Steve Case’s Revolution Money company is being purchased by Amex and I find this to be interesting on several levels. The company was founded by Steve Case, who co-founded American Online. The company’s entire core business philosophy has always been about eliminating Interchange and creating a new, lower cost pin-based transaction network. They were successful at it and it does save the merchant a lot of money on expenses since their pin-debit costs is a fraction of Interchange. However, acceptance hasn’t been widespread. You also must remember that Visa & MasterCard have been around for decades and it has taken them years to become the size they are now. I do not believe they are worried or ever were about this company’s product. If it ever became of size, then I think they would take a second look. The ironic thing is that Amex is buying the company. Amex handles the entire process. The are not only the issuer of their cards, but they are the acquirer and merchant account provider. So now, you have a company that has been charging Interchange fees, which has ironically always been higher than V/MC, purchase a company who’s product has been against Interchange and created something at a fraction of the price. Amex is the last company I would ever expect to buy them out.
Many merchants want the government to get involved by forcing Visa/MC to reduce their fees or Interchange cost in other words. However, a government watchdog said this could actually end up hurting consumers in the end. Merchants would save some money on their fees, but it is doubted that any consumers would see any drops in their cost of goods. You would also see banks adjust their programs when issuing cards, such as eliminate or reduce all the rewards programs currently available. The important thing to remember is card issuers use Interchange funds to cover the rewards programs they offer and cover cardholders who default. There has been another country that tried to govern Interchange and it turned out to backfire on them. I believe it was Canada or Australia, but do not recall exactly. I also feel card usage would also decline and because of how consumers live beyond their means, merchants would actually have less sales because consumers would be charging less. If you look at everything else the government has ever tried to intervene with, the consumer never comes out ahead. It would have always been better if they simply stayed out. Politics simply do not mix well.
Falls county has now introduced another form of payment customers can use to pay their taxes and that is with a credit card. This is a new feature and are still working out some of the bugs. They mentioned you can also pay your taxes on the Internet as well. But you will need your office ID to be able to pay online. The vendor charges a convenience fee to cover the fees. Most merchants are not allowed to by Visa/MC rules, but government agencies are one of the few that can. The only thing that bugs me about this is many charge a higher % than what they actually pay. Or they may be with a provider that is charging them a lot but they do not care as they are simply passing the cost onto the customer.
Fall County residents can also now pay their vehicle registration fees online with a credit card as well. Like Fall County, many counties across the country are adding this capability to their service. Even if you pay online, you will still pay the famous mail-processing and service fees of a few bucks.
There is a recent scam going around that business owners should be aware of. The way the scam works is someone calls the business saying they are with merchant services, the merchant’s company and ask the person that answers the phone if they have ran any credit card transactions that day. The employee may answer with two for example. The caller then informs the employee that there has been a problem with one of the transactions and asks to confirm the information about the cards. Such as the 6 digit authorization number, the amount and the name of the card holder. The caller will ask about the last transaction and then inform the employee they already have that one, it is the other transaction. The caller then asks for the customer’s phone number and the employee then became suspicious. After refusing, the caller became frustrated and hung up. The employee called the card holder and told them that someone actually called them saying they were calling from the store asking her the same information. The way the caller found the customer’s information was that they had their phone number listed in the phone book. The customer said when they called them, their caller ID said the name of the business. The caller then asked them for the credit card number, but the customer refused saying they would come to the store. This is simply one way thieves are trying to obtain customer’s credit card data. If anything, consumers shouldn’t be alarmed as they are not responsible for a dime on any fraudulent transactions if they still have the physical card. If they lose the card itself, then they are liable up to $50.
It seems that Wal-Mart wasn’t able to obtain a bank charter and that doesn’t seem to be a problem. Financial services is a small part of their business. Since they have the largest volume than any other company in the US, they tried to form a bank charter. The reason was they could become a sponsoring bank with Visa/MasterCard and save that profit that goes to their current sponsoring bank since all merchants must be sponsored one.
However, it doesn’t seem to have bothered them that much besides the miss opportunity of extra savings. Without one, they have been spending the past few years building a portfolio of financial services and have become a big competitor to traditional institutions, especially ones targeting low-income consumers. One of their major products are the pre-paid cards.
By not having a charter, they have also avoided a lot of attention from Washington on this issue. The issue being the separation of banking and commerce. Wal-Mart originally filed for a charter in Utah back in 2005, but withdrew two years before the Obama admin revealed reform that would eliminate specialty charters. Wal-Mart has also learned that just because you do not have a charter, doesn’t mean you cannot have your share of the financial industry. With over 2 million customers using their pre-paid product, they are on their way to becoming a big leader.
Google has released a new search tool to help shoppers find what they need and merchants to get their products in front of their customers. Google has been releasing a lot of apps over the past few years, but very few are targeted towards ecommerce vendors. This is one of those apps, similar to Google Checkout that handles their needs. The search tool allows consumers to search the web for a product they are interested in buying. Google then goes out and see’s which ecommerce stores are selling these items and returns the results. One great feature Google has been known for is their spell check suggestions, which can be great for people like me that type fast and make too many errors!
It is also noted that Microsoft’s new Bing engine has been making online shopping a focus point. Google’s new search tool is a product to fend off those efforts. Google is going after the retailer while Bing is marketing towards the consumer or shopper.
Badcustomer.com is a great new service that was designed to help merchants fight against consumers and their chargebacks. This is a great tool in the merchant’s arsenal when it comes to . The way the service works, is they keep a list of “bad” customers. Ones that have supposedly wronged a merchant by disputing a charge when they shouldn’t have. It also includes customers that are prone to having a lot o chargebacks, a sign of someone that simply isn’t ever happy. Over 300 merchants contribute to the list and is growing all the time. When a participating merchant uses the service, the customer’s information is matched against their database and the merchant is notified when a match has been made and what to do to rectify the situation as the transaction has been declined.
Consumers may get off the badcustomer.com’s database list, but it will cost them a $99 fee. If the consumer has tried to resolve the dispute with the merchant directly, they are removed from the list at no charge. The service itself is funded mostly by other services the company offers.
Amex may be returning to growth levels as a major company by increasing its issuing as it has reached its highest growth rate this year. Amex mentioned at a conference in NY recently that annual billings grew by 3% in October, the highest so far. This is a lot better than compared to September, which saw a decline of more than 5% and 10% for August. This is great news for ecommerce merchants everywhere. This means they will be processing more orders as consumers are starting spend more, or at least with an Amex. Even though Amex posted a disappointing 21% decline in income this recent 3rd qtr, the next qtr is looking a lot more positive. Hopefully this shopping season will be a much better one for the economy as we really could use it right now.
A recent article raised the question, should transactions be free to process, stating possible ways for this to happen. What Todd failed to understand are some key points in the processing chain. For starters, if they eliminated Interchange, that would highly discourage issuing banks to issue credit cards. Yes, they make a lot of profit off the card holders that carry a balance,but they do incur losses on the consumers that never pay. Interchange helps bring them a very small amount for the customers that never carry a balance. The price for handing the money isn’t a very big price. Banks wouldn’t be offering all these reward programs, which would in turn discourage all the consumers that use their cards solely for the rewards.
The second point he doesn’t understand is the merchant provider that must give that particular merchant an account to accept those credit cards. They assume risk for all transactions that merchant processes. If they go out of business or have too many chargebacks, the merchant provider is liable for all chargebacks and losses. There is a cost associated with this. Just like you can’t expect a bank to take on mortgage debt for free, you can’t expect a merchant provider to do the same.
Taking credit card payments is becoming the norm for almost all businesses. New York cabbies didn’t like the idea, but now it seems that they are praising the extra payment method. By having the ability, they are finding themselves with higher ticket sales as well as bigger tips. They may not have liked it at first, but it seems the yelling turned into praises. Before long, all cities across the country will be embarrassing this new payment method. Not only does it get the customer out of the cab faster, but increases their revenue for the faster they can get to another customer, the more they bring in.
One day in the near future, credit card payments may be the sole payment choice for all consumers. If cabbies do not take them, they may find themselves with a lot less customers or lose them to the cabbies that start taking them. That would in turn create a very competitive market among the transportation industry.