I will be at the ETA (Electronic Transaction Association) conference through Thursday starting tomorrow. The ETA is the largest payment processing trade association in the world. This year as well as the last five or so are in Las Vegas. Always a good place to have a conference.

Anyway, I may make a post or two on the road. I imagine that I will run into some post worthy information and news this year.

I expect that security topics, contactless payments, and smart card payments will be prominent topics this year, as well as some good debate over free terminal programs and other internally controversial processing topics. I’m hopeful to get some good information while there.

Lastly, if anyone going to Vegas has some extra time, and is looking for a good place to gamble, check out the Casino Royale. It’s probably the last, non-corporate owned casino on the strip. Top-shelf drinks are usually under $5, and the table prices are all reasonable. This may be the only, true to Vegas casino left.

I have been getting a plethora of emails recently from people who’s current processor is insisting that they need to upgrade their credit card terminal. While older Tranz, Zon, Linkpoint, and some older Hypercom T7P terminals are being phased out, the terminals that many of these businesses have are still well supported and very popular.

The Nurit 2085 seems to be number one of terminals that processors are trying to get their customers to upgrade from. In most cases much more expensive terminals were being suggested to replace the Nurit 2085.

Businesses shouldn’t need a new terminal:
The Nurit 2085 uses an operating system called NOS (Nurit Operating System). Right now there are two NOS versions commonly being used. NOS 6 and NOS 7. Terminals that are currently being manufactured are all NOS 7 as far as I know, while existing stock and older terminals will most likely still have NOS 6 on them. Both NOS 6 and NOS 7 are still functional, but some business types and applications will need a specific NOS version to operate correctly. With that being said, it is also possible to change the NOS version on a Nurit terminal. This is a fairly simple download that allows the operating system to be changed.

So, there is really no reason that you should have to upgrade your terminal, unless you need to use a feature that is not available with a Nurit 2085. Examples of these would be Ethernet, WiFi, high memory applications, unsupported 3rd party apps, or features and programs not compatible with your terminal.

The two exceptions:
There is one version of the Nurit 2085 that is not upgradeable. I’m not even sure on the exact model number, because we have only seen one of them is the last five years, but that one model cannot be upgraded to the recent NOS 6 or NOS 7 operating systems. If you are unlucky enough to have one of those terminals, then you may be in a position where you have to upgrade. But, the un-upgradeable model is extremely rare. By my guess these consist of less than .01% of Nurit 2085s in circulation. Secondly, your processor may be phasing out Nurit 2085 terminals. There isn’t any good explanation that I can come up with as to why to do this, but from the sheer number of questions about this I am getting, it looks like it may be happening with a few processors.

Personal Outtake:
So far I haven’t seen any solid info that any processors are phasing out Nurit 2085’s. Unless I missed some gigantic press release, I have no reason to think that this terminal wont work for years to come. I do know for a fact that 2085’s are still supported with most processors, and they are still the terminal that I recommend for entry-level needs. If you are confronted with this situation, I strongly suggest that you get an actual reason why you need to upgrade. You shouldn’t have to spend extra money replacing something that works perfectly fine.

Dmoz is something that webmasters either hate, love, or just don’t care about. There has always been a lot of speculation about Dmoz editors abusing their privileges and only adding sites that they have interest in. Another major problem with Dmoz is that many categories are edited by business owners, who are somewhat less than likely to list their competitors in their category.

I was looking at the dmoz merchant services category this morning, and I have to say that it needs a lot of work. I have personally attempted to become an editor for the category on several occasions, but have so far been unsuccessful. While I can accept that some meta-editor at dmoz may not think that I am worthy to be an editor for dmoz, what is upsetting is that the editors for the category are absolutely worthless. I have emailed the editors of almost every category on multiple occasions pointing out sites that no longer exist, hijacked and redirected websites, sites in the blatantly wrong category, sites that haven’t been updated in ten years, and a multitude of other problems. Some of the problems have been corrected, but many are still blatantly there.

So if any dmoz editor that has any control over the merchant services category happens to see this post, here’s the major problems in the main and the card processing categories, (for anyone else if you don’t care about or know what dmoz is, you probably want to stop reading here).

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When you sign up for a merchant account, you specify an expected average transaction size and an estimated monthly volume. These numbers work as a reference for your actual processing. Rarely will these soft limits cause a problem for your business unless you go and exceed them by what your processor would consider a lot. The two ways to exceed these limits are to either run a single, very large, transaction, or to run enough transactions that your monthly volume greatly exceeds the limit.

Now the title of this post ‘Don’t run that $50,000 transaction’ is for those businesses that specified a lower amount and all of a sudden they have the need to process a very large transaction, or the just exceeded their estimated monthly volume and it is the second day of the month. Sometimes it happens only because the business is having a really good month.

This is something that happens all too often. A new or even an existing business will get a new merchant account, and looking at past history, or a well founded guess, will specify an amount that they think their average ticket and monthly volume will be. Then they go and greatly exceed on of the limits that they specified on their application.

Estimate a higher monthly volume and ticket size from the start:
A good processor will instruct a business owner to make a good guess on what they expect their volume and ticket size to be and to raise it, sometimes a lot. Depending on the type of business and how low the monthly volume was estimated, I have recommended people to raise their estimated volume more than ten times what their original was, in a few situations. For most businesses, doubling the initial guess is usually about right, unless a very large volume was initially assumed. Whatever the business may be, you should always specify a number much higher than what you actually think you will do to allow for growth. If you think you will do $5,000 per month, I would put down no less than $10,000. Think about where you want your business to be in two years and write down that number. The point here is to try and prevent ever reaching one of the amounts that you specify.

What happens when you need to make a $50,000 charge?
Situations like these must always be looked at on a case by case basis. If your normal transaction size is $48,000, then a $50,000 ticket shouldn’t be any problem. If your ticket size averages to be $55, then running a $50,000 transaction is a very bad idea. Looking at it from a risk standpoint (Which is what your processor will do), a $50,000 is enormous risk for a business averaging $55 per transaction, both for the business itself and the processor.

How Risk Works:
Risk is the likeliness of fraud and chargebacks on transactions that a business processes. Processors care about this because if you commit fraud through your merchant account or get a lot of chargebacks and cant pay the bill, the processor gets stuck with it. Risk is handled differently with each processor. Some have computer systems that flag batches for a later manual review, and some are completely reviewed by humans. Some allow businesses to exceed their limits, and some will temporarily or perminantly shut down the business’s merchant account once limits are exceeded. Whatever processor you are with, when you run large transactions or you exceed your monthly limit, a big red flag goes up. In fact, if any single day’s batch is higher than a specified amount, you can be 99% sure that it will be manually looked at by a human before the money is ever cleared to your bank account.

Having worked with more than nine processors and ISOs that handle risk, I can tell you that not all risk departments are created equal. Some will shut your merchant account down completely if you process 10% more than your estimated monthly volume. Some will automatically hold any transaction larger than your specified max ticket for several months. Some risk departments wont even tell you that your account is in risk, instead they wait for you to notice that your money is missing and call in. Once your money or account goes to the risk department, it can get really tricky to get it back in a timely manner. Remember when you were a kid, and your parents told you that you weren’t going to get something if you asked again. Well, risk works the same way when they are holding money. The more you ask about it, the more angry you are that they are holding it, and the more you need it, the less likely they are to give it up.

What to do when you need to run that transaction:
I highly recommend not running a large transaction in haste. If at all possible, call your processor and ask them if you can run the transaction. They may say it’s fine, they may want you to fax over a copy of the signed receipt or an invoice, they may just flat tell you not to run it. Whatever the case, calling your processor first is likely to prevent some major headaches.

If you decide to run it anyway:
Be prepared at the very least to not get your money on time. The first thing that will happen, is that the entire day’s batch will be held and manually reviewed. In the best case, they will release your money, after review, and may not even contact you. In the wost case, they will hold your batch and future batches until they resolve the situation with you. They can automatically refund the transaction to the customer, and ask you to collect payment via another method. They can hold the money from that batch for six months. They can shut down your merchant account completely, and hold your funds for six months. The point is, that if your processor sees too much risk in that transaction, the result is going to be much worse than if you would have called them before you made it, especially if they told you to not run it.

In conclusion:
Try to setup your account with the highest monthly volume and ticket size possible, and if you do need to run that huge transaction, or you start approaching the monthly volume that you specified, call you processor and see if you can work something out.

A year ago this month, Verifone made a move to acquire the processing equipment manufacturer Lipman Electronic Engineering. This acquisition effectively combined the number one and number two processing equipment manufacturers into a single company. Since then, Verifone has slowly started to assimilate the Lipman brand into it’s own Verifone name.

While this move showed little significance on the front of traditional land-line processing equipment, Lipman owned about 90% of the wireless processing market. With Verifone’s already huge grip on the land-line equipment market, and the now complete domination on the wireless market, Verifone is now in a superior position for all types of processing equipment in the world.

So where’s wireless going?

Currently, wireless processing is shifting away from the Mobitex and Motient networks that most popular terminals operate on. The newer networks, the GPRS (TDMA) and the CDMA wireless networks are beginning to see wireless terminals process on them. Lipman has all but cut manufacturing for anything but the Nurit 8000 GPRS terminal. The Nurit 8000 GPRS is a very good terminal, with much improvement in reliability over the standard Nurit 8000. However, it doesn’t look like Verifone plans to keep the Lipman brand going for a long time.

Verifone has it’s own wireless terminal (VX 610). The VX 610 is apparently compatible on the GPRS, CDMA, and WiFi, but it is not being well supported by most processors. It costs about the same as the Nurit 8000 GPRS, but the complete lack of compatibility keeps it from getting off the ground.

Meanwhile, companies like Way Systems, Comstar, and eProcessing Network are quickly growing in the wireless processing community. All of these companies make portable wireless terminals, that are becoming very popular, especially with businesses selling at trade-shows and businesses that need very portable terminals. Many of these terminals have better connectivity than the Nurit 8000 GPRS which processes on Cingular’s GPRS Edge network.

The only setback for these companies that I currently see, is that their price is not low enough under the Lipman or Verifone wireless terminals, to make purchasing them worth it. Right now they all cost just a little less than the Verifone and Lipman wireless terminals. Once these companies figure out how to decrease the price by about half, I can see a major shift in wireless processing scene. The low price in conjunction with Verifone moving to their own wireless terminal, and Lipman terminals becoming unavailable, will give the smaller wireless terminal manufacturers the chance to make major ground on the wireless equipment market.

My prediction:
If Verifone decides to get rid of the Lipman wireless terminals, and they don’t make some major initiative to get processors to support and promote their terminal, an industry-wide shift is almost inevitable. Conversely, if Verifone decides to keep the Lipman brand of wireless terminals going, I think that the smaller wireless manufacturers will reach a wall in growth, unless they can price their terminals substantially lower than what they currently are.

If Verifone looses it’s position on the wireless terminal market, it will effectively negate the billions of dollars that they spent to acquire Lipman because the wireless market is what was gained when they got Lipman.

If you are starting a business or you follow the trends of the processing industry, you would know about the free terminal programs that are being offered by many merchant account providers. If you have been watching a little closer, you would also see a division in merchant providers. Some think the free terminal programs are a great idea, and some think that they are not. I personally fall on the “free terminals are a bad idea” side, but even so, free terminals programs are very popular and continue to be a strong marketing tool for many providers in the industry.

This brings me to the question, is it better to get a free terminal, or purchase one outright?

First off, free terminal programs are not ownership programs. I cant speak for the specifics of every program out there, but generally they are a free rental of processing equipment. If the business closes their merchant account, switches companies, or needs to upgrade they must give the terminal back or pay for it.

Free terminal programs can be great for new businesses that don’t want to spend a lot to accept credit cards. These programs offer them a way to start accepting cards with a terminal, sometimes a wireless terminal, without any upfront cost.

On the other hand, purchasing a terminal is for an outright ownership of the terminal. You can choose what processor you do business with, and you don’t have to give your terminal back if you do decide to switch. You do have an upfront cost, but many terminals are reasonably priced and there can be less strings attached in your contract.

Neither of these are a best solution for every business. Different businesses have different needs, and the business should choose what is best for their business.

Why I don’t like free terminal programs:
The reason that I don’t like free terminal programs, is that they force processors to add extra fees in other places. Since processors normally compete with each other on price (Another truly terrible practice) they have to at the least make their cost appear to be comparable. But, they are taking a several hundred dollar gamble on the business processing with them. Multiply this several hundred dollars per business across hundreds or thousands of businesses, and the cost to the processor can be well into the millions. Since it may take several years for the processor to make up this money from a single business’s free terminal, they try and make some of it more quickly. This is done with higher monthly and statement fees, sometimes yearly fees, higher processing rates, and other fees. What makes the matter worse is that since the processor wants to look competitive they very often get ‘creative’ with their application. They obscure fees and change the normal structure of the fees so that the extra cost is easily overlooked. They will almost always raise their termination fee, so that if the business leaves them before the contract is up (normally 2 – 3 years) they will get the cost of that terminal back immediately.

I am quickly seeing myself head towards a previous post which I don’t want to do, but the point is, that the processor will make up that money somewhere else. As a business owner, I would much rather know what all of the fees I will pay are, than have my bill be much higher than I originally planned because of factors I never accounted for. I hate surprises in situations like this.

On the other side of the fence, purchasing a terminal is not always the best idea. There are proprietary terminals that keep merchants with certain processors (Linkpoint, FD100, Eclipse). Terminals can break, and even if the terminal is under warranty it is still a major inconvenience to get it replaced. Hopefully you have some sort of overnight replacement program with your processor, and if not, how do you accept cards without your terminal. If the terminal becomes outdated, you need to get a new one. This is happening more often since some platforms are disqualifying older terminals with lower memory due to security concerns(Older T7P’s, Tranz 330’s, ZON’s, Some Linkpoints). Credit card terminals are normally inexpensive to maintain, and are very reliable, but the cost of high end terminals can be substantial. Since most free terminal programs have overnight replacement warranties, it is another reason for businesses to like them, especially if higher-end terminals are offered.

Whatever you decide to do, make sure that you weigh your options knowing exactly what you are getting into.

I have been doing some research lately on some upcoming posts here on the blog, and more and more I am coming across companies marketing with extremely low processing rates. Yesterday I was emailed a website by a colleague that was advertising 1.11% and only $.11 per transaction.

Now, credit card interchange is about 1.7% when both Visa and MasterCard are taken into account. When businesses offer 1.39% or generally anything lower than about 1.7%, they are advertising a signature debit rate. While this rate is probably valid for debit transactions, it is not valid for credit transactions.

After looking into the businesses advertising with these rates, I found retail rates for credit cards above 2%, transaction fees above $.30, monthly fees above $20 in addition to $25 and higher monthly minimums, and $10+ statement fees.

My conclusion with businesses that advertise like this, is that if they are this deceptive up front, they are even more deceptive when you look at the fine print. This may not be the case every time, but honestly, if a company blatantly, deceptively, advertises a cost, and what you actually pay is 30% more, they are not someone good to do business with.

My advice for new business owners, or persons looking for a new merchant account. Find a company that is at the very least up-front with you about their rates. If they are advertising well below interchange, they are going to make up the money somewhere else. It is far better to pay the same amount, and know what the money is actually going towards, than not knowing what the extra cost is from.

Related Posts:

MisShaping the merchant account industry

First Data released this morning that they are to be acquired by the Company: Kohlberg Kravis Roberts & Co. (KKR) for about $29 billion.

This acquisition could in some way affect just about every business that accepts credit cards in the world. First Data is the largest payment processor in the world, and somewhere aroung 60% of all credit transactions are processed through or in some way going through a First Data owned resource.

Link to First Data Press Release »

Store and forward is an application that some credit card terminals can run, that allows transactions to be taken without the terminal being connected to a phone line. The transactions are later processed when a connection is available.

Most wireless terminals have the ability to do store and forward, when there is no cellular coverage. But, there are also some land-line terminals that support store and forward. These terminals are a lot cheaper than wireless terminals, some having battery packs, making them moderately portable.

Store and forward on a land-line terminal can be a good solution for low volume mobile businesses, and can make a great backup for a wireless terminal. If you use a manual imprinter for your transactions, a store and forward battery operated terminal can be a good low cost step, without going to a wireless terminal.

What terminals work:
It’s not quite as simple as which terminals can support store and forward, because the correct terminal also has to be with the correct processing bank in order for the store and forward to be programmed correctly. Overall Lipman ‘Nurit’ terminals are the only ones that support store and forward. The wireless terminals (Nurit 3010, Nurit 8000) can be programmed with store and forward through at least Nova and FDMS, and the land-line terminals can potentially support store and forward at FDMS only.

As far as battery powered terminals go, there is the Nurit 2085U, the Nurit 3020U, and the Nurit 8320U, that have battery packs. These terminals are more difficult to obtain than the standard models, and will probably have to be special ordered, but are still much cheaper than wireless terminal.

Also, in the case of these terminals, you processor may charge extra to program these terminals with store and forward because the programming is almost always outsourced to the processing bank, who charges for it. Even if this normally wouldn’t be an issue, it is something to be aware of.

Store and forward isn’t perfect:
Store and forward creates an illusion that you are processing your customer’s cards just like normal, but this isn’t the case. No actual authorization is being made when using store and forward, so there is a chance that the card will decline when you finally go to run it. The second drawback is that if you don’t process the stored transactions quickly enough, they can all downgrade.

So, if you have an abnormally large transaction, or you have a bad feeling that the card may be no good, I recommend making a voice authorization before accepting the card. Businesses that get a lot of declined cards probably want to stay away from store and forward because all those declines will hurt your business and your time. Also, make sure to batch all of the transactions out of the terminal every day that you process to prevent downgrading.

Providing good customer support is absolutely key to running a successful online business. It is also one of the most time consuming aspects of running an ecommerce website. And, it is one of the most overlooked aspects of online businesses. Taking a step away from the traditional brick and mortar business, business owners often get the idea that support is not an issue in ecommerce.

Unfortunately, no matter how well you run your business, you will eventually end up with some dissatisfied customers. Shipments get lost, things get back-ordered, people simply make mistakes, and some customers will not be happy no matter what level of service you give them. What is important is that you adequately correct situations where customers are upset, and that you attempt to prevent area of poor service before they become a problem for your customers.

These are five simple rules of customer service that I think are essential to providing good support for online businesses.

#1 – Maintain contact
This is the most important and often most ignored idea behind customer service. If you receive an email from your customer stating that they are upset with something, or something went wrong with their order, acknowledge them immediately. Nothing is worse than being ignored by a business that you purchased something from. By immediately, I mean immediately. One or two hours tops. Not two or three days, or never. Even if you don’t have a good answer for them, let them know that you got their message and that you will get back to them in a reasonable amount of time. If you don’t acknowledge them fast enough, you can expect a phone call within a few hours. Ignoring problems will never make them go away…

#2 – Learn how to apologize
Something that is almost as bad as getting no response is getting something that tries to place the blame of the situation on the customer. This is a sure-fire way to lose you customer forever, and you can be sure that they will tell their story to others. Seth Godin wrote a great article about how to apologize. The old saying ‘the customer is always right’ still applies to online business. If your business is any way was responsible for the error, apologize.

#3 – Respond quickly
This doesn’t have to be strictly related to complaints or problems. If a customer fills out a contact form, get back to them within the hour. If they email you, get back within an hour. Unless you have so many requests that you cannot possibly respond quickly, or it is the middle of the night and your business is closed, there is no reason it should take any longer. The internet is all about convenience, speed and efficiency. Don’t let the only area requiring human interaction ruin your customer’s experience.

#4 – Let visitors actually contact you
So I ordered that part for overnight delivery and you sent the wrong one, I need the correct one now! It gets really frustrating not being able to get a person on the phone, when something is really urgent. If I email you, it will probably be a day before you get back to me, and that’s simply unacceptable, so i need to get you on the phone. Just because your business is online, doesn’t mean that you shouldn’t answer the phone. If nobody is really available and I leave a message, refer to #1 and #3. Also, make sure that you have a customer support number (preferably toll free) and that it is plastered all over your website.

#5 – Prevent bad experiences
This one seems obvious, but I can’t count how many times I have ordered something to later find it was back-ordered. If you don’t have something in-stock, don’t list it as available. If something is discontinued, make a recommendation for a similar item. Most importantly, don’t ever make promises that you cannot deliver on. This is one of the quickest ways to sour your customer’s opinions of your business. Try to over-deliver on everything no matter how insignificant it seems. If you tell your customers that a shipment should take six days, try to get it to them in four. Every time you impress your customer by exceeding their expectations, you increase the chance that they will do business with you again, or that they will refer their friend to you.