Friday, September 12, 2008

Use PIN to "Start Sticking It To Them"

Canada is the latest to jump aboard the "let's attack Visa and MC and their high fees bandwagon." A new campaign, called "Stop Sticking It To Us" has been started by the Retail Council of Canada.

I have an idea...albeit on the surface it seems to contradict itself. (see pic below) I believe the Retail Council of Canada has it backwards. There's a much easier way to get V/MC to "stop sticking it to retailers".

Rather than going after V/MC, retailers could simply increase the use of a solution that already at their disposal, to reduce these so-called "unfair fees!"

Ironically, a "PIN"-based transaction boasts the lowest card fees, yet, despite it's name, the "PIN" transaction is the one that "won't stick us!"

If retailers, specifically Internet Retailers, truly want V/MC to "stop sticking it to them," they should be organizing a push for PIN debit and the lower fees and higher security it brings to the table.

Speaking of tables, we can reverse them to fight back and "Start Sticking It To Them". With what? Stick them with a PIN. Lower Fees, Highly Secure.

It's time for not only a's time for PINterchange.

If the most secure transaction has the lowest fees, PIN debit must be the most secure. It's physically impossible to have a card present (CP) transaction done on the web because the consumer, by virtue, cannot be there.

However, a PIN debit transaction brings a lower rate to the table than the CP rate anyway. HomeATM provides your online shoppers with a highly secure, personal magnetic stripe card reader...complete with a PIN Entry Device. End result? More secure transaction for them, lower rates for you.

Internet Retailers should be Pushing the PIN into the faces of Visa and Mastercard all day long. Need help? I volunteer. Email me and let me know that you'd like to utilize our services and I'll put together a plan designed to get Visa and Mastercard to allow you to accept PIN Debit for your e-commerce operation. Only members of the Top 100 Internet Retailers need apply. I'm of course kidding. EFT Payment Networks are certainly welcome to apply as well. But seriously, let me know that you'd like to cut your Internet Interchange fees and we'll get it done for you.

Moving on:
Here's the press release on them asking V/MC to "please stop." instead of asking retailers to "please start."
Credit card companies are gouging retailers with transaction fees that cost $4.5 billion in 2007 — and the costs trickle down to consumers, the Retail Council of Canada warned Wednesday as it launched a campaign called "Stop Sticking It to Us."

The council's campaign was launched in conjunction with organizations such as the Alberta Liquor Stores Association, Canadian Booksellers Association and the Hotel Association of Canada. It was timed to coincide with the federal election, set for Oct. 14: the groups are calling on candidates to weigh in on credit card transaction fees.

The council estimates nearly $2 of every $100 Canadians spend using credit cards goes directly to Visa and MasterCard, and their issuing banks.

Most of money comes from so-called "interchange fees" that Visa and MasterCard banks collect from merchants every time a credit or debit card is used to pay for a purchase. The fee varies with the type of card and size of merchant, but is calculated as a percentage of the transaction.

"A $1 transaction and a $100 transaction costs about the same to process, yet the fee is based on a percentage of the total price of the sale — why?" asks a Derek Nighbor, vice-president of national affairs for the council.

(Editor's Note: Regarding that statement, with all due respect, on account of how I'm aware we should "love thy nighbor," in his position as VP of national affairs, Derek should have a better grasp on how the payments industry works, do some research, or maybe change his name to Peter Principal.)

It's not a problem only for merchants, Nighbor said, who pointed out that interchange fees eventually trickle down to consumers.

The Retail Council of Canada says that a large part of the interchange fee goes to cover the cost of credit card incentive programs, corporate credit card benefits and junk mail.

Meanwhile the Canadian Federation of Independent Business has launched a separate but related campaign. Shannon Martin, a spokesman for the CFIB, said the credit card companies and banks increased fees businesses must pay in May.

While personal credit card fees increased from 1.6 to 1.7 per cent, business fees increased significantly. "We had a member who in one month saw their processing fees … increase by over $1,200," he said. Martin noted that more increases are expected in October.

Credit card companies say fees are reasonable

In a statement released Wednesday, VISA said its interchange rates are reasonable.
"It is important to note that retailers and consumers do not pay interchange. Retailers negotiate what is called a Merchant Discount or Service Fee (MDR) directly with an acquiring financial institution. Visa Canada sets its local interchange rates in response to the competitive Canadian market and they are designed to encourage retail acceptance," the company said.

MasterCard also noted merchants choose to offer credit and debit card service because they offer good value. "Debit and credit cards represent convenient, secure and globally recognized forms of payment that enable billions of dollars in commerce for Canadian retailers and independent businesses annually," the company said. "Moreover, card payments are more cost-effective than handling cash or cheque.

EU to Allow Debit Interchange For Now - ETA

Direct Debit logo used in the UKImage via Wikipedia
EU to Allow Debit Interchange For Now - Electronic Transactions Association
EU to Allow Debit Interchange For Now

With European banks reeling from the credit crisis and other economic woes along with their US counterparts, the European Commission said last week it will relax its position on the issue of interchange bank fees and allow them on a "justified and temporary basis" to smooth the launch the EU's Single Europe Payments cross-border direct debit scheme scheduled to take effect in November 2009.

Despite insisting a year ago that so-called "Multilateral Interchange Fees" are a violation of EU competition regulations, the Commission announced that it would now allow them, although only on a limited basis.

"It may prove necessary to have a multilateral interchange fee for cross-border SEPA direct debits in the very initial stage," EU Competition Commissioner Neelie Kroes said in a Sept. 4 statement. "But we will have to be convinced that these fees will be strictly limited in time and objectively justified--that they are, for example, not aimed at providing additional profits to banks."

Acknowledging that the launch of the SEPA bank debit plan for November of 2009 was in danger, European Central Bank Executive Board Member Gertrude Tumpel-Gugerell said that "a European solution has to be found by the banks which is also agreeable to the competition authorities." Tumpel-Gugerell continued," In this respect the idea of maintaining at national level the same interchange fee for national legacy and SEPA schemes during a limited transitional phase should facilitate the rolling out of the SEPA direct debit scheme."

"This would also ensure the necessary level playing-field in the national context for the SEPA direct debit scheme and the national legacy direct debit schemes," Tumpel-Gugerell added. " ... It would not be acceptable that bankers are not able to deliver the SEPA direct debits by November 2009."

Visa, MasterCard Address Debit Card Holds at Pump

As I've stated in the past on numerous postings, using your debit card can cost you in overdraft charges, particularly when you pay at the pump.

Here's why: The minute you swipe your debit card, the merchant authorizes a hold on your account for a certain amount of money. Mastercard and Visa have typically allowed gas stations to hold as much as $100, even if you bought only a couple dollars' worth of gas.

Merchants say holds help ensure a customer's account has sufficient money for the purchase, but consumers and consumer advocates don't like it.

But there's a new development. According to Consumer Report's October issue, Visa will soon institute a new policy regarding these holds.
Starting next month, it will offer gas stations a real-time clearing process, so instead of lasting the three business days currently permitted, a debit hold should last less than two hours. I stress the word "should". Expect 24 hours.

Mastercard will require banks to release debit holds for gas purchases within 24 hours or the next business day (more realistic) but that program doesn't start until next summer.
Until these changes are in place, (according to the experts at Consumer Reports), here's what you need to do:

- Track debit holds online so you know how much of your account is tied up.

- Ask your gas station if and when it's switching to real-time clearing.

And then there's my favorite, the easy one:

- Avoid holds altogether by paying inside with your debit card using your PIN. They can't put a hold on a PIN transaction because it's processed in real-time.

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