Starting early in 2019, many businesses in the US will lose the ability to force transactions. A forced sales happens when a merchant uses an existing authorization number to push a transaction into the settlement system. While many businesses will never have to do this, it is very common for others. Legitimate reasons for forcing transactions include when sales are processed offline such as a mobile terminal without access to a cellular network, or merchants who still manually imprint cards.

The problem with forcing transactions, is that there is no ability to verify the authorization number before processing the sale. So this is an extremely common method that criminals use to defraud cardholders and processors. They just enter a card number and some random digits for an authorization number and process the card. This has a variety of consequences, but generally ends in the card holder or card issuer requesting a chargeback.

About a year ago, card associations decided they were fed up with the amount of fraud being committed using forced sales so they passed a new regulation requiring processors to disable the ability to force sales for all businesses and only allow it on a case by case basis. This regulation goes into effect in January and will remove the ability to force transactions for most merchants. Some processors are taking it a step further and making it very difficult to force sales even for businesses who have a legitimate need to do so.

So, if you are a business who routinely or occasionally needs to force transactions, be aware that this function is likely to disappear from your terminal, POS system, or payment gateway in January. If you have a legitimate need for it, you will likely be granted access to the function, but it may be literally on a case by case basis.

Colorado’s Online Sales Tax Mess Disaster

While collecting sales tax is a complicated process for ecommerce businesses, Colorado just made it a million times worse by requiring online retailers, both instate and out of state, to collect and remit taxes for sales made in the state of Colorado. Unlike most states who have attempted to make collecting and remitting sales tax easier, Colorado has an extremely complex sales taxation mechanism with dozens of taxation districts and even within these districts the total taxes can be different because Colorado collects taxes based on numerous factors. And to make it even worse, Colorado has a home rule law, where different cities are allowed to control the collection process entirely.

Effective Dec. 1, 2018, the Colorado Department of Revenue will adopt new sales tax rules. The new rules state that sales tax must be collected and remitted based on the jurisdiction’s tax rate at the point of delivery for the taxable good when taxable goods are delivered to a Colorado address outside the retailer’s jurisdiction.  This includes any applicable state-administered local and special district taxes. For example, if a retailer delivers taxable goods to a customer’s address, sales tax must now be collected at the rate effective for the customer’s address, not the taxes that are in common between the customer’s address and the seller’s location. For a complete list of location/jurisdiction codes for sales tax filing go here. 

So, an out of state online retailer will have to figure out the specific taxation rate depending on the shipping address of the customer at the time of checkout. And, then will have to figure out how to remit those taxes to the state and/or city themself. In other states with consolidated sales tax rates, this isn’t such a problem, but in states like Colorado with complex sales taxation, it is a nightmare for businesses trying to comply with the state’s policies. This is a clear example of putting the cart before the horse and is going to cause serious problems for the few small remaining online retailers who have so far managed to not get put out of business by Amazon.

In our last article we covered how to get your effective rate to better understand what your credit card processing costs vs your processing volume.

Here we are going to take a look at some adjustments that can be made to help lower your effective cost just by making some changes to your operating procedures.  With some operational changes you can make an immediate impact on your processing fees.  While most business are not going to be able to use all of these methods, even implementing one of the following can do a lot to bring down your effective processing costs.

Increasing Ticket Size

One place to start would be looking at your average ticket size and seeing if increasing it will have a significant effect on your processing statement.  The lower your average ticket, the more effect increasing it will have.  To understand how this works we should take a look at your processing fees which may be made up of a flat per transaction cost and/or a percentage rate.  On lower ticket amounts the transaction fees accounts for a higher percentage of your sale amount than the processing rate.

Here is a quick example of the effect of increasing your ticket size has on your effective rate.

Here are a few ways to increase average ticket size.

We are going to list a few of the common ways to increase your average ticket, but don’t be afraid to step outside the box. We have seen many businesses roll out some unique strategies that have done wonders for increasing ticket size.

Bundle Items:

Bundling items will help increase overall sales when done correctly and for our purposes here, bundling will also help push up your average ticket. Quick services restaurants have used combos for years to help increase the amount of food and drinks server.  That said it doesn’t just apply to quick service, you can do the same sort of bundling in retail.

While with most retail ticket sizes will be higher you can bundle smaller items to help increase your overall average ticket size.

Add Impulse Items at checkout:

The impulse purchase can be a powerful tool. Adding low cost items at the point of sale can help drive higher tickets. You see this everywhere from the convenience stores and grocery stores to clothing stores and mechanics. Take some time to consider what items would appeal to your specific customers. 

Offer Discounts on multiple items:

If you can sell one thing, maybe you can sell two.  There is a local automotive repair place in town that offers discounted oil changes if you purchase two or more at a time. In their case, it’s much more about building return customers, but you can do the same while helping to increase ticket sizes.

There is also a favorite donut shop in town that heavily advertises discount for ordering multiple of the same item, allowing them to more efficiently move products and improve their processing costs.

Up Sales and Add-ons

This staple of the fast food industry shouldn’t be overlooked by other business types. Train your staff to know what products or services go together, and to watch for what products are typically purchased together.

Being able to suggest something a customer might be missing from their purchase is just good customer service. Better yet it increases your ticket size.

Gift cards are a great up sale, and way to increase ticket size. They also in-affect accomplish most of the points above in one transaction.  They help to build customer loyalty, increase transaction size, increase total customer spend, and generally you are charged a lower flat fee per transaction when compared to standard credit card fees.

Tips can effect your processing rate

All kinds of businesses accept tips, but many don’t realize that it can affect the processing rate charged on a transaction. In the processing industry, only a few business types are routinely acknowledged to accept tips, and even then there are limits. Basically if you’re a restaurant, bar, or saloon, tipped transactions generally won’t increase your discount rate as long as its under 20% of the original sale amount.  If your are any other business type tips are essentially not supposed to happen.

And, sometimes tips organically exceed 20% of the original sale amount, and some business allow their employees to receive tips on credit cards.  In those instances your processing fees may increase.  There are a few things you can do help keep these costs down.

Counter Tip

Counter Tip is a popular alternative to the restaurant normal tip-line on the receipt. With Counter Tip you present a receipt with a tip line before processing the card payment.  The card holder can then fill out the tip amount and total and return the receipt with their payment card. When running the transaction you would enter the total payment amount, including the tip, that way the sale is processed with the original authorized amount including the tip.  This avoids the transaction costing more due to the tip amount.

Many credit card terminals support this feature out of the box, however some will need to have a configuration update to enable it.

Ask for a tip before finishing the transaction

Similar to counter tip, just asking before processing the sale allows you to enter the total amount entirely avoiding a tip adjustment which can increase your costs.

Cash Tips

Make it known that cash tips are appreciated. The more you move tips to cash, the better.  Even when you are getting the best possible rates, you are still paying processing fees to accept a tip. If you are passing those tips directly to your employees then the business is paying fees on money it did not collect.

Proper use of your point of sale

The way you process and handle sales can cause your transaction cost to increase. While this is not an exhaustive list these are the most common things business do that increase their per transaction expenses.

Settling properly

When you run a transaction on your terminal and you receive an approval, no money has moved. Basically at this point the issuer has just reserved those funds for your business. The authorization is only good for a limited period of time and needs to be settled in order for your business to collect those funds.

There are two important time-frames for authorizations.  The first is 24 hours from initial authorization.  If a transaction is older than 24 hours when it is settled, it can cause the cost to increase. The second time-frame is the expiration of the authorization which depends on the several factors, but general rule of thumb is 7 days. Once an authorization has aged beyond 7 days, not only will the costs increase, but you will also have a higher risk of a dispute by the card holder or the issuer.

Ignoring prompts

When you run a transaction and your terminal prompts for an address or zip code or tax amount, do you ever just leave those blank?  If so, it is  almost definitely costing additional money.

Conversely, you should take note if your terminal is not prompting for an address or zip code when keying in a transaction. It should be prompting every time you key a sale.

Not all prompts affect the rate charged by issuers and processors however, some do, and it’s important to enter that information not only to keep your rates down, but also to help verify the card holder is who they say they are.

Just a quick heads up, with the address prompt, you only need to enter the numerical portion of the address, not the entire street name, suite, apartment, unit, etc..

Swipe / Chip read everything

You want to be accepting using the chip on every possible card. While not all businesses are going to have physical access to the card but if you can process using the chip, do it, and if you can process by swiping, do it.  Not only does this help keep your processing costs down, it is also much more secure. If you accept a stolen card and it was processed using the chip then the card issuer is much more likely to be responsible for liability in case that card is stolen.  If you don’t use the chip, then your business is almost always responsible.

Pin Debit?

This is  a touchy subject and depends on your average ticket, rates, networks, and location. More and more, debit networks are increasing their pricing and are closing in on or exceeding credit and debit card costs.  Also, PIN-Debit may have a higher transactions fees, and now monthly fees, which can end up costing more. Some networks will charge $5 or more dollars per month even if you only accept a single PIN transaction. Further more some PIN-Debit networks will also charge an annual fee if you have accepted one of their card types.

Since the interchange rate on large bank debit cards has cap at $0.05% and $0.22 per transaction it may not bring any savings at all, or it may be more expensive for many merchants.

That said it’s still possible that PIN-debit can save money but it’s very specific to the business and the type and number of PIN transactions they are accepting.

Additional thoughts on lower expenses

For many merchants, more savings can be had by making changes to how they accept card payments, than specifically by lowering rates. It’s important to work with a team that is serious about helping you lower your costs. You should be able to contact your processor and ask them what things you can do to help lower your own costs. If they can’t suggest any improvements for your business and they can’t tell you why then it’s probably time to start seeking a new provider. Your business may be doing everything as efficiently as possible, but they should be able to point this out and explain how what you are doing is the best possible practice for your particular business.

November 4th is right around the corner, don’t forget to update your terminal’s time.

Updating the date and time in the Verifone VX520 terminal can be done quickly using the instructions below.  There is also a video below that you can follow along with.

Start on your main sales screen.

Press Enter

Select F2 for Setup

The terminal will prompt for a password.  The default password for this device is z66831.  This can be entered by pressing 1 followed by the alpha key two times, then entering the remaining digits 66831.

Once on the Setup screen, press the far left purple button to page down until you see Date/Time.

Press the “F” key that corresponds to Date/Time.

The terminal will then prompt for the date.  This terminal requires a 4 digit year, so for example Oct 29 2018 would be entered as 10292018.

Press Enter to save and move to the time prompt.

Use 24 hour time to key in your local time.  You must enter the seconds, which you usually just set to “00”.

Once the time is entered the terminal will jump back to the setup screen.  From there you can press the red “x” key two times to take you back to your main screen.

Here is a video we made if you would like to follow along.

We know how excited you are to receive your credit card processing statement each month. You just can’t wait to open it, stare at it blankly, and finally resign yourself to the comforting feeling of confusion.

Payment processing statements, even simple ones, can seem like hieroglyphics to many, which basically makes them worthless.  Even if you understand your processing statement, with all the different fees and details, can you really tell if your getting a deal your happy with?

Let’s cut through all nickels and dimes and get to the heart of what matters, overall cost.

Effective Rate Review:

You don’t need to spend much time at all on any statement to get a feel for what your merchant account costs you.  Once you have a basic idea of your payment costs you can go a little deeper, but to start let’s look at getting a baseline.  Grab your processing statement, and look for two bits of information.

1.  Your processing volume – To start total up all of the processing volume that your processor deposits into your account.  For example if you are funded and billed directly by American Express for your Amex sales, you would not want to include that volume as it doesn’t really apply to the fees.
2. Your Total fees for the month – Sometimes you will need to add the charges from each section of your processing statement, but most will have the grand total listed. One thing to keep an eye out for is daily discounting. If your processor is debiting your processing fees with each batch you will want to confirm that your statement total includes that amount in its totals. If it does not, you will want to add those daily fees on to your fee total. If you have questions about doing this, just give us a call and we would be happy to lend you a hand.

Now it’s time for some basic math. Your going to divide for total fees by your total volume.

Example

Let’s say you processed $20,000 in volume for the month, and your fees were $589.12.

589.12 / 20,000.00 = 0.029456.

Or as a percentage, 2.95%

So now you have come up with your effective cost, and we can start playing with numbers to see what affects your rate the most.

Fixed Monthly / Annual Fees:

Let’s start with fixed monthly fees. Look at your statement and pick out items that you believe to be fixed monthly and annual fees.

Here are a few examples: Statement / Service Fees, PCI Non Compliance, PCI Annual Fees, Equipment Rentals, etc.

Now subtract those fees from you total processing cost and divide the difference by the total volume.  This will give you an effective rate based much more closely to just your processing fees.

Let’s look at a couple examples.

Example 1 (Continuing with the example above): Volume: $20,000 Fee:s $589.12 Monthly Fees: $30.00 Original Effective Rate: 2.95% Lets remove those monthly fees: $589.12 – $30 = $559.12 Here we will use the remaining fees to calculate the effective rate again. $559.12/$20,000 = 0.027956 OR 2.80%

Example 2 (Lower Volume, same monthly fees): Volume: $5,000 Fee:s $169.78 Monthly Fees: $30.00 Original Effective Rate: 3.40% Lets remove those monthly fees: $169.78 – $30 = $139.78 Here we will use the remaining fees to calculate the effective rate again. $139.78/$5,000 = 0.2796 OR 2.80%

As you can see both of these accounts come up with the same effective rate based on just the processing fees, however their original effective rate that was based on overall cost was quite a bit different. This illustrates how fixed monthly fees skew your effective processing costs on lower volumes.

With these two effective rates, you can see what your entire account is costing you as a percentage of volume, as well as how much of that is just from processing fees.

On the lower volume account it would clearly be more effective to look at lowering your fixed monthly costs. Whereas with the higher volume, it starts to make more sense to focus on processing fee improvements.

Keep in mind that a lot of times processing companies and sales agents will use a general pricing method to simplify the initial understanding. That leaves room for some businesses to receive an effectively better cost than another. You can use this information to help negotiate for pricing that is more effective for your particular business. That said sometimes you can make changes to your business to help improve your effective rate in a much more profound way than just getting your processing costs lowered.

In our next article we are going to look at some ways to lower your effective rate without having to shop around. You may be surprised how much you can effect your processing costs without even calling your processor.

If you missed the previous two parts of Confessions of A Risk Analyst check out part one and part two.

What to do if your funds are on hold?

If you are put on hold, the processor may or may not contact you about it.  It generally depends on why you have been put on hold.  Most commonly it will be to verify a transaction or batch, in which case it’s customary for the processor to reach out immediately and request invoices, card holder information, and other relevant financial information.  It is in your best interest to be courteous and promptly send over what has been asked for. If you cannot provide everything they have asked for just explain what you are able to send and what you can’t send and the reason why. Generally, processors request more than they need to lessen the likelihood they will have to come back and make a second request, so its likely not a problem if you can’t send them everything they ask for right away.

It’s important to be courteous and prompt, and not saying you need to become friends with the risk department, but whether the person you speaking to makes the decisions or is just a liaison for the risk department, these people are part of the process of getting your funds released. Insulting them and telling them your going to cancel will not influence their decision and can often delay any action.  Most processors try to handle batch related risk holds the same day in attempt to avoid delay your deposit, so it is in your best interest to respond as quickly as possible.  If after you have received your funds you still feel like you don’t like how it was handled, then it would be best to reach out to the processor’s customer support and make a complaint there.

If you notice you are suddenly not receiving batches and the processor has not reached out to you, contact their customer service immediately. Do not mention anything about potentially being on hold, as this just raises suspicions. Most merchants don’t know holds even exist and if you start asking if you’re on hold, it might be assumed that you were doing something you knew could get your funds held. If customer service does find that you are on hold, they will directly you to the proper people to speak with, sometimes it’s just a glitch in the fund transfer system or a minor technical issue. Remember the customer service employees generally don’t have access to detailed information concerning holds and risk related information, so most answers about why, are going to be speculative at best.

Again, once you reach the risk department, go ahead a provide them with whatever they ask for.  Risk groups are generally going to ask for invoices, financials, and possibly even tax returns in rare situations. If you feel they are requesting something unreasonable, just talk to them about it.  Again, many times they are trying to request more than they need so they don’t have to keep reaching back out to you, if a risk assessor is not satisfied with the initial documentation.  If they are looking at your account due to chargeback related issues then the process is definitely going to take longer than a day. In rare and complicated cases, these issues can go on for weeks or month, and the details on those are vary on a case by case basis. This is outside of their control, the issuer controls the chargeback process, the processor is just an advocate for the merchant.

The key takeaway here is that it’s in the processors and the business’s best interest to get risk related issues resolved as quickly as possible. While most risk related issues can be handled within a day, others take more time and energy by both the processor and the business. Remaining professional helps the process move along at its fastest pace. You can always put in a complaint about the process once your funds have been released or if the process has started taking longer than expected.

This will never happen to my business!

You may feel like your business isn’t the type to be victim to fraudulent transactions, customer disputes, or wild changes in transactions or batches and that none of this applies to you.

We’ve worked on dozens of these issues where a business thought it couldn’t happen to them and was crushed by any of the previous mentioned issues. Some of those business knew they were doing something that could get them in trouble, but most were just normal businesses doing what they do and become victims of fraud or a distributor that quit supporting or shipping the products they sold. We’ve had numerous contractors and suppliers who processed very large transactions only to find out later that the transactions were fraudulent. Remember just because you receive an approval authorization, that doesn’t mean the transaction is legitimate indefinitely.  A chargeback can be issued in some cases up to 18 months after a transaction was processed and by that time the money has already been spent by the business.

Take time to look at your business and plan for potential risk related issues. Give yourself a sort of pressure test to see where your business is weak and look to avoid deal in those areas or strengthen those areas.  Also do research on avoiding card holder fraud. Small changes to your business can a big deterrent for criminals as they tend to only go after easy targets. If you do find yourself in some risk related issues, remain calm and work with the processor to get through it as quickly as possible.

How Processors Assess Risk

Continuing from part 1.

A processor takes a silent backseat to assessing potential risk based on what they know about the business, its owner, and the transaction information. They do this while reserving the right to request additional detailed information about a transaction, the business, the owners, and the company itself. A processor reserves the right to hold funds if they feel the potential risks warrants it. Holding back funds gives them some level of protection against loss but protects the business by not allowing those funds to get spent. If a business obtains those funds and spends them in operating the business, then they could become in debited to the processor who will then end up having to hold back funds to get repaid.

Example:
A business was selling custom hot tubs and was successful for the better part of 10 years. The manufacturer they were using changed some of their processes which created a quality issue and caused almost all the products they were selling to stop working shortly after delivery. While the agreement with the manufacturer included a money back guarantee, the process to refund the business was very slow. In the meantime the business was struggling to put a new manufacturer in place to build replacement units not to mention the new orders they had coming in. They were trying to replace and refund every customer. However, with the manufacturing issues, it was taking months to get replacement sent out or refunds processed. These refunds started to turn into chargebacks which immediately began draining the cash reserve the business had on their own. In the meantime, they began accepting new orders and using those funds to refund previous customers, while waiting for their reimbursements and their new products to arrive. After months of struggling to fix their customers issues, everything started to fall apart, they couldn’t float orders anymore, or pay their employees, or deliver whatever products they did end up acquiring.

In the end, the business collapsed leaving the business owner with more than $1.5 million owed back to card holders. The processor ended up covering all of it, and is still in the process of trying to collect from the business owner. Basically because of a change at a supply chain company entirely outside of the oversight of the processor, a thriving business imploded leaving the owner, and subsequently the processor, with millions in debt.

It’s important to have your employees trained to look out for fraud which we cover in a previous articles (link1, link2). Small changes to your business can stop would-be criminals from taking advantage of your business. It’s also important to have backup plans in place to allow your business more flexibility in times of stress. Sometimes just having a line of credit you can draw on to help in a crisis can save a business if used properly. In our next article or two we will cover why processors don’t want to hold funds and what to do if you find yourself with a risk reserve.

Processors don’t want to hold funds!

Truth is, processors don’t want to hold funds. To dispel a common myth, held funds cannot gain interest, so there is no incentive on that part for a processor to place a hold. It is very disruptive to the business, the relationship between the processor and their merchant, and requires a substantial amount of administrative work for everyone. However, holding funds is better than allowing a business to over extend itself and collapse in the worst case scenarios. Most businesses and business owners are not expert risk assessors. They don’t see all the potential pitfalls, and are understandably biased about their invulnerability. A business owner doesn’t understand sometimes that a chargeback can happen at any time and that “big sale” is actually just a chargeback waiting to happen. From time to time this entrepreneurial spirit gets businesses in over their heads and sometimes it’s what causes a business to fail, which is also bad for the processor. Another reason the processor doesn’t want to hold funds is they will have to spend time, money, and resources to internally research and handle these issues. They would rather focus on addressing serious threats and their routine operations. The faster they can get the issue cleared up and funds released, the happier their customers are, and the quicker they can move on to normal operations.

Risk reserves are one of those things in the processing world that go unknown for most businesses. For many businesses the first time they find out about risk reserves is when their funds get held. It can be a scary and confusing thing. One day you are receiving deposits, and the next nothing. It can happen without warning – leaving business owners scrambling to find out what has happened. Over the next two or three articles we are going to go over the primary ways you could find yourself with your funds held and how best to resolve the issue. We are also going to include real world examples that we have seen first hand with our own customers or that we know about from others in the industry. We hope this information and these stories will help you build a stronger business by preparing you for future unknowns.

What is a Risk Reserve?

A risk reserve or held funds usually starts with a rapid change in the business. Maybe it’s an abnormally large batch on an account or sudden activity on an account that hasn’t processed for some time or a large transaction that is far outside the norm for the merchant. More concerning it can be caused by a sudden increase in card holder disputes (chargebacks), or legal action against the business. Whatever the reason the first thing to understand is it is not a punishment sent down by the processor. While it may feel like a punishment, its really designed to protect the business, the card holders, and the processor from loss.
What losses or risk could there be?

For businesses the primary risk will come from disputes like chargebacks. These can originate from many different types of fraud on the part of the card holder (i.e. friendly fraud or stolen credit cards). Many times, a chargeback is not from a cardholder fraud. A chargeback may originate as legitimate claim against a business such as not processing a refund, selling faulty products, or not completing the anticipated services. The higher the dispute amount, the higher the potential for the business to be financially overwhelmed which could effectively destroy a business’s cash reserves, leaving the business owner with a large debt owed to card holders. And if the business cannot cover the refunds back to their customers, the processor is left to pick up the bill.

Real Life Example
A jewelry store owner several years ago was the victim of friendly fraud. In short, a man walked into her store in a small beach town and asked to see some diamond necklaces. While displaying her work to the man he calmly explained he was on vacation with his wife for the first time since they had been married years ago. He told her about the business he started and how his wife stood by him during the darkest days, but now it had grown, and they were doing well. He wanted to find something he could give his wife as a small token of his gratitude for putting up with all the hard years.

He finally settled on a $10k necklace and during the checkout process his credit card declined. He seemed quite a bit embarrassed about it, but they both figured it was due to the amount and the fact that he was out of town. He stepped aside to call his card issuer, and several minutes later returned saying they had fixed the issue. He also explained that his card issuer had given him an approval code along with instruction on how to properly run the sale, so the terminal would prompt for the approve code he had obtained. Now the merchant was a taken a bit off guard by this and the man told the her that his issuer wouldn’t be able to identify the transaction unless they used the code she provided.

The merchant knew that she needed to swipe the sale in order to be protected from stolen cards. So when they were processing the sale she made sure that the card was swiped. Her terminal then spit out her normal receipts, which the man signed for and everyone parted ways happy.

Happy, until the merchant received the chargeback notice a few days later. Not just any chargeback, but one specifically for accepting a stolen card and using a fake approval code on a closed account. It turned out that the card the man used had been closed after it was stolen, which is why the card was declining in the first place. The man never called his credit card company, he had just faked a phone call, and then told the store owner how to process the card in such a way so the terminal wouldn’t contact the issuer for approval.

In the end she lost the chargeback, the money, and the necklace. We assisted her and the local police to get a criminal report made. Surprisingly the man was later caught in a different state and arrested. He had been using his real name and bragging on social media about how we went on vacation and basically stole from a bunch of businesses using the same tactic. Unfortunately, they never found the necklace.

For the card holder, the risks are smaller and generally more related to time and inconvenience. When you are the card holder, the industry rules are heavily weighted in your favor, but they still have their limits. There is a relatively small amount of true business to consumer fraud out there, however the main source of risk is stolen card information. While the card holder can dispute transaction, they have to notice them and dispute it within the time-frame of their card agreement. Generally, they get paid back, but it takes some amount of time and frustration on their part. If they don’t check their statements with any frequency, they can miss the window to dispute a transaction.

For the processor, its much the same as the business, just amplified. The processor is the second in line for liability. If a business cannot cover their chargebacks, it will fall on the processor, who will then place a negative balance against the merchant’s revenue. Meaning they will have try to collect from the merchant, either through holding their batches until they are paid back, or some type of legal action. Since the processor is exposed to thousands upon thousands daily, they must watch and verify that their portfolio of merchants isn’t taking on too much risk. This creates a problem however since it is impossible to take a detailed look at every transaction or batch nor do their customers want the processor investigating every little thing they do.

Stay tuned for part 2 of our Confessions of a Risk Analysis series.

Payment processing is a complicated industry and if you’re starting an eCommerce business, you shouldn’t expect to have a thorough understanding out of the gate. That said, there are a couple of secrets to the process that would be useful to know before you agree to a commitment that doesn’t meet all your needs.

Payment gateways the bridge between your merchant account and your customers. They allow a merchant to manually or electronically process sales from their customers, they can add payment processing capabilities to a website, and they offer a variety of functionality to help run an eCommerce and more recently a retail business.

Payment gateway features vary depending on the gateway, and often the cost varies depending on the gateway.

Standard Features

• Virtual Terminal for Manually Entering Transactions
• Transaction Reporting
• User Management
• API for Website Integrations

Optional Features

• Email Invoicing
• Quickbooks or Accounting Integration
• Recurring Billing
• Secure Card Storage Vault
• Fraud Screening
• Retail or Smart-phone Integration
• Multi-MID support

Besides obvious features like reporting on the transactions that have been run, basic features typically include a virtual terminal to manually enter transactions and an API interface that allows integration with a website. Some gateways charge for additional services such as recurring billing or fraud screening, and some include it in their base service package. It is important to understand the potential additional costs if these additional features are required as these can increase the overall cost by a sizable amount, depending on the gateway.

Some of the more advanced gateways also support retail payment methods such as PC and native Smartphone apps. These can be useful for certain types of businesses as well as backup methods in case a terminal or POS system is down.

Integration
An integration is essentially adding a payment gateway to a website. There are varying degrees of technicality when considering an integration. Some gateways do offer copy and paste HTML that can be used to allow their customer to make purchases and return to their website once payment is complete, but merchant’s will usually want to use an API integration which makes the checkout process seamless as their customer never leaves their website. Due to concerns over security, most website owners will want a well qualified programmer to integrate their website with their payment gateway regardless of which method they use. Popular gateways often already have pre-built integrations with popular shopping carts. Otherwise, integrating with a payment gateway is a fairly standard programming procedure that competent programmers shouldn’t have much problem with.

Costs
Gateway costs typically exist outside of the fees associated with a merchant account. Normally a gateway charges a flat rate per month and an additional fee per transaction. The overall cost of a payment gateway can greatly vary between companies and the cost for additional services can vary between companies. Typical, a merchant can expect to pay $20 – $30 per month for the ability to use a payment gateway and an additional $.05 – $.10 per transaction processed through the gateway, although some gateways do charge substantially higher in both the monthly and per transaction fee. Some gateways have much higher fees for additional services, so if things like recurring billing, card storage, invoicing, of fraud screening are added, the cost can increase considerably.
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Support
Nobody needs great support, until they need it. Can you call someone when your customer’s cards are declining? Often overlooked, but gateways without sufficient support can seriously hurt a merchant’s revenue when they do go down or there are technical issues such as problems with a gateway’s API. Nobody wants email only support when their ability to conduct business is on the line.

New for this year is the Clover Station 2018. It is a redesigned version of the previous Clover station with many added benefits. Clover went back to the drawing board on the 2018 Station and improved just about every part of the system. Below we will dive into some details about the new Clover Station.

Completely New Hardware:

While the overall function of the device remains largely intact, it has gone through a major overhaul. The Station 2018 now houses a larger 14” screen with built-in finger print reader versus the former 11.6” screen while retaining its proprietary Clover swivel stand in a one-piece design.

Clover has also removed the brains of the device from the printer, which allows for other printer options. In the previous generation it was the printer that contained the heart of what a clover device is and if you had to replace a printer, you were essentially replacing the entire system. You are now able to get a Clover Station 2018 with a standard thermal printer, or with a similar printer with built-in customer facing screen. It also comes with an NFC for Apple Pay and Android Pay.
Since the Printer is no longer the central hub of the device, Clover opted to include a separate port hub to minimize the number of cables that you have to run from the screen stand itself. With this new device one cable runs from the hub to the Station’s screen, and one cord from the stations screen to the printer, see the image below. From there any cash drawers, Ethernet cables, or USB connection are connected to the hub. This allows you to stash away the hub and limit the wires that are exposed on the counter top.

You still get plenty of connection options on the 2018 including Ethernet and Wi-Fi for network connectivity. It also includes Bluetooth, 4 USB ports, and now 2 cash drawer ports. This is very similar to the previous generation; however, all have been moved to a hub that is easier to stash away and keep out of view.

The processing capabilities have been bumped for the new Station, the processor is twice as fast as the previous station and has plenty of RAM for a device of this kind. Speed was never an issue on the previous model but these enhancements all add up to a faster system that will continue to operate smoothly as time goes by.

Payment Acceptance:

The Clover Station 2018 has really improved on its predecessor by having not just a Magstripe reader but also including EMV (Chip Cards), and NFC (Apple Pay/Android Pay) built into its screen. Unfortunately, PIN Debit was not included as part of its built-in capabilities, but there are options. You can connect a FD40 or Clover Mini to act as customer facing payment devices and accept PIN Debit as well.

There are some things you should be aware of when looking to add a customer facing device to the 2018 Station especially if you accept EBT. First – EBT cannot be processed using the FD40, so if that’s a payment type you accept, you will have to use the Clover Mini as your customer facing device. Secondly, and probably less importantly, once you connect a customer facing the device, the Station 2018 will no longer accept payment inputs from its built-in payment readers. It will force all electronically read payments to originate from the FD40 or Clover Mini. If you do happen to try to dip a chip card on the station, it will remind you to use the customer facing device to complete the transaction.

While the PIN Debit structure isn’t ideal, it makes sense from a card holder stand point and is still a huge step up from the previous model. The older Clover Stations required a customer facing device to accept anything beyond magnetic card reads.

Backward Compatibility? Kind of…

The key to remember here is this is all new hardware and the ultimate brains of the device, at least from a deployment point of view has changed. Where the printer was the hub for the entire system the new Station has completely separated the printer from the connectivity hub.

What that means, is you can’t connect an old Station Screen or Printer to the a 2018. There just isn’t a way to do that since the original Station was setup to be paired. Having said that, the Station 2018 does work with most if not all the same peripherals. So, if you have an existing cash drawer, bar code scanner, USB label printer, etc., those should all work just fine.

Software:

The station 2018 now has access to Clovers Lite Register pricing tier that starts at $9.00 per month and the full Register tier at $39.00 per month. The Lite plan is a great starting point for most businesses and allows access to most of the basic features you would normally use. If you need more functionality, the Register Plan opens Clover devices up to their full potential, greatly expanding what you can do. See the breakdown here that shows what the different plans offer.

If there isn’t a feature that is already built into the system, the Clover Marketplace is stronger than ever offering more first and third-party apps than any other POS provider. Most of these apps are free or include free trails. For the apps that don’t offer such things, they are generally quite affordable and can be shut-off without a penalty at any time. The App Marketplace allows you to find the apps that best fit your business needs without having to pay for software that your business never uses.

How does Clover Station stack up?

The new station is quite an upgrade over its predecessor and definitely worth every penny. The price point has basically remained the same as the original Station, but has also fixed some small annoyances with the previous generation and really improved on what Clover has already been getting right.

Check out our past comparison of Clover and Square Register.

For many businesses the Clover Station 2018 is a good fit. The Clover Mini and Clover Mobile devices also remain well equipped which offer all if not more of the same benefits but with a smaller footprint and lower cost. For many businesses, they will enjoy the larger screen of the Clover Station.

This is a follow up to our past article The Future: Signature Less Payments.

Towards the end of 2017, beginning of 2018, the major card brands stated that they would drop most if not all of their signature requirements starting in April 2018. I don’t know about you, but the signature on the back of my card, if there is one, looks nothing like my signature on those small receipts. Even if it does, nobody checks the signature and very rarely even verify the name on the card matches the card holders ID. I wouldn’t say they were ever really securing anything. There was an article written years ago that perfectly outlined how woefully inadequate signatures are. If you have a few minutes check out that article, it worth taking a look at. In short, the card holder just started off trying to make his signature as different as it could be, by the end is signing his receipts are signed “I Stole This Card” and no one ever took notice.

Technology is definitely paving the way for a signature-less future. Bringing chip transactions to the US is a lot of it, but companies like Apple and Google have shown the industry other ways to secure their sales with cost effective technology. For example, MasterCard is doing a trial release on a new card with a built in finger print reader, that works with the existing EMV standards. That card is planned to have a full roll out later this year. In the next few years I expect we will see a move to bio-metric confirmation potentially even with online transactions, which would be a huge win for online retailers.

It’s nice to see the card brand making changes that will help businesses and consumers alike. These kinds of changes will increase transaction speed and ease by removing the slowest part of the transaction. It will also cut down on the amount of time and money business spending keeping up with transactions and fighting disputes. Over the next several months expect more and more retailers to skip requesting a signature, and just move forward to saying “Have a nice day!”