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Impact of Data Breach for Target

An estimated 1.1M customers have had their personal and financial information compromised, thanks to the security breach via the malware now known as BlackPOS at Target, Neiman Marcus, Michael’s, and potentially other retailers.  That number could climb as additional retailers come forward.

The impact could be long-reaching for consumers, merchants, and financial institutions.  Target may be on the hook for fines anywhere from $400M-1B, not to mention potential lost revenue as consumer confidence wanes and usage of the Target labeled cards decreases.  The consumer confidence issue is something that could impact other retailers, too.  As fears of privacy mount, consumers are less likely to make purchases in stores, online, and via mobile devices.  Financial institutions are already bearing a brunt of the cost as they are reissuing cards, to the tune of $10 per card reissued.  So far, about 15.1M cards have been reissued for a cost of $150M.  They also stand to lose some revenue as consumers revert to cash for more purchases and save their credit cards for higher ticket items only.

Every player has skin in the game here, but one solution that is being touted by the card associations as providing much more security for brick and mortar stores could actually open up online and CNP merchants to additional fraud.  EMV (Europay,MasterCard, and Visa) chip technology (also called chip and PIN) has been in use in Europe and other industrialized nations for more than 20 years.  While it has proven effective at reducing fraud at the point of sale, CNP fraud has increased with the adoption of EMV.  Fraudsters are more able to get fraudulent transactions through in a card not present space with chip cards than they are in person, thereby driving […]

By | 2014-02-03T18:44:59+00:00 February 3rd, 2014|Categories: Blog Post|Tags: , , , |0 Comments

More Fallout from the Target and Neiman Marcus Data Breaches

As the numbers of people and retailers hit by the data breach at Target, Neiman Marcus, and likely other retailers who have not yet come forward are increasing, credit card issuers are tightening the reins to help mitigate the risk of fraud.  JP Morgan Chase recently issued a statement to their customers informing them of lower daily limits for charges on certain cards.  If a card reaches the daily limit, the decline code will come back as a  Do Not Honor decline code.  Recycling strategies for these codes during this time could change.  Since the limit will reset the next day, that account will likely be approved the following morning.

Tracking decline recycling and recovery success is going to be increasingly important in coming months.  Flexibility to change the rules will also be key for recurring billing CNP merchants.  As the investigation into the Target data breach continues, and the affected population increases, it is very likely other banks will also implement temporary credit limits or other fraud filters that could impact your recurring business.

Stay tuned for updates on best practices as the landscape shifts.

 

By | 2014-01-20T20:44:13+00:00 January 20th, 2014|Categories: Blog Post|Tags: , , |0 Comments

Visa MasterCard Interchange Fee Settlement

 

If you are a merchant who has accepted Visa or MasterCard at any time between January 1, 2004 and November 28, 2012, you are eligible to receive an interchange fee settlement from the $6B class action lawsuit filed against the card associations.  There is an additional $1.2B interchange fund allocated for merchants accepting Visa and MasterCard from July 29, 2013 through the subsequent eight months. The amount to be distributed to merchants from the interchange fund is 1/10th of 1% of total Visa and MasterCard transaction volume for the eight month period beginning July 29th, 2013. The suit was filed in the state of New York with the claim that Visa and MasterCard conspired to charge excessive fees to merchants accepting their cards.

 

The settlement was recently finalized, and all merchants fitting into the above classification are now eligible to get their payout.  However, not everyone considers this a win for merchants.  To find out why, we can look to the “big guys” who have rejected the settlement (the deadline to do so has passed).  19 of the largest retailers in the U.S. have opted out of the antitrust lawsuit in order to retain their right to bring another suit against Visa and MasterCard at some point in the future, and to prevent the release of future liability of anticompetitive actions on the part of the credit card associations.  The retailers include Walmart, Lowe’s, Costco, Starbucks, Gap Inc., J. Crew, 7-Eleven (Alon), and others.

 

Not only are they opting out because of the future release of liability, but also because they don’t believe the settlement does enough for merchants of any size to help reduce costs of credit card processing, and therefore to help reduce prices for […]

By | 2013-12-23T19:57:21+00:00 December 23rd, 2013|Categories: Blog Post, Uncategorized|Tags: , , , |0 Comments

Is Visa Charging Me For Lack of Integrity?

Is Visa Charging Me For Lack of Integrity?           

Honor, truth, veracity – integrity embodies all of these, but now Integrity also means an extra $0.10 for Visa transactions on debit or prepaid cards that don’t meet certain Custom Payment Service (CPS) qualification criteria.

 

How to Avoid the Fee

There are a few ways to avoid the fee.  For CNP merchants, avoiding them could be a bit trickier than for POS merchants, but here are the basic guidelines:

  • Always authorize and settle for the same amount
  • Always obtain an exact AVS match – in some cases, requiring an exact match can erode overall conversion and lifetime value to the point that it’s not worth saving the $0.10 fee, so this would need to be evaluated on a merchant by merchant basis, or perhaps by affiliate or other marketing channel
  • Ensure your processor is submitting the correct indicators and MCC with your transactions

 

Again, it’s important to remember that this fee only applies to debit or prepaid cards, regulated or non-regulated.  Each merchant’s file will be different and best practices may need to be tweaked by merchant, transactional division, source of orders, product line, BIN, or more.  For questions on how to best implement this for your specific business, contact us.

By | 2013-11-26T15:21:21+00:00 November 26th, 2013|Categories: Blog Post|Tags: , , , |0 Comments

Increases to Visa and MasterCard Processing Fees Beginning October 2013

Visa and MasterCard have just announced additional processing fees that will impact all merchants beginning with transactions processed as of October 1, 2013.  The fees will add $0.0025 for each settled transaction for both Visa and MasterCard.  For Visa, this is known as the Base II Fee and MasterCard refers to it as the Settlement Fee.  In addition to these settlement fees, Visa will be tacking on $1.00 image document fee, assessed when disputing a chargeback, while MasterCard is adding $0.45 per chargeback support document.

The impact of the settlement fees will essentially be to add $2.50 per 1,000 transactions settled.  The additional chargeback fees will impact the representment process, but will not have any impact on chargebacks that are not being represented.  Depending on price point and success rates, it could make representing chargebacks less lucrative for some merchants.  Those with high price points and good success in disputing chargebacks will likely still want to continue.

If you have any questions about how this will impact your specific business, please reach out to your main contact at PLC, or contact us at info@paullarsenconsulting.com.

Braintree Acquired by eBay to Expand PayPal’s Mobile Marketshare

In a move to expand PayPal’s mobile payments position in the marketplace, PayPal owner eBay has acquired payments gateway Braintree for $800M, announced today.  In addition to being a payments gateway, Braintree also owns mobile payments solution Venmo, which it acquired last year.  Venmo allows users to pay each other via text messaging, among other things.  As an increasing number of consumers are transacting on mobile devices and with merchants looking to capitalize in omnichannel marketing, this is a very interesting acquisition to watch.  eBay expects the deal to close in the fourth quarter of this year.

 

 

By | 2013-09-27T16:19:08+00:00 September 27th, 2013|Categories: Blog Post|Tags: , , |0 Comments

E-Commerce Merchants Selling in Brazil, Listen Up

The Association of Brazilian Credit Cards and Services Companies (Abecs) recommended that issuers no longer accept transactions using Dynamic Currency Conversion (DCC).  As a result of this recommendation, two major issuers in Brazil, Itau and Bradesco, have stopped allowing purchases using DCC on credit cards they issue effective as of September 13th.  With DCC, merchants control when they hit the consumers’ cards with the foreign exchange rate.  For these two major issuers who will no longer accept DCC transactions, they are regaining control over charging their cardholders the FX rate.

 

DCC is useful for merchants who sell cross-border because it enables them to present an offer in the shopping cart in the purchaser’s local currency.  According to Abecs’ Executive Director, Ricardo Viera, his agency was fielding complaints from consumers who had purchased in Brazilian reals but were seeing transactions on their credit card statements in U.S. dollars.  By disallowing DCC, merchants could face two headaches – increased shopping cart abandon rates and different processing for customers in Brazil.

 

Merchants who are selling into Brazil will need to monitor whether this impacts their sales and processing costs enough to warrant alternative options, such as setting up domicility in Brazil in order to present and settle transactions in Brazilian reals.

For more information on the switch, visit our friends at CardNotPresent.com.

By | 2013-09-16T20:50:59+00:00 September 16th, 2013|Categories: Blog Post|0 Comments

Mobile is the buzzword, but what does it mean?

The answer for most card not present subscription merchants is an overwhelming “not much”. While mobile payments remain a hot topic and are the focus of much media attention, there isn’t necessarily a consensus on what mobile actually means. For some merchants, it refers to payments using near field communications (NFC) while for others it means simply using a mobile device, such as an iPad, to shop online.

The payments revolution is much more meaningful to point of sale retailers. Enabling small businesses to grow by accepting payments through a mobile device via a tool like Square or speeding up transactions in London’s tube by offering NFC payments are shaping up to have a real impact on how merchants conduct business – in the physical world.

In the virtual world of card not present transactions, the impact of the mobile revolution is still unclear. For recurring billing merchants, it’s possibly even murkier. New currencies like BitCoin and other payment methods could have a greater impact on CNP merchants in the near-term. The focus for CNP merchants should remain on decline prevention and recovery strategies, fraud prevention, and improving processes while keeping an eye open on the future while the brick and mortar world helps mobile payments platforms work out their kinks.

By | 2013-05-16T21:02:13+00:00 May 16th, 2013|Categories: Blog Post|0 Comments