For the first time in history, debit card usage has passed credit card usage. A study by the Federal Reserve, shows that debit card usage is now 27% of non-cash transactions while credit is now 23%. There was no change in credit card usage from 2003 – 2006 while debit card usage went up 70% (from 19% to 27%) over the course of three years. At the same time the use of paper checks went down 72% and ACH bank drafting went up by 69%.

Nothing surprising but paper checks are definitely on their way out and are being replaced by electronic drafting and debit cards. It’s about time!

For more Federal Reserve Reports:
http://www.federalreserve.gov/paymentsystems/paymentsresearch.htm

We recently installed a Verifone pay-at-the-table system in a restaurant here in Austin. Our customer, Ruth’s Chris Steakhouse, is the first restaurant in Texas to use a table payment system, and so far the result is very positive.

Pay at the table is something that has been around in Europe for a long time, but is just now gaining popularity in the US. Table payment offers much better card security (if setup correctly), and is a way to increase the speed of processing customer transactions.

Benefits of pay-at-the-table processing:

• Card skimming potential is eliminated.
• Customer can process their own payment with tip, without ever handing over their card.
• Faster than using a central location for processing.

The biggest benefit from any standpoint, is the increased security that customers have by not ever handing over their credit card. Card skimming is eliminated entirely, which protects business owners and their customers from bad employees. This is one of the few systems that truly benefit both the customer and the business.

Setup a pay-at-the-table system for your business:
The system that we used in the case of Ruth’s Chris Steakhouse is a custom Verifone system called “On The Spot”. This is not the only system available but it is ready virtually out of the box using WiFi Verifone VX 670 terminals, and it provides centralized reporting for any number of terminals being used with the system. VX 670 terminals work with most wireless networks, and if you already have one setup, integrating should be fairly easy.

Other possible methods include standard WiFi or Wireless terminals. These systems would lack the centralized reporting that On The Spot provides, but would be substantially lower priced. WiFi would be preferable to avoid wireless access fees. Wireless terminals are getting to a price that almost makes them affordable for a system like this, and a true wireless terminals would eliminate the need for a WiFi network, and would be much more portable than a WiFi terminal.

Both Verifone and Hypercom appear to be developing WiFi battery operated terminals for this specific purpose, so pay at the table may become mainstream rapidly. Once the prices on these terminals go down, I think that table payments will become common in the US.

If you’re interested in using a pay at the table processing, check out the On the Spot system that we offer.

After December, PCI-PED compliance takes effect for all new terminals, and as a result some of the most popular terminals are going away.

PED is basically a standard set by card issuers that sets technical specifications for PINpads and credit card terminals with internal PINpads. Since there needs to be a lot of security when handling the transmission of PIN numbers, the new PCI-PED is a way to better control how terminals process a transaction, and how they handle PIN security. Most PIN devices were previously using Visa-PED, which is being replaced with a more universal PCI-PED.

The most noteworthy terminals that are going to be discontinued, are the Omni 3750, and the Nurit 8320. The Omni 3750 is being replaced by the VX 570 which is available in Dial and Ethernet versions, and is basically a more advanced Omni 3750. The Nurit 8320 is being replaced by the Nurit 8400 which is identical except the PED compliance. Current 3750’s and 8320’s should still be fine until at least 2010, and if you don’t use the internal pinpad for PIN debit processing, you shouldn’t have anything to worry about.

This is a great time to get a good terminal for cheap, as these terminals most likely will not be available after the new year, and existing terminals are being liquidated.

This theory isn’t yet a fact, but now that banks (Capital One) are offering reward programs for debit cards, we can all assume that more/higher interchange rates are going to result.

Until now there were no rewards card programs for debit cards, which helped to reduce the price for businesses accepting debit cards from their customers. For some businesses, more than 50% of all transactions are from debit cards, which contributes a significant savings over time.

The effect of Capital One making a card like this, will likely result in banks offering similar rewards for their own debit cards. A similar Visa labeled card to compete with the Capital One card is also a likely future development. The combination of this cascade of debit card expenses, will likely drive both MasterCard and Visa to increase debit card interchange, and create additional debit rewards tiers. This could be the beginning of huge growth and change in the debit card market.

The Capital One Card:
This system stands to actually have a major impact on the processing industry, because the new Capital One Debit card is unique compared to any debit card in existence. The new capital one card can be linked to any bank account that offers ACH capabilities. What this essentially means is that a person can sign up for this new debit card, and not switch banks. If you personal bank doesn’t have a reward program for debit purchases, then the Capital One program would be a great card without any drawback for using it.

The catch is that if a person does not have a Capital One credit card, they must get a co-branded debit card, where the rewards can only be redeemed at the place of co-branding (Most likely a large retailer). Even with this inconvenience, it is still a much better program than any other debit card out there.

The uniqueness of this card in conjunction with mega-retailers brute-force marketing, gives this debit card the potential to get very popular, very fast.

The whole problem lies in consumers:
Rising interchange fees are almost always a result of consumer credit card trends, as rewards cards are one of the leading causes of higher interchange rates. Until consumers stop buying into reward cards, interchange can’t go anywhere but up. It’s ironic that the people who spend money at businesses, are also responsible for rising processing costs.

When you integrate a website with a payment gateway, you have to decide what to show your customer when a transaction is declined, or if their card received an AVS or CVV mismatch response. As simple as this may sound, doing it wrong can drastically impact a customer’s desire to change their information and try again.

In the past, I have supported giving a visitor a single response for any decline, AVS mismatch, error or otherwise because it eliminated one of the lesser-known types of online fraud. Card testing is not something that should be overlooked, because it can have severe consequences that many business owners are not aware of.

After some long-term observation, I think that there is a better way to handle card testing while increasing the chances of a prospect becoming a customer. Depending on how your customers react to their transaction not going through as planned, it’s possible to lose a measurable amount of sales by not displaying the correct message.

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Credit card terminals are vital pieces of equipment for millions of businesses in the world. They are also more abused than any other office equipment that I have seen.

While most credit card machines only cost a few hundred dollars, it is a good idea to protect your investment, and get the most life out of your terminal. Terminals can last for ten or more years if they are well maintained, even if they are heavily used.

Common terminal killers:

• Heat
• Liquid
• Extreme cold
• Mechanical agitation
• Power surges

Heat is an enemy of electronic components.
Heat causes the resistance of electronic components to change and also causes silicon chips to change their properties on a molecular level. These changes cause variations in voltages inside the terminal, and can eventually cause something to break. Luckily, credit card terminals are nowhere near as complicated as computers, but in the case of newer terminals, there is a lot of electronics inside a very small space. Try to keep the terminal in a somewhat open area, where there is decent ventilation, not in the exhaust path of a cash register.

More so than heat, liquids will definitely destroy a terminal.
I can’t even count how many times I have heard of someone spilling a coffee or sofa on a credit card terminal, causing it to fail. This is a no-brainer, keep drinks and other liquids away from your credit card terminal. If you do spill something on it, you should unplug it immediately, and try to wipe off as much liquid as possible before it seeps further in. Drink spillage is normally not covered by terminal warranties FYI.

Extreme cold.
A lot of the country has nothing to worry about, but in those areas that it does freeze a lot during the winter, try to keep you terminal somewhere that it will not. If it is going to get very cold where your terminal is, keep it running. The biggest problem comes when a frozen terminal warms back up, and condensation shorts it out. Frozen terminals are also prone to loosing the internal battery (or the main battery for wireless terminal) which depending on the model, can cause the loss of information or may just mess-up the internal clock.

The quickest way to break a terminal is to drop it.
Some of the older terminals can take some major abuse, but the newer ones are not likely to take a large fall well. Even if nothing internally is damaged, it’s pretty easy to crack the screen making it unusable. Attaching it with the wall mounts, or using some non-skid rubber tape can keep your terminal from sliding around if the factory rubber-bumps are worn off.

Power surges break terminals.
Power surges can break the terminal from the electrical plug, and from the modem. It’s a good idea to get a good power strip or UPS (Uninterpretable Power Supply) with phone jack, and Ethernet protection. Power outage tip: If you are using an analog phone line (the lines where your phone still works when the power is out) you can use a UPS power supply to retain your ability to process, even during a complete power outage. A small UPS should cost a little over $100, and since terminals have low power consumption, your terminal could be operating for several hours of power outage. It’s a good idea to have so that you can at least ring-up any customers that are in the store when the power goes out, and you can get your batch out for the day.

Final tip: Keep your terminal on unless you absolutely need to reset it or turn it off. It is very rare for any electronic component to fail while operating at a steady state. Power cycles take their toll on electronics, so the less you can get away with, the better off your terminal will be in the long-run.

Bank of America is going to again issue the BankAmericard.

Along with American express, the BankAmericard was one of the first bank issued credit cards, both originally issued in 1958. BankAmericard was later changed to Visa to differentiate Bank of America from the card.

Here’s a little more credit card history.

Computer world magazine just published an article regarding the move for all businesses that accept credit cards to become PCI compliant.

This article covers the basic fact that retail store owners are required to store receipts with full credit card numbers on them for 18 months (they are in case you didn’t know!).

The problem with the whole system which is clearly outlined in the article, is that if card numbers were never stored, there wouldn’t be any need for PCI compliance. Since they are required to be stored by Visa and MasterCard, the system simply perpetuates itself.

The full article »

Mastercard just released their own payment gateway.

This system appears to be a little different than the traditional (authoize.net / Verisign) payment gateway. It appears to be more like what we would consider a P2P money transfer medium, where buyers can pay businesses directly and businesses can invoice and collect payments from their customers. I guess you would call it a B2B money transfer system. There’s very little information about it currently, but I will be sure to post updates as they release more information about it. The website has some general information for buyers and for sellers.

This is a quick tip for retail and other businesses who batch their terminals out manually, in the morning or late at night. If you make your daily batch in the afternoon rather than at night, you can often get the transactions from that day into your bank account earlier. Obviously you don’t want to completely screw up your books, but if you are looking to get your money a little faster and changing your batch time wont screw everything up this can reduce a day from your deposit time.

This can also work for merchants using payment gateways that allow them to specify their settlement time at the end of the day. If you can, find out what time your processor makes settlements every day, and set your batch to an hour or so before that time.