2009, the year of mega data breaches
Posted by: Curtis Stevens on December 1st, 2009

2009 looks like it will be a year with a lot of big mega data breaches, including credit card data.  The government has reported over 400 breaches for 2009.   The big problem is the amount of data that is tied to credit card info, ssn and medical records.  Last year it was around 35 million and 2009 will see over 8 times that much.  Many would consider that an explosion of growth.  The whole credit card industry has had way too many breaches these past few years.  All the data breaches that are related to solten credit cards have played a big role in the formation of PCI compliance among the credit card processing. Because of so many big merchants like TJMax that had their systems compromised, PCI was created to help reduce the problem as it is very expensive for an issuing bank that must reissue all those cards that were stolen. 5 years ago, PCI didn’t exist and all the credit card data breaches during the past 5 years is a major part of why it was created.

The white house crashers
Posted by: Curtis Stevens on December 1st, 2009

I’m sure you have heard it on the news, the couple that were able to slide through security and meet the president himself at the recent state dinner.  How is this related to the credit card processing you may ask? I will explain in a little bit. Apparently the couple recently filed for bankruptcy and it seems that they did this to be able to sell their story or information to help pay their debts. The Salahil’s have a vineyard company that seemed to do great in 2007, but almost nothing in 2008. The story mentions that the business they own, owes money to several different credit card processors. $25K to a merchant provider that offers rewards, $8.7K to EPS for chargebacks, $3K to another processor and $28 to BB&T for a machine. That is the risk merchant providers take that most merchants do not understand. We are liable for every dollar we fund. If chargebacks come in, we must pay them if we are not able to collect from the merchant. It is not a happy day when you take on losses like that and I hope those processors are able to recover some of those funds if any.

Which entity should your business be
Posted by: Curtis Stevens on December 1st, 2009

We receive a lot of applications from merchants for our credit card processing service that have various entity types, such as sole proprietor, corporation, LLC and non-profit. Which one is right for your company? I will explain them all and give my recommendation based on some information from a public accountant. You have three choices, sole, a corporation or an LLC. By default, all businesses are a sole proprietor if they do nothing. Sole proprietor is the easier one to create. All income is transferred to your personal tax return. In short, the IRS do not recognize a distinction between you and the business. There is no personal legal protection if someone were to sue you. If you were to go this route, you simply need to file a DBA with your local courthouse which costs around $10.

A corporation whether it is an S or C, is a separate entity from the owners. If you go with S, the corporation does not pay income taxes. Everything is passed down to the owners. C corp on the other hand does and the owners are treated like employees where income is passed down by salary or pay. The corporation then itself pays income taxes on anything that isn’t paid to the owners or employees. You however have the personal protection if someone were to sue the company, as long as there isn’t any fraud or negligence. There is some cost associated when becoming a corporation. Filing your taxes can be a little ticker. The last entity, LLC is best for most businesses. The cost is very minimum, around $300 for many states. You can also become an LLC in any state no matter where you are located. That way you can benefit from the most favorable state in regards to legal protection. An LLC isn’t a corporation so there is less paperwork, but it is a separate entity so the owners are personally protected. The great news about an LLC is you can file your taxes however you wish. You can file them as a sole, s corporation, etc. When you are an LLC, everything is separate when it comes to filing your taxes. My recommendation is to form an LLC for most businesses. There isn’t much cost to it, fairly easy to do and gives you legal protection. Simply go to the state’s web site that you want to form it at and fill out the paperwork.

Avactis review
Posted by: Curtis Stevens on December 1st, 2009

I am reviewing the Avactis shopping cart today.  The company is based in NY and according to the company, they have over 10,000 users.   It is a php and mysql driven solution.  It has been optimized for performance and flexibility for its ability to easily integrated into existing stores.  They have both license and hosted base versions.  If you want it hosted, then it is $19.95 per month.  If you prefer to buy the license, it is a reasonable one-time fee of $199.  A web developer can receive a free copy and receive a substantial discount on all future copies.  This is great for web designers that want to use this product on their customer’s sites.   They even have a reseller version that can be re-branded.  This runs just under $300.  Another great benefit is they even have a free open source version of the cart!  It does lack some features, but definitely something to look into.

One of their strengths is the merchant can have one admin area for multiple stores, including the free version.  You can also have unlimited products & categories.  It is also compatible with most credit card processing providers. Its biggest drawback is their lack of partners & affiliates.

A POS vendor is being sued
Posted by: Curtis Stevens on December 1st, 2009

Radiant Systems has found themselves in a lawsuit filed by a group of 7 restaurants in the Louisiana area.  Their claim was the POS system they sold was not PCI compliant and therefore was hacked by someone overseas.   The suit states that the POS system stored all the credit card data which is in violation of PCI standards.   The POS system named is called Aloha. Aloha was originally owned by a POS company, but was purchased by Radiant Systems, which also  does credit card processing. Computer World was also mentioned in the suit. They allegedly installed a program that allows their techs to remotely access the systems, but did not secure the program. They used the default ID & password, which created a big vulnerability. The hackers then gained accessed through the software program and installed malware that grabbed the stored credit card data. One of the plaintiffs stated that he was forced to hire a forensic team to investigate the breach, which cost him thousands. He was then fined by Visa & MasterCard for the breach. In total, the breach cost him $50K. I see why they created the lawsuit, as both companies involved should have taken measures to prevent this. Computer World should not have done what they did and Aloha should never store the credit card data. It generally is not a good idea to store that kind of sensitive information.

2009 Cyber Monday – sales are up
Posted by: Curtis Stevens on December 1st, 2009

CNN reports that Cyber Monday sales for 2009 are up 14% compared to last year.  This is great news for the economy and retail industry.  The report mentioned that consumers were more excited about shopping online than compared to retail stores on Friday.  The report also mentioned that the average order was up 30% as well.  This is great momentum for ecommerce businesses.  This will also have a direct impact on credit card processing providers. They will see their merchant’s volume up for November & December, which will mean more revenue for them. We can’t wait to see how it turns out. Electronics seem to be a big seller this year, like the Kindle from Amazon. Amazon mentioned last month was the biggest sales ever for the Kindle in its two year history. Another merchant mentioned selling out of the iPhone fairly quickly. The price was about $40 less than 200. There was also over 4 million shoppers a minute according to the report. It peaked at over 5 million around 8:30 CST. This makes complete sense to me as I noticed the grocery store was abnormally empty. I was wondering where everyone was and had the thought that Cyber Monday was playing a role, but this confirms it. I thought most people shopped during the day at work! :)

Bank of America & others are increasing APRs
Posted by: Curtis Stevens on December 1st, 2009

I saw on the news yesterday a report stating that BOA has sent out a letter to 40 million cardholders telling them their interest rate on their credit card is going up again.  It seems all the big banks are taking advantage of this opportunity before the credit card act that was passed earlier this year goes into affect.  From a business perspective, the credit card processing industry may see some negative results from this. If consumers are paying more on their credit card, they may spend less, which would mean merchants process less credit cards and more cash & checks. If you are a checking processing company, you may see an increase in your usage. From a personal standpoint, I have always believed you should live within your means and have self financial control. There are rare occasions where people have lived as conservatively and responsibly as possible, but something happens to put them in a bind, even though they did everything right. Such as they have an 8 month emergency fund, monthly expenses are quite a bit lower than monthly income, etc. In those cases, I have sympathy for them. It is the people that simply spend money they should not and it is catching up to them now. If they lived a sound financial life, then it wouldn’t matter what the banks did to the interest rate as they do not carry a balance. I strongly believe credit cards should only be a convenience, nothing more. But too many people do not have any self control and must have or do things and then worry when they are in trouble.

Merchant attrition is a big concern for many ISO’s
Posted by: Curtis Stevens on November 30th, 2009

Many ISO’s have had a tough year in 2009.  With shrinking margins and other challenges, many ISO’s are being forced to become creative on how to increase revenue for the new year.  This is all based on a study that was released by Aite.  They surveyed 28 credit card processing companies and 17 banks that acquire merchants. This includes most of the top 100 largest acquirers. When they were asked about their 2010 challenges, many stated customer attrition will be one of them. Then margins and PCI compliance followed. As the economy tighten, many merchants will want to see what kind of savings they can find with all of their vendors and expenses. What are some of things merchants are asking for most? Pricing being the number one, then reputation and better service third. I was surprised by the reputation answer, I figured that wouldn’t be very important, but all the data breaches this year and years past, may play a big role in this.  I also find it interesting that 69% of acquirers said they plan on increasing their sales force, which means more competition for companies like  I personally welcome the challenge as most acquirers do not provide the level of personal service that we do and most of our merchants appreciate the personal touch.

Global payments announced a sell off
Posted by: Curtis Stevens on November 30th, 2009

Global Payments announced last week that it will be selling its money transfer business.  They agreed to sell its DolEx & Europhil branded money transfer business to another entity called Palladium.  Under the agreement, Global will receive around $85 million based on the performance of the business at the time of closing.  The company said this will allow them to put more focus on the merchant acquiring business and reinvest in the sales process of acquiring more merchants. Global is one of the top largest credit card processing platforms and processors in the US. Experts are saying the sell off makes sense as the business had been a drag to margins & growth in past years. Excluding the money portion of the company, Global expects to have revenue of 1.60 billion for 2010.

A new MasterCard authentication method for online sales
Posted by: Curtis Stevens on November 30th, 2009

MasterCard recently announced a new authentication method for online transactions.  Visa / MC have had online authentication programs out for several years now.  Visa’s is called Verified by Visa, MasterCard is called MasterCard SecureCode.  These two programs work great when the two pieces of the puzzle fit together.  One, the cardholder must be using a bank that participates in the program and many do not.  The second piece is the merchant must be using a credit card processing platform and/or shopping cart that is compatible and capable of collecting this information. Many do not as well. The new authentication process is to use cell phones and text messages. When they try to make a purchase online, it will send them a text message to their phone to enter into the computer when prompted for it to verify the transaction. The service is first being offered in Brazil and maybe eventually make its way to the US. I however believe the use will be limited like the current verification programs the two brands already have in place now. I think everyone should use and support them that way cardholders do not have to deal with stolen credit cards as often. It doesn’t cost them anything, but having to deal with a stolen credit card can be a big pain.

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