Monday, December 14, 2009

"How to use your Gift Card"

I often redeem my credit card reward (thank you Mr./Mrs. Merchant for paying a premium in Interchange, oh am I suppossed to thank my bank?) for a "debit" card. I just got one for $200 bucks. You gotta love the instruction manual that comes with it! Under "how to use your Gift Card", it states a number of things; 1) "...tell the merchant you'd like to sign a receipt", 2) "At a PIN pad, swipe your card (keep in mind they just called it a "Gift Card" that clearly says "Debit" on the front), ....choose "Credit" and sign your receipt. Luckily, it tells you, "Although it states "Debit" on the front of the card, your Gift Card does not come with a PIN." You gotta also love that there is a 6 page pamphlet of fine print that accompanies this thing.

How did we end up here?

And we wonder why PayPal is doing so well!!!!

Thursday, December 10, 2009

Best Practices for Subscription Based Merchants

it my be counter-intuitive, but making it easy for a customer to end their subscription may be the best method of growing your business...(it will clearly have a dramatic impact on reducing your chargebacks!)
Here are a few thoughts;
1) have a link clearly visible on your home page for Customer Service
2) make it easy for a customer to cancel their subscription, albeit nothing wrong with offering alternatives to cancelling but nonetheless, just deal with it if that is what they want
3) if the cancel requires human intervention, have those people available 7 days a week, if not 7x24, but preferably have it be self-service
4) process refunds promptly
5) communicate clearly and repeat the message that the credit will take 7-21 days to show up online and up to 2 billing cycles to show up in paper statements
Why do these things make sense?
1) in this connected world we live in, word of mouth references are profoundly important and someone saying, "I used X and it was great and when I was finished with their service and went to cancel it was a piece of cake..." is much more likely to win you the next customer and potentially even this one back later when their needs change
2) it will clearly save you money in operations cost, chargeback fees, etc.
3) you will sleep better at night and be doing your part to give the subscription based business world a better name.

Friday, December 4, 2009

Underwriting, what is that? & How does it impact subscription based merchants?

It is wonderful that new business is the engine of our economy. It also means that individuals who start these businesses often have gaps in their experiences. For example, one of the most common questions I get is - why does it take weeks to get approved for a credit card merchant account and why do they need copies of my personal tax returns, etc.?

Merchants need to understand that their credit card acquirer/processor is taking responsibility upstream for their viability. For old world face-to-face merchants selling physical goods this was less of an issue than it is for ecommerce merchants and especially those selling intangible goods and/or services. And, it is doubly true for those delivering those services over an extended period of time.

If you take a payment from a consumer for a 12 month subscription to a service, you get paid within 2-3 days. If for some reason, your business fails in month 6, and the consumer files a chargeback to get their money back, if your business is gone, it is the acquirer/processor who has to cover that cost.

Wednesday, November 18, 2009

Bye, bye, Revolution Money!

American Express just announced they are buying it for not much more than what has been invested in it. There has been so much smoke and mirrors about this company, for anyone that actually knows what they are talking about, it at least has provided some entertainment value. If American Express cannot figure out how to copy anything of value that this company had (and if anyone can explain to me what that was) for a lot less than $300M, it is a pretty bad situation.

Sunday, November 1, 2009


I am sure I am missing something about this new feature from Amazon. I was really looking forward to having yet another Username/Password to remember (not!). I guess by calling it a PayPhrase, we are not supposed to realize it is just another Username. I only have about 100 others. When I saw the release, I immediately went and signed up presuming that perhaps this was something genuinely new and different. Alas, it was not.

With GoogleCheckout heading toward oblivion and PayPal seemingly unstoppable, I realize that desperation can drive other copycats to try and force innovation, but this one really seems like a very long stretch.

If anyone understands what this is supposed to accomplish and can explain it to me, I would really appreciate it.


Friday, September 25, 2009

Whose Data Is It? - Can you get it back?

As a result of PCI compliance a lot of merchants are relying on 3rd parties to store their credit card info. That does make sense for many merchants, large and small. However, it is imperative, especially if you are a subscription based service or have "1-click" accounts set up for your customers that should you leave that particular service provider, there is an agreement and the processes in place to securely and in a timely fashion get your data back.
Here at Vindicia, we have a standard clause in our agreement that covers this possible outcome and as long as the merchant has become PCI compliant themselves or is switching to another PCI compliant vendor they can have it back.
Unfortunately, as we have recently learned, not all outsourced providers are treating this issue this way and in fact are using PCI as an excuse to handcuff their customers and potentially bring great harm to them financially if they ever leave.
We brought on a new customer about 9 months ago and have been engaged, along with the customer, every since in trying to help them get their data back. First we were told No, then Yes, but they claimed they did not have the capability to extract the data argument and the latest is No again. I will not name the provider (yet), but they are hiding behind PCI. PCI is not an excuse for handcuffing your customers. More on this as it evolves, but be careful who you trust with your data.

Thursday, August 27, 2009

Hosted Order Pages?

On the surface (like with a lot of things in payment), it would seem to make sense to use a HOP. But, unless you are a mom & pop merchant with little choice and a serious lack of technical resource, be aware of the compromises that you are making. It is tempting to "solve" your PCI requirements by letting someone else host the order page and therefore handle all the credit card storage. Here are a few things to think about;
1) whose data is it? If you ever decide to change providers or take the order page back under your control, will you be able to easily get your data back? Does your contract cover that? Is your provider prepared to do this in a timely, efficient, and secure manner?
2) maintenance windows? Remember, yours for the rest of your site and your providers for the HOP will rarely be the same so there are going to be times when your store is open, but your checkout page is not available.
3) security settings? If your consumer has their security settings set high, the transition from your shopping pages to the HOP may cause a warning box to pop up. This could lead to confusion, concern and of course the dreaded shopping cart abandonment syndrome.
4) branding/look & feel? Most HOPs allow you to attempt to make the page look like the rest of your site but it will never be perfect and therefore again this transition could lead to shopping cart abandonment.
5) customer service? If you are using a HOP, are you going to have the info you need to provide customer service? Are your CSRs going to have to switch from one system to the other to get access to info?
6) chargeback handling? Does the HOP give you adequate info to prevent and/or handle chargebacks when they arise?
I am sure there are things that I am missing but I hope I have at least caused the people who are in a position to make choices on matters like this have some add'l food for thought to help make an informed decision.

Sunday, August 23, 2009


Just recently the desire by ecommerce merchants to accept electronic checks has been expressed a few times so I thought I would make a few comments. Merchants are often led to this interest by a rational desire to save money. However, for most ecommerce merchants, this is clearly the case where the lowest cost is not usually a valid enough reason. It is true that accepting electronic checks usually costs between $.25 and $.50 flat per item. Compare that to 2.25% + $.25 for a typical $20 or more transaction with a credit or debit card and the math looks very appealing. However, when you consider what you get for your ~$.375, it may not make sense. First of all, many consumers are leery of giving their checking account number/routing & transit number to a merchant, and rightly so. In the wrong hands, someone can access the consumer's demand deposit (DDA) account (sometimes referred to as their "current" account) and drain it, causing mortgage payments and other critical payments to bounce. While, in the case of true fraud, these problems can be reversed, they are very time consuming. Secondly, there is no way to verify if that account is valid and if it has funds in it in real time like there is with a credit/debit card. That means that the merchant needs to either sit on the order, if physical goods or permit access if a digital good, then wait 5-7 days and if the transaction is not funded, then reverse the order/shut off access.

There are a variety of alternatives that have been launched, are being piloted or are being planned that access the DDA account and offer some solutions to the aforementioned problems but they typically involve some enrollment step (see earlier blog post on this topic) which is the kiss of death for success or are priced much closer to regular credit/debit cards and therefore are not as compelling.

Welcome your feedback/questions!

Sunday, August 2, 2009

RFID? (my apologies that this is not about ecommerce)

Whether you call it PayWave (Visa), ExpressPay (AMEX), or PayPass (MasterCard), you do not hear much about this technology these days. Today I was at my local Office Depot and I noticed that they had capable terminals so I purposefully pulled out the one enabled card I have, AMEX Blue, and tried to use it. Apologies to all my former POS colleagues but it was not working. The clerk had to grab my card and swipe the old standby Mag Stripe through the terminal's reader. He commented - "it fails about every 20th transactions". My luck!

We Americans take a lot of guff from the global payment marketplace that we never adopted Chip cards and with all the noise about RFID, it is barely scratching the suface. Having personally sold a few hundred thousand mag stripe based terminals, I recognized one key value of RFID was solving the mag stripe wear and tear issue. Of course, that isn't enough to justify the deployment expense. One of the other projected values, speed of transaction, barely exists under the best of circumstances especially compared to customer activated terminals and <$25 receipt-less transactions becoming all the rage. The only thing left is a slight enhanced security benefit from the dynamic CVV, but unfortunately that is probably not enough to justify the expense of deployment even combined with the mag stripe failure issue.

About all I can say is I am glad my physical POS hardware days are behind me!!

Wednesday, July 8, 2009

PIN Debit for Internet Transactions

Noise about this approach is floating around once again. Seems every 18-24 months or so, I guess that is how long it takes folks to forget why the last attempt failed, "news" about this concept surfaces. Speaking of "floating", one of the schemes uses a floating soft PIN Pad as its magic. I watched a YouTube video that showed a demo, supposedly real but clearly a demo since the merchant referenced is not live with the solution, of one of these transactions. My vision is still blurry from following the keypad doing its multiple scrambles after each entry.
What are these people thinking?
p.s. This technology was resurrected out of the ashes of a now bankrupt fingerprint-at-the-POS based payments company. That company blew threw around $100 million dollars of investor's money.

Wednesday, June 17, 2009

What a difference a few letters make - "a" or "the"

A lot of companies claim to be "the" leading provider in this or that. This is a common issue in the payment processing and infrastructure realms. Of course, rarely is there one true "the" and of course you can immediately tell the difference between a start-up claiming "the" and a public company which has to actually defend their claims and therefore more often saying they are "a" leader.
Personally I have always argued for the more mature stance at the various start-ups that I have worked for claiming "a" leadership role in the various realms. Actually nothing is more satisfying than being "the" and everyone actually knows it but you do not have to claim it.
Credibility, quality, execution, etc. really do matter.
So, my advice is to question anyone that claims to be "the" leader in their realm. If they are stretching the truth about that, what else are they stretching?

Wednesday, June 10, 2009

Bill Payment +/-

This post is from a user's perspective rather than a provider's perspective. I use both my bank's bill payment service and I have enrolled in a variety of merchant direct bill payment programs. I use the bank approach mostly for the gardner, dentist, etc. I use the merchant approach for my wireless, water, gas&electric, etc.
It surprises me that there is so much inconsistency in the way the "biller direct" models work. I have also signed up for paperless statementing from most of my providers. Regardless of how I get notified that a bill is pending, some statements include the dollar amount and the date that the payment will be processed and others make you log-in to get one or both of those pieces of information.
I am sure that some very smart and well meaning programmers/product managers had good reasons for their individual approach to this, perhaps security concerns about email exposures, and/or the information they needed to populate the fields was not easily available.
It would seem to me that some studying of the Best practices in this area could help to further the adoption of these great programs since consistency is key to massive adoption and reduced costs for customer service.
I personally prefer that I be reminded of three key pieces; How Much, When, What Account (Credit Card or Checking) is going to be hit without me having to log in and probe for that info.

PCI DSS (Payment Card Industry - Data Security Standard)

Much has been and will be written about this program. Like a lot of other aspects of the payments industry, there seems to be an endless supply of confusion on this topic. To be fair, it is a somewhat complicated topic. There are so many layers in the eco-system that can touch and/or store cardholder information and there are multitudes of ways that merchants implement their payment systems. During a recent discussion with a merchant client of ours and one of the qualified assessors, the assessor acknowledged that the program was designed for the common mainstream models, both ecommerce and retail, and that this particular merchant's situation did not easily fit. Nonetheless, this merchant, who could also be characterized as a quasi-service provider was faced with a complicated dilemma.

While a lot of progress has been made on key aspects of PCI such as the consolidation of requirements across payment brands, there is no end in sight for a simple PCI for Dummies tomb that will answer all the questions.

Another relevent point for ecommerce merchants to consider is the +/- of allowing your gateway to handle PCI for you through what is called Tokenization and/or a fully hosted order page. In both cases, while the appeal of avoiding PCI is tempting, it is important to make sure that your contract gives you the ability to get your data back if you end up deciding to switch vendors or take the process back in-house. Otherwise, those of you with 1-Click shopping or subscription payments will place your business at serious risk.

p.s. Having been involved in both retail and ecommerce payment infrastructure for close to 30 years, it never ceased to amaze me how much focus was placed on the fear of compromises coming from the Internet channel and little to no concern or governance was focused on retail until pretty recently. At least in the Internet, with the standardization around SSL, the one part of the threat around transport security was pretty well covered. Things really started getting crazy when retail terminals started being switched from communicating over private lines (dial or leased) to using the Internet for transport and neither the terminals or the applications running in them were architected from a security perspective.

Wednesday, May 13, 2009

Who needs a Gateway?

I have gotten this question frequently in recent months so I thought I would take a stab at answering it here. I worked at CyberCash which was the very first Internet payment gateway. (p.s. This was a very exciting time and I still have the receipt from my first transaction at Virtual Vinyards!!) The purpose for a gateway at that time was very clear. The only way to connect to your payment processor was through a dial-up or dedicated communication line known as a leased line. CyberCash acted as the protocol converter by enabling merchants to connect to us via IP and we translated that into the communications protocols that the processors were capable of supporting over leased lines out the other side of our systems. For the various start up companies that were pioneering selling over the Internet, the concept of not being able to use the Internet to connect to the processors was ridiculous and therefore a new business was launched. During the lead up to the bubble (& ultimate burst), new payment gateways came out of the woodwork on almost a daily basis. Eventually, as with most similar situations, there were too many and most are now gone. Eventually (about 5 years went by), the various payment processors began adding their own IP gateways and now all of the major payment processors have their own. Of course, the few remaining independent gateway providers were not standing still during these years. They added a variety of value added services to differentiate themselves such as fraud screening, sale tax calculation, alternative payment types, international payment support, FX capabilities, PCI compliance, etc... In today's market, often (as with Vindicia) the gateway function is there simply as a means to an end (delivering a comprehensive value added subscription billing and chargeback management service) rather than the defining capability. The other major reasons to use an independent third party is the fact that no one payment processor has everything a merchant typically needs and since most companies that have embedded gateway capabilities connect to multiple payment processors the merchant is empowered to switch (or as is sometimes necessary connect to multiple processors simultaneously) much more easily if for whatever reason their needs change.

Tuesday, April 28, 2009

Enrollment - the kiss of death for a new payment method

Tonite I was reading about one of the newest alternative payment players, Moneta and as is my calling, I decided to check it out. I went to the site and although they only have a few merchants functioning, one being Delta Air, I went ahead and enrolled. It was easy enough, the website was well designed, etc. (Note to them - one lame thing is the password challenge questions - they ask you to identify your favorite ____________ which is a bad idea since people's favorites change all the time. Alas, this is a very common mistake.) However, it is not an instantaneous process. They are going to deposit a few small transactions in my checking account which will take 1-2 days and then I am going to have come back and go through a verification process. This is a sound, but not particulary convenient method, to verify that I actually own this checking account.

If I was not a payment geek, I doubt I would go through this effort to enroll, remember yet another username/password and then what is the likelyhood that I will remember to use this method at some point in the future. Delta Air already has my credit card on file and they actively promote their own co-branded American Express card. And, what about my miles/cash back, etc.? Consumers that are concerned about not building up add'l debt can simply use their Visa/MasterCard branded Debit card. And, unless Amazon embraces it (which is unlikely), they are toast.

The inertia any of these new payment methods have to overcome is huge and a multi-step/multi-day enrollment method is one of the many speed bumps. But, with BillmeLater getting acquired for almost $1B by eBay, there will be no shortage of folks trying. One of the beauties of BillMeLater was they figured out how to move the enrollment to the back end, after you already made your purchase. That was brilliant.

Saturday, April 18, 2009

Alternative Payment Defined

So what is an alternative payment? Do e-wallets qualify? There are various projections out there that say "alternative payments" will represent n% of all ecommerce payments by "n" date by such well respected research firms such as Javelin Strategy. Unless we define the term, these projections can easily be mis-understood and overstate the actual change underway. Some seem to believe that any payment where the consumer does not directly enter their credit/debit card number into the check-out form qualifies as an "alternative payment". In my opinion, Google Checkout, for example, is not an alternative payment. PayPal transactions that are funded by a Credit Card are not an "alternative payment". BillMeLater and eBillMe are clearly alternative payment. Taking Google Checkout and Credit/Debit card funded PayPal transactions out of the projections would reduce them dramatically.
What do you think?

Thursday, April 9, 2009

What is a micropayment?

The answer - it depends on who you ask.
My definition is - a payment of $1.00 or less.
I would like to propose a new term (just what we need, right!) - Minipayment.
What is a minipayment? My definition is - a payment of between $1.01 and $5.00.
Then we would have a plain old "payment" which I would define as anything above $5.00.

There has been a lot of attempts to solve the micropayment problem. They go by the names; Digicash, CyberCash, MagnaCash, PepperCoin (all dead and gone) and the latest incarnations; SpareChange, PayByCash, etc. PayPal has toyed around in this area as well but without much success.

The problem is that if the consumer pays by Credit or Signature Debit (see earlier post), the cost of the transaction includes a flat fee of ~.20-.30 plus some % of ~2%. On a $5 transaction run through PayPal's (& now Google Checkout's) standard pricing, the fee works out to be 9%.

The "solution" has been to have the customer fund a larger amount, say $20 (works out to a 4.5% fee if a typical SMB merchant is using PayPal/Google Checkout). The problem with this are; a) the % of consumers willing to commit that larger amount on the hope that they will use it at one or more merchants that support it, b) the economics for the provider and the merchant of providing customer service around these very low value payments and c) for the credit card companies, the % of these transactions that result in disputes at a very high cost. Other solutions are individual game currency, pre-paid cards, mobile payments but each of these have a variety of issues whether it is; utility, accessibility, cost, fraud, etc.

I do not have a magic bullet for this one, I know too much about how all this works and therefore the challenges. I am always intrigued to observe the volume of noise on this issue and the amount of VC money that finds it way to the latest attempt.

p.s. The biggest challenge is not any particular technical issue. If the credit card companies or PayPal wanted to offer a viable solution, they could. It is the Incumbent's Dilemma in spades, however, since in order to price a micropayment service in the realm of what the merchant would desire, it would undermine the pricing models for the higher value payments since the fact is, it costs about the same to process a $1.00 transaction as a $100.00 transaction and at the volumes the big guys are processing, that incremental cost for the next transaction is pretty low. The other guys that are trying to solve it are faced with all the chicken & egg start-up costs whereas the incumbents are already at scale.

Feeback welcome!

Friday, March 13, 2009

Merchant Risk Council Conference

Just returned from Vegas where I attended the MRC conference. For those of you unfamiliar the MRC is an organization that brings together ecommerce merchants, card brands, alternative payment providers, payment service providers and other peripheral technology providers to network and educate. Of course, this was Vegas, so the rest of what went on I cannot discuss. The sessions provided adequate content but the real serious discussions were happenning in the hallways and byways. One of the interesting challenges is that very often the merchant side is represented by newbies who need 101 level orientation and so a significant amount of time and energy during sessions has to be spent on the very basics. Another issue that is always present is the hesitancy associated with revealing too much to competitors. Lastly, there is the fear of saying something that might alienate one of the Big Brothers in the room by digging into one of those many slippery slope issues that are so prevelent in this realm. If you were at the MRC and have any thoughts to share about what you picked up (hopefully nothing that antibiotics cannot cure) or perhaps topics that were missing, please let me know.

p.s. It was great that numerous people came up to me at the conference and commented that they have read and enjoyed the blog!

Friday, February 20, 2009

PINless Debit is not synonymous with Signature Debit

Signature Debit is used without a PIN but it is not PINless Debit. This is just one of the many perplexing realities of the payment world. You really have to leave your common sense at the door. It is true that you would not be using a physical signature to "sign" a PINless Debit transaction but you would be using your electronic "signature".

PINless Debit is a type of transaction where a consumer can pay a very limited type of bills such as a Utility bill, mortgage payments, etc. with the same card they otherwise would use at the ATM with a PIN or at the POS with a signature or a PIN or online as a signature debit. PINless Debit transactions are processed by the ATM networks such as Star, NYCE, Exchange, etc. The card may have a Visa or MasterCard logo on it but for these unique transaction types and with certain merchants who have been individually qualified by each ATM network, they would be processed as PINless debit. Interlink/PLUS and Maestro/Cirrus which are the Visa/MC PIN based POS/ATM networks do not support PINless Debit. These transactions are priced with a % fee but it usually caps out at around $.50.

Signature debit (used to be referred to as check cards) is where a debit card that also has a Visa or MC logo on it can be used for any retail or online purchase and when it shows up at the bank the funds are debited from the consumer’s checking (DDA) account. These transactions are priced like all Visa/MC transactions under Interchange albeit slightly less than credit card interchange but there isn’t a cap on the fee.

As an example, I have a Wells Fargo card that doubles as my ATM card and as my signature debit card. Depending on where I use it and which button I press on the POS terminal the transaction travels over a different processing network and the merchant would pay a different fee. If I were to use it at my mortgage company online, (and they had set up all the right back end systems and agreements), the transaction would run across the STAR ATM network rails. If I use it at a BofA ATM and enter my PIN, it likely would travel across the PLUS or STAR networks. If I use it at the POS and enter my PIN, it would travel across the Interlink network (owned and operated by Visa) and if I use it online to shop at AMAZON, it would travel across the Visa network.

Have I completely confused you? I have gone back and read this post over a few times and even I am confused. Oh well!

Friday, February 13, 2009

Not Exactly!!!

There seems to be a new alternative payment solution showing up on the scene every day. This week, two new ones appeared. Mazooma and Noca. Where do they get these names from? I visited both sites and right off the bat there is a huge difference here. It is obvious that Mazooma is the more sophisticated company, at least from a marketing perspective. Noca's messaging is clearly techy orientated. What is "not exactly"? I have to pick on Mazooma's messaging. They claim you are paying in "real time". Well, need I say more? Awhile back I tried and commented on another player in this realm, eBillMe. While I was impressed, I experienced the downside of these solutions compared to paying with a Credit or Check card. The merchant is not going to release the merchandise until they actually get the money which is probably going to take 2-4 days. I bought something from and since I was paying with eBillMe, the merchant put my order into a pending status whereas if I had paid with a Credit or Check card, they would have immediately released it for shipment. As it turned out, therefore, they ran out by the time they got the funds (or notified confidently enough that the funds were on the way) and I had to wait over a week for them to replenish their stock and ship the item.

The bigger question for all of these types of solutions is will the customer bite? Will they want to enroll and manage yet another account with another username/password for a service they will likely only be able to use at smaller merchants and therefore it has minimal utility.

Final note, I enrolled in Mazooma and of course, their email confirmation back to me got trapped by my ATT/Yahoo webmail SPAM filter. Surprised?

Friday, February 6, 2009

Visa/MasterCard Results & the Economy

It never ceases to amaze me how the news media continues to confuse the role of Visa and MasterCard and the Issuers. The other morning on CNBC, the reporter was talking about the great results that both companies had posted "in spite of the economy". As we all know, Visa/MasterCard are in the transaction processing business, not the lending business. The good news for those of us in the electronic payments world is that regardless of the state of the economy, the continued shift from cash and checks to credit and debit cards carrys on. And, while there are things that could be done to make the processing of electronic payments even more efficient (and fair, secure, etc.) for all parties, there is little doubt in my mind that this evolution to electronic payments is a good thing.

It is not what you say, it is how you say it!

When it comes to dealing with Chargebacks, one of the greyest (surely not the greatest) areas of the world of payment processing, the devil is clearly in the details. Consumers, who wish to game the system, have learned what to say in order to get a refund from a merchant or chargeback handled by their issuer when they may or may not really be deserving of one. Issuers have learned that if they code chargebacks a certain way, many merchants will simply not bother fighting them. The disparity in the rules and processes between the various issuers is enough to make your head spin. During these types of economic times, the tension between the various parties in this wonderful 4 Party system have a tendency to become even more tight as everyone is looking for any margin of victory (deserved or not). Therefore, maybe now is not the time to address all of this confusion and disparity, but if the full potential of the electronification of payment is going to be achieved, this realm will have to be advanced in the not too distant future. Welcome your thoughts on how this situation can be improved upon.

Sunday, January 18, 2009

Time to mark time!

My first exposure to the payments biz was in 1985 when I joined VeriFone. Visa and VeriFone partnered to bring the Zon Jr. (called the Visa Mini Terminal by Visa) to the market to replace the paper warning bulletins. Most people reading this probably do not even know what a warning bulletin was. The mag stripe was pervasive but most transactions were still processed by pressing the embossed numbers onto a sales drafts with a Zip-Zap machine with the merchant either dropping them off at the end of the day down the street at their bank branch or mailing them to some remote sweat shop for processing. It was a REVOLUTION spurred on by Visa's promotion of a low cost terminal and an interchange incentive called TIRF (Terminal Interchange Reimbusement Fee) to get an electronic authorization followed about three years later by yet another REVOLUTION called EDC (Electronic Draft Capture).

Here we are 24 years later and while much has changed, the Mag Stripe (thank you Jerome Svigals) is still the predominent form of payment card, at least here in the good old USA.

I predict that when President-elect Obama is replaced by the next president in 2017 that will still be the case, albeit waning by that time. What do you think? Will it be Chip Cards? Will it be RFID? Will it all be replaced by our mobile phones acting as payment cards or devices?

Wednesday, January 7, 2009

"Pick Up Card"

Since the beginning of CNP (Card Not Present) payments, this response coming back from the Issuer has always provided both confusion and entertainment. For those new to the anomalies of processing a credit card, seeing a message like this can be very frustrating. Once you have been around awhile you realize this is just another little indicator that for the most part the underlying credit card processing systems are all geared toward face-to-face Card Present transactions. While CNP overall which includes MOTO (Mail Order Telephone Order) and eCommerce now represents something like ~15% of total credit card sales, if you recall back at the dawn of ecommerce and listened to the pundits, by now all shopping would be done online. Well, like with most things, it is evolution, not revolution. Ecommerce faired better in 2008 than retail, but was not immune from the crisis and while this channel will continue to take more and more share, for a very long time to come the majority of transactions will continue to be done face-to-face. p.s. Once they figure out how to "transport" your meal through the Internet, I guess the % would rise exponentially since restaurant spending on credit cards is such a significant % of the total!!!