On Payment Processing
they finally here to stay?
years, the US payment industry has tried to facilitate national acceptance
of smart cards. The latest push by Visa and MasterCard may have done
the trick. In the fall of 2000, a couple of large card issuers began
issuing smart versions of their credit cards.
months later, there is still very little that a smart card holder can
do with their smart chip. It is, however, gaining momentum. More and
more companies are announcing future initiatives or offering exclusive
coupons to smart card holders.
appears as if the card companies and issuers may actually be approaching
critical mass. Target is the first heavy weight to launch a smart card
program. Their smart chip will be on their private labeled Target credit
card. It is just a matter of time before some of the other huge retailers
jump on the band wagon.
you aren't familiar with smart cards, they are credit cards that are
embedded with a small electronic chip. This chip is electrified and
accessed by using a smart card reader. This smart chip has the ability
to hold a wide variety of information including passwords, coupons,
loyalty programs, and actual cash value. Increased security is one of
the primary benefits of smart cards. The cards are very difficult to
duplicate and can only be accessed through a smart card reader and a
PIN number. Smart card benefits will initially be felt by internet merchants
who will lower their risk dramatically by accepting smart cards. Consumers
wanting to pay on the internet must have a smart card reader on their
computer (most issuers are providing readers at no charge right now).
sound pretty cool! What's the hold up?
key to smart card success in the United States is simple functionality
for the consumer. The payment industry is searching for what they call
the "killer app". The "killer app", in this case,
is a program that will operate on a smart chip that will provide widespread
benefits to an enormous user group. That means lots of people must easily
see and be able to utilize the benefits of the chip.
Another hold up at this point is the cost of conversion to chip technology.
According to industry experts, this cost will run from $7 to $10 billion.
That's not chump change for something that, at this time, offers nothing
of value to cardholders other than a cool card!
you need to worry about them?
not at this time. As they grow in popularity, merchants will start to
see more and more of them. Smart card readers are becoming available,
but most merchants won't really need them for at least a couple of years.
Smart cards should be a consideration when upgrading equipment, but
the lack of a smart card reader shouldn't be a reason for the upgrade.
Effective July 1, 2003, Visa and Master are requiring all new programming
in point of sale terminals and software to truncate the credit card
numbers. This move was apparently made to expedite this security procedure,
since it is taking too long for states to enact their own regulations.
Most processors are being proactive as well and implementing the new
truncation requirements ahead of the July 1, 2003 deadline.
states are now banning the printing of full credit card numbers on printed
receipts. This is another effort to reduce credit card fraud.
limiting the printed credit card number to the last 4 digits, your discarded
credit card receipts can't be used to make fraudulent purchases.
this time, truncation has been moving from state to state. It probably
won't be long before there is a federal mandate requiring truncation
need to worry, you don't need to run right out and upgrade your terminal
and printer. Over time, all terminals, printers, and software will only
print the last four digits. Your equipment should be grandfathered (until
2006) as long as you don't have to replace any of it and don't require
a new download for your terminal.
for it, coming to a state very near you!
and MasterCard Loyalties
(just a reminder to merchants everywhere)
merchants question why Visa or MasterCard tend to always err on the
side of consumers. They answer is easy, Visa and MasterCard are 100%
consumer driven organizations. Without the faith of consumers, Visa
and MasterCard would history.
merchants feel as if they are the key to the merchant services equation.
The merchant definately plays an important part, but the cardholder
is king. The best example of these relationships is seen in chargeback
procedures. It can take very little effort for a cardholder to protest
a sale. On the merchant's side, if you can't provide your processor
with a card imprint (electronic or manual), an authorization, and a
signature, you can forget about keeping your money for that sale. Those
three things are the holy grail when it comes to defending chargebacks.
doesn't take a rocket scientist to know that Visa and MasterCard are
accepted almost everywhere. Merchants almost have to accept both cards
just to compete with each other. The amount of money charged on Visas
and MasterCards is so staggering that even very large merchants can't
afford not to take them. Sam's Wholesale Club is probably the largest
merchant in the United States that doesn't accept either Visa or MasterCard.
simple facts give merchants very little leverage when it comes to dealing
with Visa and MasterCard. This lack of leverage ultimately means the
cardholder is and will remain king.
you have questions regarding the merchant services industry, please don't
hesitate to CONTACT US! We
will help in whatever way we can!