices).

Once you identify service providers that meet this criteria you can then begin your comparison. Important note, please don’t trust the “marketing” proposal but instead read all the fine print for yourself before you sign any application!

With so many credit card processing companies in the market, and without adequate knowledge of the payment industry, it can be hard to decide which merchant services provider is the best for your business. If you are shopping, please read these testimonials and include Vantage Card Services in your RFP. Vantage provides a host of online resources and personal consultations to help small business. On MerchantRates.com you can get an instant Interchange rate quote and customize the proposal specifically for your business. There is a buyer’s guide with frequently asked questions as well as numerous resources to help you gain a better understanding of the industry’s Interchange schedules.

Please share your experiences and most effective shopping strategy with us here.

As we head into 2012 we want to once again take this opportunity to Thank You for choosing Vantage.

This year we blogged about some of the most pressing issues in the payments industry impacting merchants accepting card payments. 2011 saw major industry changes enacted, including new PCI security, IRS reporting, and the Durbin Debit regulations.

Thank you again for the privilege of being your payment solutions partner and for the opportunity to earn your trust, loyalty, and business every day. It is very exciting to be able to work with so many great entrepreneurs! We would like to extend a special thank you and our sincere gratitude for all your referrals and testimonials. We pledge to continue to build upon and maintain the Vantage reputation for the high level of personal service you have come to expect.

As we head into the start of a new year, now is a good time to review your card processing procedures. Many of the highest Interchange rates result from transactions that downgrade for preventable reasons. Please take a moment to review your card acceptance procedures and follow best practices as they are important in qualifying your transactions at the very lowest Interchange rates available.

Here are the most common issues:

• If you are accepting key entered transactions, the most common cause of downgrades is due to missing AVS (address verification service) which looks to match the cardholder’s zip code at the time of authorization. Best practice: always enter the zip code. Check with your staff and your system to make sure you are entering and passing the zip code with each non-swiped card transaction.
• Other reasons for transactions to downgrade to higher Interchange rates include a mismatch of Authorization and Settlement dollar amounts (except in certain industries where tips are allowed) and forced/offline transactions in which a previously obtained authorization code is key-entered to settle a transaction. Transactions also fail to qualify for the best Interchange rates when transactions are not settled in a timely manner (typically 1-3 days depending on your industry). Best practice: settle your batch every day and avoid obtaining pre-authorizations.
• Non travel and entertainment merchants accepting commercial cards (Business, Corporate, Purchasing cards) should upgrade to a Level 3 payment gateway or virtual terminal. Level 3 refers to passing line item detail of the invoice with the standard payment data. Best practice: don’t use a retail terminal to process commercial cards. Vantage specializes in B2B transaction processing. Please contact us with any questions and visit http://vantageb2b.com for more information.

For personal assistance, give us a call at 800-397-2380 for a free consultation.

In the news this week were several stories about small business lending. In “Bank loans to small business fall to 12-year low” an analysis of FDIC data showed that the number of small loans to business of $1 million or less have been shrinking consistently.

Small businesses rely almost exclusively on credit provided from banks. One reason small business lending is down was covered in another article, “Why Aren't Small Businesses Getting Loans From Big Banks?” which points to the big banks' new stringent credit policies. Bankers seem to be denying that lending standards are an issue, but small businesses report that borrowing has changed dramatically and has become an extreme process. The evidence seems to support the fact that there has been a fundamental change in how big banks view risk and that small businesses are perceived as risky customers to big banks.

Another big bank claim is that while they have enough money to lend, there aren't enough borrowers. Yet one community bank example said that their small-business loan applications doubled this year. In a third article, “Small business loan demand shows new economic gain”, analysis also showed that borrowing demand is up for new investment by small businesses. The bottom line was that small businesses are not the client of choice for big banks. Experts say that small businesses should go to small banks to get their lending needs met. Even then successful small businesses are finding it hard to get credit.

If you conduct business-to-business trade and are looking for a new source of support for growing your business or if you’ve not sought credit because of the challenging banking climate, you might want to consider an alternative to the slow and ultra-conservative bank funding approach, and the inflexibility and expensive traditional factoring companies.

VantageB2B can help your small and medium-sized businesses obtain the funding you need. We offer a proven, innovative solution--combining business lines of credit with account receivables management. With hundreds of millions in business loans on the books and receivables processed, plus a team of funding experts in place, we can provide individual attention, quick decisions and affordable small business funding.

In addition, VantageB2B payments solution, available nationwide in the United States, delivers payment processing, automated invoicing, recurring billing, customer management and reporting, in one integrated payment suite for small-to-medium business owners. Vantage understands the need for business owners to invoice and accept payments in a timely, efficient manner to optimize their cash flow and keep their businesses healthy.

For more information, please visit http://vantageb2b.com.

Prior to new Fed rules, as required under the Durbin Amendment of last year's financial-overhaul law, debit Interchange was priced based on numerous factors such as: signature or PIN; card present or not; transaction less than $15 or higher; supermarket or lodging and more. The new Fed regulated debit Interchange in effect since October 1^st forced the addition of a new rate to be determined by the size of the cardholder’s bank issuing the debit card. For small banks, with less than $10 billion in assets, the existing debit Interchange rates remained unchanged. However, for the largest banks issuing debit cards, with assets are over $10 billion, the new Fed regulated debit Interchange rate did have an impact on merchant processing costs in October.

Mega-merchants were expected to see the most savings from the new law because they were already on an Interchange pass-through pricing schedule. Yet this is not the case for the majority of small and mid-sized businesses and a well documented concern was that for these merchants, their experience would be much different. And so it was no surprise that according to a WSJ poll, 78% of respondents said NO when asked "Is your small business seeing savings as a result of the new law slashing fees for accepting debit card payments?"

Vantage Card Services, Inc. provides small and mid-sized businesses the same Interchange pricing structures as the nation’s largest merchants have negotiated and we passed through savings from the new regulated signature and PIN debit Interchange rates to our merchant clients. Based upon a Vantage analysis of October merchant statements, the majority of debit transactions (69%) were debit cards issued by regulated banks and subject to the new regulated debit Interchange rates. We found that 73% of Visa debit and 60% of MasterCard debit transactions qualified as regulated transactions with Visa accounting for 77% of all debit volume and 79% of all debit transactions. Of these Visa debit transactions only 9% were regulated prepaid transactions. The mass majority of Visa prepaid transactions were non-regulated.

In our analysis we calculated and compared the effective rate of Interchange in September 2011 to October 2011 when the new regulated rates went into effect. Card-Not-Present merchants including ecommerce, mail-order telephone-order (MOTO) and touch tone capture (TTC) merchants saved the most with an average of an 88 basis point (0.88%) reduction. Other merchant industry categories saved as well. Lodging merchants saved on average 84 basis points (0.84%), followed by emerging markets / public sector merchants at 71 basis points (0.71%), business to business at 67 basis points (0.67%), retail at 66 basis points (0.66%), restaurants at 52 basis points (0.52%) and supermarket at 48 basis points (0.48%).

Effective Interchange Rate Savings: September to October 2011 

Card-Not-Present

Rate

Retail

Rate

9/30/2011

1.58%

9/30/2011

1.36%

10/31/2011

0.70%

10/31/2011

0.70%

Savings

0.88%

Savings

0.66%

Lodging

Rate

Restaurant

Rate

9/30/2011

1.45%

9/30/2011

1.57%

10/31/2011

0.61%

10/31/2011

1.05%

Savings

0.84%

Savings

0.52%

Emerging Mkt / Public 

Rate

Supermarket

Rate

9/30/2011

1.02%

9/30/2011

1.70%

10/31/2011

0.31%

10/31/2011

1.22%

Savings

0.71%

Savings

0.48%

Business-to-Business

Rate

QSR

Rate

9/30/2011

1.57%

9/30/2011

1.81%

10/31/2011

0.90%

10/31/2011

1.83%

Savings

0.67%

Savings

-0.02%

Vantage restaurant clients saved the most averaging $146/month each from reduced regulated debit Interchange. This is largely attributed to the fact of more debit cards being presented for payment. Card-Not-Present merchants say the greatest percentage savings due to the difference between the existing higher key-entered Interchange rates compared with the regulated rates that didn’t take method of acceptance into account, while the average size of the transaction had the most impact on the effective rate savings in face-to-face sales environments. The quick serve restaurant’s small transaction size made accepting regulated debit more expensive for them.

Overall, in October, the average signature and PIN regulated debit Interchange rate calculated to 61 basis points (0.61%). The effective Interchange in October for Visa regulated debit was about 42% lower than exempt non-regulated debit while MasterCard was nearly 37% lower. 

Debit Card

Rate

Visa Total Non-Regulated Debit

1.51%

Visa Total Regulated Debit

0.63%

MasterCard Non-Regulated Debit

1.53%

MasterCard Regulated Debit

0.57%

Our PIN debit analysis revealed that unlike Visa and MasterCard where the majority of signature debit were regulated, only 39% of PIN transactions fell into the regulated Interchange categories. Regulated PIN debit also had the lowest effective rate calculation due to the higher average ticket for PIN transactions compared with signature debit.

Debit Card

Rate

PIN Debit Non-Regulated

1.03%

PIN Debit Regulated

0.35%

How did your current processor treat you? Are they passing through the regulated debit Interchange savings? As we've pointed out, payment processors are not required by law to pass these savings; and many processors have continued to define their own "qualified” and “non-qualified” pricing plans, thus keeping the regulated Interchange savings for themselves. As a result, many small business owners, who often struggle to figure out how to read their merchant statements, will be disappointed to learn that they are not getting to take advantage of the lower regulated debit rates.

About Vantage: Vantage Card Services provides merchants, businesses and banks with payment system consulting as well as credit and debit processing, merchant services and gift, loyalty, check, ACH and Visa payroll card services. We offer full-service consulting including comprehensive financial analysis of processing expenses and selection and implementation of the latest payment technologies. As a boutique firm with a solid reputation in the payment business since 1996, Vantage caters to clients that require value, expertise and personal attention. For an instant merchant Interchange rate quote please visit: MerchantRates.com.

The B2B buying experience is being transformed by ecommerce technology to resemble that of a consumer online shopping experience. B2B sellers have traditionally used their web presence as a brochure site and to generate leads, taking advantage of buyers who have increasingly turned to the internet for all of their product research. However, as vendors have bulked up ecommerce platforms to handle the more complex B2B product, contract management and pricing rules, B2B ecommerce is pushing the final purchase online as well.

B2B ecommerce is being adopted as a new sales channel, augmenting traditional direct and channel sales strategies, delivering on the “do more with less” mantra of today’s business environment. And a new-generation of buyers, with expectations crafted from their consumer ecommerce experiences, are demanding the speed of an ecommerce channel to keep pace with their own on-demand needs.

Better B2B ecommerce technology is helping organizations leverage their existing web presence, turning it into a buyer-facing extension of the company’s CRM or ERP and delivering more intuitive online selling tools. And while today’s B2B ecommerce platforms include full-featured shopping carts with one-click checkout, unfortunately many of these platforms still rely on consumer-oriented payment gateways to process card payments.

The type of cards being used at checkout in business-to-business environments are more likely to be commercial card products like a corporate card, a business card, a purchasing card or GSA (government) purchasing card (or p-card). To properly accept these commercial card payments requires a Level 3 merchant account and a Level 3 payment gateway that can qualify these card transactions for the best Interchange rates available.

Interchange rates have made headlines of late with the passage and implementation of financial overall rules requiring the Fed to govern debit Interchange. Interchange is the single largest component of merchant discount rate pricing and is collected and paid to the card issuing bank. Level 3 processing refers to passing the line item detail from the invoice when submitting the sale transaction for settlement.  Level 3 Data is additional information about a transaction which is commonly found on an invoice, such as product/service descriptions, quantities and other details. Visa and MasterCard apply higher Interchange rates for commercial card transactions if Level 3 Data is not included with the transaction. For example, a Level 3 qualified transaction can save up to $11.10 in Interchange fees per $1,000 in sales (or more on Large Ticket transactions). Get an instant Level 3 merchant rate quote now.

In addition to including functionality to accept commercial card payments that meet Level 3 data requirements, B2B ecommerce platforms should provide a secure, PCI certified, Level 3 payment processing technology. Our secure checkout API is a data tokenization solution that provides real-time payment processing without the merchant or the ecommerce platform collecting, transmitting, storing or even touching cardholder data for one-time, recurring and repeat buyers with cards on file for one click checkout.

One company specializing in helping GSA vendors integrate Level 3 processing into their B2B ecommerce solution is PriceReporter.com. Price Reporter empowers ecommerce sites for GSA vendors, including managing multiple pricing models for different user groups and creating special rules such as “don’t charge shipping fees and tax for government users”. Price Reporter synchronizes a client’s web catalog with the GSA Advantage price list, provides the ability to integrate with price-comparison and shopping sites (like Google Shopping, Amazon, Price Grabber, etc), and provides seamless integration with any accounting and/or order processing system.

Social networking is also finding its way to B2B, with customers rating products, submitting reviews, and even posting comments. And B2B sellers should keep an eye on emerging consumer ecommerce trends as social networks become marketplaces for consumers with features to allow buyers to connect and shop collaboratively in real-time. B2B sellers should also follow consumer trends in the use of QR codes and mobile commerce. As history has shown, they too will likely be adapted for B2B channels. But remember, regardless of how you sell, pay close attention to the method of payment and when accepting commercial cards, don’t overlook the savings associated with properly qualifying your transactions at the lowest possible Interchange category.

American Express is building on initial success with this year's 2nd annual Small Business Saturday® on November 26th.  On one of the busiest shopping weekends of the year, Small Business Saturday is sandwiched between and inspired by Black Friday by Black Friday for the big box retail and Cyber Monday for e-commerce stores.  Small Business Saturday encourages holiday shoppers to " Shop Small^sm " at local brick and mortar businesses.  Nearly 2.4 million have pledged to shop small on Nov 26 with a 'Like' on the Small Business Saturday Facebook page. 

Small businesses can make the most of this day with tools to promote their business with siganage, marketing materials, and by creating and sharing offers.  Visit http://smallbusinesssaturday.com/ and http://www.facebook.com/SmallBusinessSaturday?sk=app_214385065292578 to learn more.