Happy Thanksgiving from Host Merchant Services

Black Friday is just hours away. The big sales, and the huge discounts are all locked and loaded. But for now, The Official Merchant Services Blog is going to take a moment to pause. The calm before the storm. We would like to wish everyone following our blog a very happy Thanksgiving holiday!

So while you’re getting ready to dine on turkey and trimmings, Host Merchant Services is going to offer you up some fun facts about Thanksgiving, its history, and the bird it centers on:

Talking Turkey

According to the National Turkey Foundation the U.S. raised a whopping 244 million turkeys in 2010. Of those birds, approximately 46 million found themselves roasting in ovens across the country last Thanksgiving. That number is on the rise in 2011. An estimated 248 million turkeys will be raised for slaughter in the U.S. this year, up 2 percent from 2010’s total, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service.

National Geographic states: “Minnesota is the United States’ top turkey-producing state, followed by North Carolina, Arkansas, Missouri, Indiana, Virginia, and Indiana. These “big six” states produce two of every three U.S.-raised birds, according to data compiled by the U.S. Census Bureau. U.S. farmers will also produce 750 million pounds (340 million kilograms) of cranberries in 2011, which, like turkeys, are native to the Americas. The top producers are Wisconsin and Massachusetts.”

History of the Holiday

Though many competing claims exist, the most familiar story of the first Thanksgiving took place in Plymouth Colony, in present-day Massachusetts, in 1621. More than 200 years later, President Abraham Lincoln declared the final Thursday in November as a national day of thanksgiving. Congress finally made Thanksgiving Day an official national holiday in 1941. Sarah Josepha Hale, the enormously influential magazine editor and author waged a tireless campaign to make Thanksgiving a national holiday in the mid-19th century, and is often cited as having an impact on getting Lincoln to declare it a holiday. Hale was also the author of the classic nursery rhyme “Mary Had a Little Lamb.”

Merchant Services pumpkin pie picture for Thanksgiving Blog

What Was On The Menu?

The traditional foods we tend to associate with Thanksgiving were most likely not part of the menu that day in Plymouth. The feast was organized by Governor William Bradford and attended by some 50 English colonists and about 90 Wampanoag American Indians. It lasted for three days and had some foods that might surprise you. That National Geographic article suggests that the Wampanoag killed five deer for the feast. And that the colonists shot wild fowl –– which could have been geese, ducks, or the turkey we all associate with the feast. And it is regarded that some forms of Indian corn dishes were also served. The article also suggests that the Indians supplemented the venison with fish, lobster, clams, nuts, and vegetable dishes like pumpkin, squash, carrots and peas.

Retconning Turkey Day

The aforementioned National Geographic Article also suggests Plymouth wasn’t really the first Thanksgiving. It states that American Indian peoples, Europeans and other cultures around the world often celebrated the harvest season with feasts and gatherings, many of which gave thanks to higher powers for their survival and their sustenance. In 1541 Spaniard Francisco Vásquez de Coronado and his troops celebrated a “Thanksgiving” while searching for New World gold in what is now the Texas Panhandle. After that, a similar feast was held in 1564 by French Huguenot colonists in present-day Jacksonville, FL. English colonists and Abnaki Indians feasted together in Maine’s Kennebec River around 1607. And Jamestown, VA colony celebrated the arrival of a food supply ship that ended a brutal famine in 1610.

Merchant Services picture of a turkey

More Facts About the Holiday

Some quick tidbits:

  • Benjamin Franklin wanted the turkey to be the national bird of the United States.
  • The annual Macy’s Thanksgiving Day Parade tradition began in the 1924.
  • Congress to passed a law on December 26, 1941, ensuring that all Americans would celebrate a unified Thanksgiving on the fourth Thursday of November every year.
  • Since 1947, the National Turkey Federation has presented a live turkey and two dressed turkeys to the President. The President does not eat the live turkey. He “pardons” it and allows it to live out its days on a historical farm.
  • Each year, the average American eats somewhere between 16 – 18 pounds of turkey.
  • Californians are the largest consumers of turkey in the United States.
  • Although, Thanksgiving is widely considered an American holiday, it is also celebrated on the second Monday in October in Canada.
  • The heaviest turkey ever raised was 86 pounds, about the size of a large dog.
  • Turkeys will have 3,500 feathers at maturity.
  • Male turkeys gobble. Hens do not. They make a clucking noise.

So there you have it. A completely incomplete rundown on Thanksgiving and turkeys! Enjoy your meal and get ready for the big shopping blitz to begin at midnight. Black Friday is upon us and credit card processing, merchant services and e-commerce business is about to boom.

Don’t Overlook Small Business Saturday

For the past couple of weeks The Official Merchant Services Blog has been preparing you for the Holiday Shopping Season. We’ve discussed a lot of different strategies and services that merchants can use to boost their businesses on Black Friday and Cyber Monday. Much of what we’ve covered also applies to going forward through the entire shopping season.

Today we’re going to focus on a new “day” that’s been added to the rush and crush. Sandwiched in-between Black Friday and Cyber Monday is a new kid on the block: Small Business Saturday. Since Host Merchant Services has many small businesses in its customer base, we wanted to take a moment to spotlight this newer day of shopping focus and frenzy.

The Basics

First of all, what is Small Business Saturday? It is a shopping holiday created by American Express, held on the Saturday after Thanksgiving during one of the busiest shopping periods of the year. It’s not that old. It was first celebrated on November 27, 2010. Small Business Saturday is designed to be a counterpart to Black Friday and Cyber Monday –– which feature big box retail and e-commerce stores respectively. Small Business Saturday encourages holiday shoppers to patronize brick and mortar businesses that are small and local.

How it Did Last Year

One of the key elements of the campaign last year was its social media push. Small Business Saturday has a Facebook page –– found here –– and last year AMEX bought advertising inventory on Facebook that it gave to its small merchant account holders for the purpose of promoting them and the event. The Social Media buzz generated 1.5 million likes on Facebook, as well as getting 13p public and private organizations and 41 politicians involved in supporting and publicizing the effort.

The bottom line? The event did indeed boost sales. According to AMEX executive Mary Ann Fitzmaurice Reilly, the event provoked “a 28 percent rise in sales volumes for our small business merchants versus the same day in 2009.”

What’s 2011 Bring To S-B Saturday?

The most basic perk to the Small Business Saturday campaign is that it gives money back to consumers for shopping at local small businesses. As defined by American Express at their Small Business Saturday Link Here: “You can receive a one-time $25 statement credit when you register any eligible American Express® Card and use that Card to make a purchase of $25 or more at a small business on November 26, 2011.”

Merchant Services logo for Small Business Saturday

There are multiple ways to obtain the savings:

  • Register your American Express Card here.
  • Sync your Foursquare account to your American Express Card here.

FedEx this year also gave away 40,000 $25 gift cards, which have all already been claimed.

Also, AMEX continues its robust social media marketing through the event, giving $100 in free Facebook advertising to 10,000 qualifying merchants.

Why You Should Get Involved

A survey by American Express  found 93% of consumers believe shopping at small businesses is important, and are backing that sentiment up by spending about a third of their discretionary income at local small businesses. This prompted AMEX to initiate the campaign in the first place. And if you are a small business merchant, AMEX is going the extra mile to get you involved in the perks and promotions of this holiday.

Merchant Services Small Business Saturday LogoEven if you are a late-comer to this event and have missed out on the free Facebook ads or the free gift cards from FedEx, there is still quite a lot of value to be had from participating in Small Business Saturday. The $25 credit program applies no matter what else you do. But there’s also these amazing resources still available:

  • From AMEX you can get free in-store signage, and a free online marketing kit.
  • You can use AMEX’s Go Social app to create mobile-based deals for your American Express card-wielding customers.
  • A joint venture from Google and YouTube offers up My Business Story which lets you create custom videos using YouTube’s editing tool to entice your customers.
  • YourBuzz –– a tool that allows users to read and respond to customer reviews and online mentions in one location –– is offering $200 in free advertising credits on LinkedIn Ads ($100 for 6,500 business owners) and Facebook ($100 for 10,000, which is all used up).
  • FedEx offers a 20% discount on printing for  Small Business Saturday-related promotional materials through Nov. 26.

Too Early To Tell?

So what do you think? Will Small Business Saturday catch on? Cyber Monday seems to be gaining some traction, fueled by the rapid growth in online shopping and e-commerce, and standing on the precipice of a predicted boom in mobile payment business. Black Friday is still going strong, with big chains like Toys”R”Us and BestBuy fueling it year in and year out. Is there room for Small Business Saturday? Are you a small business merchant and have you participated in this event last year? Will you be doing it this year? Feel free to share you thoughts and insights on this bold campaign from AMEX. I know I’m particularly interested in hearing about what kind of use you’ve gotten out of the social media marketing tools AMEX is providing with this.

Merchant Services: Why Should You Offer Gift Cards?

Today The Official Merchant Services Blog continues its ongoing series to get you ready for the Holiday Shopping Season. A previous blog entry looked at the next big thing, virtual gift cards. But we figured we’d take a moment to focus on the old school mainstay, and offer insight into why merchants should offer their customers regular old plastic gift cards.

The Numbers Are Telling

Getting the obvious out of the way first: Gift Cards, Gift Certificates and Loyalty Programs are big business. According to one report, businesses sold $23 billion in gift cards in the U.S. in 2010.  The consumer perspective is pretty straight forward: they are convenient for both the shopper and the recipient of the card. This blog article here goes into detail about why they are convenient and popular with shoppers.

But what about your business? Why would gift cards and loyalty programs be good for your business?

Here’s a rundown on some of the most prominent reasons to start running a loyalty program and offering gift cards:

Increase in Sales

You’re about to see a lot of new foot traffic (or click traffic if you’re reading this from an e-commerce perspective). And a gift card program will heighten the sales potential you have this Holiday Shopping Season. From impulse buys to people who just aren’t quite sure if the person they’re shopping for has a particular item, the gift card steps in and provides more chances for consumers to purchase something from your store.

Getting Sales Referrals

Gift Cards take two to tango. The person buying the card, and the person receiving the card, are both potential long-term customers for your business. It could be that the person buying the card knows the recipient likes your store but doesn’t know what specifically to buy from you for them. Or it could be the other way around, and the gift giver likes your business and wants to introduce the recipient to your goods or services. The real power in gift cards is that they inherently refer your business beyond just one customer shopping one time.

Free Marketing Tool

A Loyalty Program and the Gift Cards you run through it are powerful forces for the marketing of your business. Building off of the previous point of the ability of the cards to refer new business, Gift Cards put your brand and your business out there for new customers and for repeat customers. A good loyalty program spreads the word about your business with each individual gift card.

Customer Retention and Business Events

You can also use Gift Cards as rewards in events or campaigns your business engages in. Or just simply use them as rewards to loyal customers. The goal of long-term customer retention is made that much easier when you have the power to give back to your customer in such a way that it keeps them coming back. The customer gets the gift card in appreciation of their business. And then comes back to you to use it for more purchases.

The Opposite of ‘Breakage’

Breakage is described in this blog about gift cards as people purchasing a gift card, and then the card not being used. It often gets touted to merchants as a way to make money on gift cards as that is money being spent on future purchases in your store that never get made. So just using straight mathematics, you make more money from breakage. You get to virtually sell items more than once. But as that blog points out, the benefits of good loyalty programs and gift cards are really focused on lowering the amount of breakage.

You want the card to get used. Why? Because people tend to spend more than the gift card is worth. It’s been reported that consumers who do use gift cards tend to spend an average of 35% more than the value of the card. Which makes a lot of sense from a consumer stand point. Gift Cards let them make purchases on expensive items they may not have initially thought were in their price range. Simply put, you have a $50 gift card to a store you like, that $100 item you had your eye on seems a lot more within reach.

You want this business. You sell more than you initially sold the card for. And you cultivate long-term relationship potential. Breakage looks good in black and white numbers, but the goal is get happy customers that keep coming back to your business.

Get Going with Gift Cards Now

Those are some of the very basic reasons why Gift Cards and Loyalty Programs can help give your business a quick boost right as we enter the Holiday Shopping frenzy. Host Merchant Services offers a robust set of services to help you process gift cards quickly and easily. The company takes the hassle out of the process with complete turn-key solutions that are focused on increasing customer loyalty for you. And we offer tiered branding customization options for the card program you select. For more information on what Host Merchant Services offers, you can click here.

Superior Customer Service

As we close in on the Holiday Shopping Season, customer service becomes more and more important. That’s not to say customer service was unimportant prior to now; it’s just that most businesses –– e-commerce ventures as well as brick and mortar stores –– see a large increase in consumer activity during the Holiday Shopping Season. Any customer service mistakes that get made in this time period end up being magnified due to the time of year.

As part of its ongoing series about Holiday Shopping, The Official Merchant Services Blog wanted to take a moment to examine customer service.

By The Numbers

It’s important to not let customer service fall to the wayside in favor of more direct methods of obtaining profits. While marketing campaigns and aggressive sales techniques can see quick results in black and white numbers, customer service is the foundation for maintaining a long-term sales relationship. The old adage about how it costs more to acquire a new customer than it does to retain an old one is what’s at work here. A 2010 MediaPost report indicated that U.S. businesses lose approximately $83 billon each year as a result of poor customer service. The report also indicated that 71 percent of U.S. customers have ended a business relationship based on poor customer service. The report also noted that poor customer service has an impact on a business’ competition –– the study cited by MediaPost found that 61 percent of customers surveyed said that they take their business to a competitor when they end a relationship with a company due to poor customer service.

Merchant Services image on Bad Customer Service

Do Not Panic

While those numbers from that survey are compelling, our first bit of advice is: Do Not Panic. Just like Customer Service is a long-term relationship building tool, it’s also an aspect of your business that you can take your time building. So even if you hit a few customer service snags on Black Friday, or there’s some pitfalls for your e-commerce business’ customer service on Cyber Monday, it’s not time to panic. Take it easy, and keep the focus on the long-term goal of quality customer service.

Anecdotes and Analysis

We’ve all experienced horror stories that back up the numbers cited above. It could be something as simple as walking into a store looking to purchase a specific product and not receiving any assistance. I’ve had this happen to me quite a lot when walking into a specific retail chain near where I live. I’ve gone there multiple times looking to purchase printer cartridges. And each time I have trouble finding the specific type I’m looking for and it seems I can never get an employee to even ask me if I need help. It’s made me stop going there and I now buy my printer supplies online instead.

What horror stories have you experienced? What’s the worst customer service incident you’ve encountered? Has it affected your approach to your own business and the customer service you provide?

Make Good Customer Service a Habit

Host Merchant Services makes customer service a part of their core business philosophy. It’s part of the Payment Network Provider’s overall goal to bring trust to the payment industry. And it’s part of why this merchant services blog exists. The company wants to share information with customers as well as potential customers, and take the time to explain the confusing aspects of the payment processing industry. Customer Service defines the approach to the customer relationship; it’s why Host Merchant Services makes guarantees such as no contracts and no termination fees; it’s the basis for how Host Merchant Services offers free terminals to our merchants.

Merchant Services and Payment Network Providers need quality Customer Service

Defining Good Customer Service

Using that background in customer service focus, Host Merchant Services offers some easy tips to help you enhance your customer service:

Make a Good First Impression

A customer’s first contact with your business should be a positive experience, no matter if that contact is a telephone call, an internet click through or face to face.

Real People Over Automated Responses

Contact between customers and potential customers hinges on interaction between real people. This applies mainly to the way your business takes phone calls or handles internet contact. Try to cut down on phone trees and automated telephone recordings with confusing menus. For your e-commerce businsess, make sure your website is designed well and easy to navigate. Give your visitors a convenient hub to continue to visit. And make sure you clearly mark how to contact you for customer service related issues.

Be honest, Offer Facts

Do not sugarcoat things when dealing with your customers. While it may be uncomfortable to deliver bad news, customers and potential customers prefer honest and factual information. Trying to sugarcoat things makes them feel like you are being manipulative and will have a negative impact.

Get Back To People

Follow up with people who contact you. Delays in returning voicemails, neglecting e-mails, not responding to posts to your twitter, are all negatives in customer service. If someone takes the time to try to contact you, the best thing you can do to maintain good customer service is to get back to them promptly.

Work With Your Customers

When you do interact with your customers via phone calls, e-mails or face to face, remember to work with them –– not against them. Listen to what they are telling you. They contacted you with a concern, so take in their information. Be polite. Most customer service issues revolve around customer complaints. But if you listen to them and are polite with them, you take a huge step forward toward getting their issue resolved. Customers want to be heard, and they want you take action on their behalf. Even if you can’t do exactly what they want, the process is there for you to help them feel like they are valuable to your business.

Stick To Your Plan

That’s the basics of it. It’s really just a process that involves you interacting with your customers on a human level. Getting back to them promptly. Giving them your focused attention. And doing what you can to make them feel like they are valuable to your business. This is all about building a long-term business relationship. So while you may experience an increase in the static you get from irate customers through November and December, if you stick to a plan that focuses on customer service and relationship building, you will navigate through the storm of the Holiday Shopping Season.

We want to hear from you. What does good customer service mean to you? Better yet, what does it mean to your customers? When they define good customer service, does your business immediately come to their minds? What are some tips you would offer for obtaining excellent customer service?

Merchant Services: Why You Need a Processor

The Official Merchant Services Blog functions on the logical premise that our readers are interested in the topics we cover, most notably merchant services. We strive to bring you useful news, tips, and insight that can help you as both a merchant and a consumer. That means that sometimes we delve into complex topics, like our multipart series on Payment Gateways. And other times we tackle newsworthy topics, like Google+ being opened up for business pages.

But today we’re going to get down to the basics and discuss the very heart of merchant services: Credit Card Processing. Credit cards, the plastic payment solution has become the most convenient form of payment for countless consumers. Why is it important for merchants to give their customers the option to pay with a credit card –– specifically on that merchant’s web site? Here are 10 of the top reasons we think credit card processing is an important option for merchants:

  • Competitive Advantage: If your business has the most options and the most flexible payment systems, you have an edge over your competition.
  • More Sales: Data collected on consumers shows that credit card owners buy 25 times more merchandise than customers who pay cash.
  • Cashless Society: We’re not there yet, but the trend in online shopping and electronic payment systems indicates that credit card and debit card processing are quickly becoming the preferred methods of payment. This will take center stage in business news next week when Black Friday goes right up against Cyber Monday.
  • Convenience: One of the primary reasons credit and debit card transactions are becoming so popular is because buying goods online with just a few mouse clicks is extremely convenient to consumers.
  • Impulse Sales: Credit Cards give customers the freedom to buy on impulse, spending money on previously unplanned merchandise. Cash is finite and in the pocket. But plastic lets customers reach beyond what they have in hand.
  • Enhanced Advertising: Customers are more likely to shop at businesses that accept their credit card. As such, they tend to look for and read ads from businesses that accept their credit cards first over other ads.
  • Steadier Sales: Credit Card business has less peaks. Cash using consumers buy heavily on payday and just before holidays, but credit card using consumers make purchases whenever they need to.
  • Larger Volume: Accepting credit cards helps merchants attain higher unit sales and extra orders.
  • More Expensive Merchandise: Credit card customers are sometimes less conscious of slight price differences. They are more likely to spend a bit extra at a merchant simply because they accept their form of payment instead of seeking out wholesalers or discounters who do not accept their credit card.

We’re interested in your feedback. What other reasons would you add to this list?

Tips and Terms

Revenues generated by credit card use are fast approaching the $200 billion mark. Your business can benefit  by offering credit card payment processing. To understand the process better, we’re going to define some of the important terms involved in credit card processing and give some insight into how it all works:

Image for Host Merchant Services article on credit card processingAcquirer – a bank, which is often a 3rd party provider, who processes and settles merchant credit card payments.  This can be a bank providing your merchant account or a service that provides it to your processing company.  The acquirer works with the credit card issuer.

Authorization – is the first step that happens after the credit card is swiped.  The purchase and card information are sent to the acquirer who, in turn, sends the same information to the credit card issuer.  The credit card issuer then accepts or declines the transaction.  If accepted, an authorization code is generated and the purchase transaction is continues to the next step, namely: batching.

An image for Host Merchant Services article on ProcessingBatching – is the review process done by a merchant on all credit card transactions for the business day.  The review process involves ensuring all credit card transactions are authorized and signed by the cardholder.  After the review process, the merchant sends the information as a batch to the acquirer to receive clearing for payment.

Cardholder – he is the customer as specified on the credit card, the customer so to speak.

Card network – these are networks that act as an intermediary between the acquirer and the issuer.  Card networks transfer the information originating from the acquirer to the issuer about the purchase.  This happens in the authorization process.

An image for a Host Merchant Services Article on ProcessingClearing – the third step in the payment process which happens after the acquirer sends the batch information through the card network to the issuing bank.  The card network acts as a router depending on the credit card issuer found on the purchase detail.  This process permits revenues for both the issuing bank and the card network called the interchange fee.  After deduction of interchange fees, the issuing bank sends the information back to the acquirer through the same card network used.

Discount fee – this fee is paid for by merchants to the acquirer to cover processing costs.

An image for a Host Merchant Services Article on processingFunding – the fourth step in the credit card payment process.  This involves the acquirer sending back the transaction information to the merchant less the discount fee.  The merchant receives the remainder of the payment and is now considered paid.  This generates the cardholder’s billing statement and accounts are funded appropriately.

Interchange fee – the fee charged by card networks and card issuers to the merchants.  This fee is regulated to about 1 to 3 percent of the total purchase amount and covers the costs associated with credit card acceptance.

Issuer – the financial institution who issues credit card products to its customers.  Examples of major issuers include Discover, Amex, Visa and Mastercard.

A Step By Step Guide

And finally, to get an easy to read visual guide on how Credit Card Processing works, please visit the Host Merchant Services article archive here:

How Credit Card Processing Works

Merchant Services: Discover on Discover

A previous post by The Official Merchant Services Blog featured a story about what credit card companies are doing to make themselves the more alluring choice instead of debit during this holiday shopping season. Today’s post is a bit of a follow up to that, with a specific program that one credit card company is offering to merchants that will take things up a notch significantly.

Host Merchant Services is able to offer an exclusive deal to its merchants with the new Add Discover on Discover plan. This plan comes at just the right time for merchants as holiday shopping will increase their traffic and sales. This offer from Discover, through Host Merchant Services is bold. It essentially gives qualifying merchants a year of being able to process Discover payments at no cost. Add Discover on Discover gives the merchants no fees when their customers swipe a Discover card. And they have this benefit for an entire year.

The Details of the Plan

To qualify for the Add Discover on Discover program from Host Merchant Services, you must have not processed any Discover cards in the past six months of doing business. Discover card processing includes Discover, Diners Club International, BCcard, China Union Pay, JCB and DinaCard. That’s it. That’s all you need to qualify. Once you qualify it’s a series of easy steps to get the program started:

  1. Enroll in the program by December 31, 2011.
  2. Confirm your enrollment with a required test transaction.
  3. Update signage at your place of business (or on your website if you are an e-commerce only merchant).
  4. Inform your employees and actively promote Discover to your customers to start reaping the savings.

Once you’ve been verified you will receive written notice from Discover. Within 10 business days of your acceptance you’ll receive a welcome letter with free Discover signage and tips for increasing your sales with Discover.

Benefits of the Plan

This plan is really good for merchants that haven’t been accepting Discover cards. Every Discover transaction you process for 12 full months will cost you nothing  –– no limits, no exceptions. Coming right at the end of the year, this plan is the type of holiday shopping incentive that is extremely lucrative for merchants. Discover makes a big push to get merchants to promote using their cards at a time when the interchange fees on debit card usage got hard capped by the Durbin Amendment.

Durbin Amendment Works For This Too

In fact, one of the other features of the Durbin Amendment can help Discover get added hype and promotional assistance from this Add Discover on Discover plan. As Host Merchant Services pointed out in their Dubin Amendment analysis earlier this year, one of the key pieces of the legislation focuses on competition within the payment processing industry: “[The Durbin Amendment] seeks to stop major credit and debit card networks from imposing penalties on small businesses, merchants and government agencies. The law applies to banks with over $10 billion in assets and restricts these large banks and credit card companies from using their dominant market power to force merchants to accept anti-competitive restrictions. To put it simply, large credit card companies are no longer able to punish merchants for offering discounts to customers for using another card network; or discounts for using cash, check, debit card or gift card and loyalty cards; or set a minimum or maximum transaction amount for payment by card.”

So what this means is Discover can usher in this new program –– which offers no transaction fees for a year –– to attract merchants, and those merchants seeing how much more of a savings this can provide them over other options can freely promote Discover over the competition, with no fear of punishment or penalty. Durbin lets a merchant promote the better deal for their business.

For More Information

This landmark offer only lasts until December 31, 2011. If you are interested in finding out more about it, feel free to Contact Host Merchant Services.

You can also read more about the offer by downloading one of the two PDFs Host Merchant Services provides on its resource page:

Discover on Discover For Merchants

Discover on Discover Sales Aid

Durbin Aftermath: Banks Go Ninja Style

The Official Merchant Services Blog continues its far reaching and ongoing coverage of the Durbin Amendment and the aftermath of what this legislation brings. Just a quick recap of what the Durbin Amendment did: On October 1, the legislation put in place a cap on interchange fees from debit card usage. Prior to the legislation taking affect, the fee merchants were charged on the average transaction was around 44 cents. The cap put in place by this finance reform legislation put the ceiling for the fee at 21 cents, with provisions in place that allowed most banks to reach a maximum of 24 cents for the transaction. This cut into the profits that banks were essentially “banking on.”

Host Merchant Services provided an extensive and thorough analysis of the Durbin Amendment before it took affect. And our analysis predicted the same reaction from the banking industry that many other media sources predicted –– Banks would not want to lose those profits. Billions of dollars were at stake. The banking industry’s reaction is pretty straightforward: The burden of the fees would be shifted to other parts of the services they offer. The costs and fees would go from the merchants, to the consumer.

Bank of America Takes the Heat

There was a very public media backlash over “Round 1” of this plan, as people slammed the banks for their plans to add monthly fees to debit card usage. The most notable reaction was against Bank of America, who announced they were going to charge customers a $5 monthly fee to use debit cards. This announcement polarized the Occupy Wall Street movement giving them a target for their ire and then was slammed in a wide variety of media outlets (including one Fox News Anchor who cut her debit card up on the air).

This very public display prompted all the banks considering this kind of fee to back off of the idea. With Bank of America itself being the last to relent.

The Burden of Billions

But that didn’t solve the problem. The big banks still have billions of dollars in losses from the hard cap on interchange fees that they need to make up for. And so the current plan is to spread them out through their other services. The customers are still going to shoulder the burden of these billions of dollars. It’s just now the burden is going to be much harder to spot. Which makes for less media coverage and more customer acceptance –– it’s just not as easy to slam banks for doing things like raising the cost of replacing a lost debit card or charging a fee for opening a basic checking account. The debit card usage fee was a sexy, easy to highlight news byte that could be latched onto. A news anchor could make their point with a pair of scissors. But what now? The billions of dollars are still there to be dropped onto bank customers. But now it’s tiny bits here for one service, tiny bits there for another service. It just can’t be wrapped up into one easy to characterize news angle.

Sneaking Fees Onto Consumers By Stealth

ABC News does its best to try, however, offering this article to explain that banks are now going ninja style with their plan of action. Sneaky fees hidden and peppered about their services. All combining to help make up the ground they were going to lose. But most of them deposited around their whole suite of services that it is much harder to latch on like a pit bull and berate them for doing this.  The ABC Article states: “After an uproar of protests, the largest banks have said they are not going to charge customers for debit card purchases, but hidden overdraft, ATM and other fees are likely to rise, say consumer advocates.”

The New York Times also mentions that banks are trying to avoid the noise with this plan B of theirs: “Even as Bank of America and other major lenders back away from charging customers to use their debit cards, many banks have been quietly imposing other new fees. Need to replace a lost debit card? Bank of America now charges $5 — or $20 for rush delivery. Deposit money with a mobile phone? At U.S. Bancorp, it is now 50 cents a check. Want cash wired to your account? Starting in December, that will cost $15 for each incoming domestic payment at TD Bank. Facing a reaction from an angry public and heightened scrutiny from regulators, banks are turning to all sorts of fees that fly under the radar. Everything, it seems, has a price.”

A moneymorning.com article which recapped the New York Times article cites the Durbin Amendment as a direct catalyst for this strategy: “Banks blame increased regulations that limit fees and other charges for wiping out an estimated $12 billion in yearly income. Now it costs banks between $200 and $300 a year to maintain a retail checking account, but they only take in about $85 to $115 in fees per account per year. “

Durbin Not The Cause?

The ABC News Article offers a counter to Durbin being the easy scapegoat: “[Ed] Mierzwinski [consumer program director  of U.S. Public Interest Research Group] said he believes banks are offering more a la carte services from what used to be one package offered to consumers. He said the trend is similar to what telephone companies have done over the years. ‘They’re un-bundling what used to be part of service and charging you more for it,’ he said. ‘Everybody blames Durbin. That’s hooey.’ “

Much of this was already predicted. Analysts that saw what Durbin was going to do knew the banks would have to scramble to recoup their perceived losses. Billions of dollars that they counted on couldn’t just disappear from their business plans and projections. That they would work added fees and rising costs of their other services was pretty much a no-brainer. These other areas of their service were not mentioned or affected by the finance reform legislation. Leaving banks open to make these kinds of adjustments. Occupy Wall Street is far more focused on house foreclosure practices than they are on the fee a bank charges you for using another bank’s card at their ATM.

The Bottom Line

And the bottom line is, the Dodd-Frank Act and its Durbin Amendment simply didn’t take enough of the variables into account to deal with this reaction. Even after all of this was predicted by the people on both sides of the debate. Yes, these changes are more stealthy than the straight up, in-your-face debit card usage fee. But no, they’re not that surprising. Just like a ninja in a boat full of pirates, these changes are standing on the deck as quiet as can be. But are very easy to see.

The Allure of Credit Cards for Holiday Shopping

With the Holiday Shopping Season fast approaching –– Black Friday is 11 days away, Cyber Monday is 14 days away –– the payment processing industry is still getting the last pieces in place for a brisk rush in the use of credit and debit cards. The Official Merchant Services Blog continues its series focusing on the impact the holiday shopping season is going to have on both the e-commerce industry and merchant services in general.

The battlefield is set between Debit cards and Credit cards. Debit cards received a huge boon from the federal government in the form of a cap on interchange fees that went live on October 1, 2011 in the form of the Durbin Amendment. This cap restricts the interchange fees that can be applied to Signature debit card transactions. The cap restricts the charge to between 21 and 24 cents per transaction. This is a huge cut from the previous average of 44 cents per transaction, and presents debit card transactions as an attractive option for merchants to start accepting right as we slip into the big holiday shopping rush.

That has left Credit card issuers scrambling for a response, trying to stay competitive and keep consumers answering “Credit” at the checkout line.

This Reuters article suggests one of the big campaigns that credit card issuers are going to push this year is a significant raise in rewards programs for their customers, tempting them to choose credit as their swipe of choice to get access to those sweet sweet rewards. A focus on cash back and travel rewards push the right buttons for consumers while holiday shopping.

A Look At The Numbers

Here’s a small chart detailing the dichotomy between debit card usage and credit card usage from consumers in 2010:

Merchant Services graphic for debit card versus credit card usage

The chart breaks down the chosen method of payment among a survey of credit card owners from 2010. Key numbers to note are the Travel category –– which is dominated by credit card use. It is unlikely that the Durbin Amendment and its changes are going to really affect that sector. But looking at the category listed as “Personal Items” –– which would tend to be the category for holiday gift purchases –– you’ll see a much tougher competition between the two transaction choices. This is where the Durbin Amendment changes to debit card swipe fees are going to have a large impact. And this is where the juicier cash back rewards have credit card issuers hoping they can keep things competitives.

According to the Reuters article: “For example, both Chase (CCF.A) and Citibank C.UL have cards that are offering new applicants $200 in cash back after they spend $500 on their cards.”

You Have to Dig to Find the Best Deals

Some of the best deals are not always displayed in easy to find places. The Reuters article cites a Citibank deal. On the Citi website it advertises the deal as $150 cash back on your first $500 of purchases. But then if you dig deeper by google searching “Citi Dividend $200” you find the better deal directly.

Making it Work For You

The really effective strategy to maximize these deals is to combine them with other deals you will be hit with during the holiday shopping season. The Reuters article notes: “Some cards (such as the Upromise card) have their own shopping portals that combine their rebates with rebates from merchants. In other cases, you can use your rewards points directly for holiday shopping; American Express (AXP.N) awards can be paid directly to Amazon for purchases, for example.”

This type of deal stacking gives consumers a lot of shopping incentive to choose credit as their swipe choice.

Merchant Services: Defining Tech Talk

For merchants navigating their business through the e-commerce industry, there’s quite a lot of technical jargon to be aware of. It’s now more important than ever to stay on top of the latest buzz words that go along with the technology that is at the heart of e-commerce. It can sometimes be a hassle to figure out what tech trends are important to business and what’s just a passing fad. The Official Merchant Services Blog offers some insight and explanation for some of the most important technologies that are affecting businesses today:

1. Virtualization.

Virtualization is the creation of a virtual (rather than actual) version of something, such as a hardware platform, operating system, a storage device or network resources. Cloud Hosting is essentially an extension of virtualization. But it goes way deeper than that.

Hardware virtualization or platform virtualization refers to the creation of a virtual machine that acts like a real computer with an operating system. Software executed on these virtual machines is separated from the underlying hardware resources.

Virtualization is something businesses can use to improve their workflow as well as their performance. You can pretty much “virtualize” just about any hardware or software that you need. One of the classic examples of Virtualization is an operating system. Mac users who run Windows on their Mac, are using Virtualization.

2. The Cloud.

The phrase “the cloud” is getting tossed around everywhere today. From television ads that boldly utter “To the cloud!” to web hosting companies offering cloud hosting, it’s a pervasive bit of tech jargon. But what exactly is the cloud?

Cloud Computing is a model of computer use based on sharing computing resources stored in an online environment rather than having local servers or personal devices to handle the applications. Cloud computing is obtaining mass appeal in corporate data centers because it enables the data center to operate like the Internet.  Cloud solutions for businesses are often more efficient and less expensive than maintaining software and servers on local machines. This can apply to everything a business needs to function, from financial software to document and file storage. A cloud solution can take all of that online, allowing a business (from many locations even) to access the application remotely.

A cloud can be private or public. A public cloud sells services to anyone on the Internet. (Currently, Amazon Web Services is the largest public cloud provider.) A private cloud is a proprietary network or a data center that supplies hosted services to a limited number of people. When a service provider uses public cloud resources to create their private cloud, the result is called a virtual private cloud. Private or public, the goal of cloud computing is to provide easy, scalable access to computing resources and IT services.

3. Search Engine Optimization.

Search Engine Optimization (SEO) is a specific topic we’ve covered before in The Official Merchant Services Blog. But it is extremely important and worth adding to this list. SEO is about maximizing the potential of your website to attract online customers. What it boils down to is a series of tactics and actions that you take to improve your web site’s page ranking on internet search engines. The higher your site is on searches, the easier it is for potential online customers to find your site. This drives potential business to your web site.

4. Unified Communications.

Unified Communications (UC) is a really basic concept with that can sometimes be presented to people in a complicated manner. What it essentially is: The merging of multiple communications tools, such as web conferencing and instant messing, into a single interface or integrated system.  Much like Search Engine Optimization, UC can be very helpful to businesses. On even a basic level, a business can make itself more efficient by maximizing their communication tools. This could be something as easy as integrating BlackBerry with Outlook.

5. Crowdsourcing.

Crowdsourcing, a phrase coined by Jeff Howe in a 2006 Wired article, is the act of outsourcing tasks usually performed by specific individuals instead to a group of people or a specific online community through an open call. Crowdsourcing is a distributed problem-solving and production model. The way it works is problems are broadcast to an unknown group of solvers in the form of an open call for solutions. A “crowd” of users typically forms into an online community, and the crowd submits solutions. The crowd also sorts through the solutions, finding the best ones. These best solutions are then owned by the entity that broadcast the problem in the first place –– the crowdsourcer –– and the winning individuals in the crowd are sometimes rewarded.

The typical activities that crowdourcing gets use for are design tasks, the refining or carrying out of an algorithm’s steps, or help in capturing or analyzing large amounts of data. Because it can handle functions like those, crowdsourcing has become popular with businesses. Essentially it can be used leverage mass collaboration enabled by Web 2.0 technologies and then help businesses achieve their goals.

It All Ties Together

This is just a short list of tech terms that merchants will encounter while trying to get their e-commerce solution running smoothly. Remember that value to your business is the cornerstone for evaluating technologies that can enhance your business. So don’t be confused or deceived by the buzz. Gimmicks can seem tempting and attractive, but always keep in mind that the product or service needs to bring something to the table that specifically improves your business. In the five examples provided here, there is one underlying theme to take note of: They all connect.

Virtualization ties into Cloud Computing, as one is an extension of the other. SEO and UC share the same goal of optimizing the way your business does a specific function –– search engine results of your businesses’ web site for SEO, and efficient communications within your business for UC. It’s also worth noting that many SEO tactics hinge on using Social Networking tools to improve your SEO, and those same Social Networking tools can be made more efficient with UC concepts and tactics. It’s all about improving your business and the tech presented here today by Host Merchant Services can be linked together in a concerted effort to enhance what your business can do online.