Risky Business, Part 1: Chip and Pin Transactions vs. Swiping a Credit Card

I've wanted to do a series of posts for a while now on the risks that businesses expose themselves to when accepting credit cards from customers.  So what better time to launch this than the beginning of a new year.

Generally speaking, these vulnerabilities aren't taught to business owners or managers. And if you read my post regarding commission-only reps (vs. residualized advisors), I seriously doubt these folks are bothering to spend the time and effort to educate their clients.  On that note, let's do this!

In Canada, we have adopted the chip and pin method of validating credit card transactions when using standard counter top or wireless terminals.  As you know, your customer inserts the chip bearing card into the terminal or pin pad and proceeds with the transaction.  What you may be unaware of is the level of security this affords the business compared to using the magnetic stripe swipe option.

The chip and pin method requires the customer to enter in a secret pin, while the magnetic stripe option requires a signature.  And therein lies the vulnerability.  And it is dead simple; with the chip and pin option, Visa and Mastercard will protect the business owner from a chargeback if the transaction is challenged...regardless of the reason.  

With the magnetic stripe/signature only method, no protection is afforded from possible chargebacks.  In Canada, when a signature-only transaction is challenged, the business owner loses the proceeds from that transaction.

Consider this example; this isn't the only scenario that can occur but it serves to drive this point home.  A customer claims to have forgotten their secret pin, and you accommodate them by swiping the magnetic stripe and obtaining her signature.  Seems harmless enough, especially since you even checked to see that the signature matched the one on the card.  The sale amount is of no consequence, but let's just say it was  $1,000.  Two days later that card is reported stolen and Visa kicks into gear and starts examining recent transactions.  When they get to your $1,000 sale and discover it was a magnetic stripe transaction, this is where it gets U-G-L-Y.

Without any notice, Visa will clawback the $1,000 from your bank account.  OUCH.  Thats right.

Had it been a chip and pin transaction, even if somehow the card thief had obtained the secret pin, your bank account is safe from that clawback of $1,000.

In closing, my best advice is this; unless you personally know said customer, I advise against using a magnetic stripe swipe/signature to validate a credit card sale.

Unfortunately foreign cards, say from the United States, do not have chips in them.  And yes, the risk still applies. It can be mitigated somewhat with a call to Visa, verifying the cardholders ID prior to processing the transaction.  That can be cumbersome with a customer standing at your counter. Perhaps explaining that you are protecting both parties with this call will help?

Knowledge = power to reduce the Risky.

Forrest Bivens
Advisor, Zomaron Inc.

Does Your Business Continue to Overlook This Pesky, Excessive Overhead?

As we approach the end of the year, many businesses are charting changes to improve their financial bottom lines.  My experience as an advisor has repeatedly shown me that one area of profitability can slip through the cracks.  In many cases, it is simply ignored.  To that end if you are involved in the review or planning processes to either reduce overhead or increase profits, this article is for you.

Payments processing, or merchant services.  If you can stop your eyes from rolling back in their sockets for a few moments, I'll share some rather disturbing news with you direct from Ottawa.  I say this because if you've ever answered one of the many telemarketing calls soliciting your business, your eyes have probably repeatedly done that rolling thing.  And for good reason, however I won't go on about that!

Perhaps you're aware of those lovely surcharges your business pays to accept payments via Visa and MasterCard rewards cards.  If not, I'd be very surprised however occasionally I do encounter an owner that is still unaware.  I'll assume that you do know of these higher costs, and if you do you're not alone in feeling a bit abused by Visa and MasterCard for having to shoulder the costs of air miles, frequent flyer programs, cash back rewards and any one of the myriad of consumer rewards programs.  Now maybe you were aware that last year, Ottawa's Competition Bureau filed a complaint with the Competition Tribunal on your behalf in an attempt to reign in these charges.  If not, you can learn more at that link.

Unfortunately, our government lost its case against Visa and MasterCard.  To summarize the results of this decision by the Competition Bureau, business will continue to face these higher fees as well as remaining vulnerable to even higher fees in the future.

To add to this, payment processing companies will continue to use this as an opportunity to increase their profit taking.  Canada is already among the most expensive countries in the world to process customer credit card payments, and I see the frustration time and time again on the faces of business owners and their financial officers.  Without going off into a full blown sales pitch I am obliged to tell you that this can, to an extent, be mitigated.

What you may not realize in all this is that you do have some power to negotiate just how severe these charges will affect your bottom line profitability.  As in most any area knowledge is power; in this specifically KNOWLEDGE TRULY IS POWER!  We may not be able to reign in Visa or MasterCard, however the added profit taking segment that the individual payment processing companies control is subject to negotiation.  One caveat however; you do need to understand how to delineate, separate and isolate the processing company's profits.  This is the tricky area.  And this is my wheelhouse.

In short I really do not like how my industry operates, but I do like my role in helping you, the owner or financial officer understand how to mitigate these effects and ultimately add to your bottom line profits.

Forrest Bivens
Advisor, Zomaron Merchant Services

Apathy On Two Fronts

To say I'll be brief is more of a goal...so here goes.

Front #1.  Ottawa will not take the abuses of my industry seriously.  Here is proof.

Front #2.  You, the business owner.  Yes, I get the fact that some of you are incessantly dogged by telemarketers from my industry (it wasn't Zomaron!), but I refer to those of you that don't understand credit card processing.

Which is 99.99999% of business owners.  How do I know?  Out of hundreds of clients, only one understood it when we met.

The point is that faking leads to apathy.  So does "I'm too busy".

And OUCH, that costs you guys...

It's your money.  Why do you waste it?

Avoiding the Pitfalls of Credit Card Processing - Three Easy Steps.

Credit and debit card processing.  In a word - aggravating!!! 

I've said many times since my early days in this industry that “I love my job, but despise my industry” due to its lack of transparency and confusion for the end users.  Business owners, heck human beings, deserve better.

On that note this article is single minded in its purpose; to provide an easy-to-follow checklist of items that are red flags to avoid or question when shopping for a service provider.

1. Do not be influenced by the claim of “I have the lowest rates” seen in most marketing materials or uttered by nearly every sales rep.  There are approximately 5-10 areas to consider or slices of the pie as I like to call them.  The lowest rates claim addresses just one area.  Unqualified surcharges, assessment or card brand fees, authorization fees, terminal costs and structure (rent vs. lease-to-own vs. purchase), terminal warranties and a possible variety of monthly set fees are some of the others.

2. In general, the lower the main rate mentioned above, the higher the cost for the rest of the pie and the greater the risk of unnecessary, invented fees.   The overall structure should be focused on balance vs. the appearance or claim of a low rate.

3. ***How is your sales representative compensated?  This may seem like an obscure or unimportant item; however my experience has been that it’s one of the most important factors that drive all of the above.  

Sales reps that are paid by only commission or salary generally have a singular focus – to sign as many new clients, as fast as possible and move on to the next;  which has led to an environment of confusion for business owners as they try to navigate through all the claims being made during your shopping process.  

One that is compensated by commission or salary AND a monthly residual have an automatic, built-in motivation to attract clients with a clear, balanced pricing structure that will make you happy.  Also, they will be readily available after your account is active if/when service is needed because their monthly residual income is dependent on KEEPING you happy!

In closing, asking the right questions, verifying all claims and seeking a balanced structure from a person with the correct built-in motivations will serve you best in the long run.

~Forrest Bivens, Advisor with Zomaron Merchant Services

Motivated To Tell The Truth...OR Just To "Sell" You?

Testing...One, two, three...

OK, I'm firing this bad boy up again.  Been on a writing hiatus for some time, but that ends now.

I deleted all previous posts and am going with a calmer, less in-your-face style.  Still my best advice, still delivered via No Chaser...

Just "sweeter".  :)

Today's itty bitty message to get you thinking... 

Person A is a salesperson selling you services, and they are paid on a strictly commission basis.
Person B is paid on commission PLUS ongoing residuals from your account activity.

Let's assume both commissions are nearly equal.

Question: Who is more motivated to simply get your signature and your account then become a ghost, and who is more motivated to keep your account by keeping you satisfied?

Moral of this story; if your credit card processing rep isn't earning a residual, you should ____________.

A. Flee.
B. Get your shotgun out and make THEM flee.
C. Find Person B.
D.  All of the above.

~Forrest...as in Gump.