Tag Archives: credit card processing

Are Smartphones the Credit Cards of the Future?

Credit card processing will continue to evolve over the next generation, according to a prominent consultant with deep roots in the industry. And, inevitably, merchants who accept plastic will need to keep pace with the changes, working with their merchant services providers to stay on top of new technology.

Jerome Svigals — known as the “father of the credit card” for his work engineering the magnetic stripe technology on which it is based — predicts that within a decade high-end mobile phones (smartphones) will supersede plastic as the primary payments vehicle.

“Banks have got to start thinking ahead for this transition period,” the former IBM project manager told American Banker magazine recently. “If they don’t, they are going to be left with a set-up that will not be useful in this new environment.”

In his report “Retail Bank 2020: A Roadmap for the Future”, Svigals maintains that the U.S. retail banking industry will evolve to have three supporting pillars: smartphones, the Internet and intelligent banking applications. The Internet, he says, will become the primary banking channel, with smartphones elevated to the channel of choice for transferring funds, opening accounts and applying for loans.

Approximately 35% of today’s bank transactions take place at teller stations; Svigals’ predicts that number will shrink to 15% by 2020 and 5% by 2029. The shift to the Internet will result in 55% of transactions, 50% of service requests and 45% of sales being initiated online by the end of the decade; in 20 years, 80% of all transactions will be Web based.

The technology exists to make smartphones the rulers of the banking universe. Earlier this summer, PayPal demonstrated its new phone-to-phone payment mechanism that uses NFC (near field communications) radio technology that will be built into future handsets. The video showed two users exchanging funds by merely touching their phones together.

Meanwhile, AT&T, Verizon Wireless, and T-Mobile are partnering to develop a mobile payment system that works with smartphones. Businessweek says such a system would “turbocharge mobile payments in the U.S.”

With cash and checks steadily falling in popularity with U.S. consumers, non-cash alternatives like credit/debit cards and electronic payments already account for more than half of all their purchases, according to the industry newsletter The Nilson Report. Additionally, more than half of U.S. consumers — and close to 80% of those in the 18-to-34 age bracket coveted by retailers — will rely on mobile financial services within five years, according to Boston consulting firm Mercatus. These statistics appear to support the idea that smartphones will replace credit cards for a majority of consumers in the near future.

Of course, in the near term the transition from credit cards to smartphones for financial transactions may resemble a see-saw: Consumers holding off on adopting mobile payments until enough merchants accept them, and merchants delaying implementation until enough consumers demand it. But the trend seems clear. Smartphone owners, start your engines!

A Different Kind of +1

The Official Merchant Services Blog takes a moment to look at a transition in marketing strategies that is extremely relevant to small business : Postage. The United States Postal Service announced this week that it is going to raise its postal rates. Most notable is the cost of the first class stamp is going up one cent from $0.44 to $0.45.

Some other drastic changes are being investigated as well, as cited in that article from Reuters: “The Postal Service has asked Congress for permission to drastically overhaul its business, including cutting Saturday mail delivery and eliminating a massive annual payment to prefund retiree health benefits. The agency also is studying thousands of post offices and processing facilities for possible closure.”

Digital Over Direct Mail

This change is indicative of a shift in how the country does business. And it’s not really all that surprising. The USPS has to react to more than just competition from Federal Express and UPS. Businesses are thriving on the internet. And that makes using more traditional means of marketing –– i.e. print-based marketing –– too little bang for a business owner’s buck.

Which brings us to this interesting article from Multichannel Merchant that suggests that suggests that the postal rate increase is going to cut into the amount of printed materials that businesses mail –– specifically catalogs. Printed direct mail marketing materials, in my experience, have always had a really low impact with customers. Catalogs were usually stronger than other direct mail marketing pieces, for sure. But overall junk mail is called junk mail for the very reason that people ignore it. You send out thousands of direct mail items and are hoping to get dozens of responses, if you’re lucky. So things were already looking bleak for the future of direct mail marketing strategies.

The 2012 postal rate increase only furthers things a long right at the time when internet based marketing strategies are becoming very user friendly for just about everyone.

Social Media Plus One

Social Media can have a much stronger impact with your customers when utilized properly. And there are a lot of easy-to-find resources to help small business owners take advantage of Social Media. Getting tips on how to best use Facebook Ads and Google Ads and Twitter feeds to reach customers organically and generate strong responses to your business and its activities. Host Merchant Services provides some of those resources itself. This very blog is designed with the intent of reaching out to our merchants to help keep them on top of trends and news that help their business thrive. The company also provides an article archive on topics related to the industry so merchants can understand processing better. The company actively keeps its Facebook presence updated. It’s all part of the goal of reaching out to our merchants to help their business run better. The company also provides e-commerce solutions and social media and marketing advice and analysis for its customers. Beyond just the marketing aspects, Host Merchant Services is here to provide its merchants the assistance they need for their e-commerce opportunities.

So take this 2012 postal rate increase as a sign of how marketing for your small business now exists in a very different environment, and you have an opportunity to reach out to customers with the money you don’t give the USPS. You can reconsider reaching out via direct mail and focus on reaching out to your customers through facebook, twitter, your own site and blog, or any combination thereof. At the very least you’ll avoid those higher postal rates, and should be able to drum up just as many points of contact as your mailers were generating.

Print Still Has Its Place

Keep in mind, this isn’t a suggestion to go completely digital. You don’t have to abandon print-based marketing strategies. But you can certainly give serious consideration to adjusting how much you budget for them. If the price increase isn’t worth your money, you can scale back and focus your efforts and resources on something web-based. Use the postal rate increase as a catalyst for boosting your businesses’ e-commerce. Sticking to the most basic plan:

You can have your business online, with a website.
You can offer your products online, with a catalog.
You can process transactions online, through your website and its catalog.
You can use a merchant services provider like Host Merchant Services, to handle those transactions.
You can then connect to customers and potential customers through social media services like Facebook or Google Ads or Twitter.

From the Multichannel Merchant Article: “Deb Dyer, vice president of marketing for bedding merchant Cuddledown, says the rate increase “won’t keep us from sending catalogs to our house file or prospects, but it will make us look at other digital prospect opportunities and programs.” “

Information Flows Digitally Now

And that’s really what the postal rate increase is most likely going to do for a lot of other merchants. Give them the perfect opportunity to explore the powerful tools they have at their disposal with social media and e-commerce solutions. To put it in perspective, as I was reading the article I link here from Multichannel Merchant, my eyes were drawn to the Facebook “Share” button, Google “Plus One” button and Twitter “Tweet” button that were all conveniently placed on the left-hand side of the article. It’s all right there. One click and you can get yourself involved in a whole new marketing plan for your business.

In short, a lot of people have stopped getting their news from print media. They ignore direct mail sending it to the trash as junk mail. But they’re still consumers and you can reach them with well executed social media marketing strategies. The United States Postal Service is just reminding you that you have this option, albeit indirectly.

Why the Durbin Amendment Got it Right [2023 Update]

The people in Washington aren’t exactly popular these days, and mostly for good reason. Unemployment is high, the so-called economic recovery is weak, and small businesses are hurting. However, another round of stimulus is on its way, and this time it might just work. Even better, this stimulus comes at the expense of banks that got us into this mess to begin with. To be fair, there is plenty of blame to spread around but that is a topic for another day. The Durbin Amendment went into effect October 1^st, and many businesses will see a significant reduction in their monthly debit card processing fees. This isn’t just for pin-based transactions, but applies to all Visa and Mastercard logo signature debit cards, as well as card-not-present debit card transactions via Internet and phone order. On average, fees will be reduced by over 1% per transaction, resulting in a windfall for small business.

There are a lot of arguments against the Durbin Amendement. I’ll outline and debunk the major ones here:

The savings will not get passed along to the merchants.

True, your merchant services company is not required to pass the savings along to you. If you are on tiered pricing instead of Interchange plus, you aren’t going to receive the benefits. But this is also creating a huge opportunity for merchant services companies like us to introduce customers to the benefits of our pricing model and to save them a very significant amount of money. In short, if you’re merchant services company isn’t passing the savings along to you, it’s time to find a new merchant services company.

Merchants will not pass the savings along to their consumers.

Again, true, but not necessarily the point. In a free market, any time you create margin, you create opportunity. Businesses all over the country are getting a little relief in their margins. Some will choose to use that margin to compete on price. Some will pocket the profits. Many will use that extra profit to reinvest and grow their businesses through hiring and infrastructure enhancements. No matter how you slice it, this is money directly to small business and that is great for the economy.

Banks will charge fees to offset the lost revenue.

Sure, this is happening at some high profile institutions like Bank of America. But other banks are also using it as an opportunity to lure you away. Banks are limited by competition in terms of how much of the fee they can pass along to you before you bolt to a competitor. That is the free market working the way it should. When you take monopolistic fees like Interchange that are unavoidable to merchants and move them to the front of the transaction, consumers and small businesses ultimately win. You now have the ability to shop for the best deal, where transaction costs were previously hidden and passed along in other ways.

Overall, the Durbin Amendment should provide a multi-billion dollar boost to small businesses everywhere, and the government didn’t have to shell out taxpayer dollars to make it happen. Sure, it may be somewhat arbitrary, and too much regulation is never a good thing, but the card associations that impose Interchange fees operate as a cartel with monopolistic powers, so the government has a valuable role to play in the process. We should all celebrate the Durbin Amendment and the tremendous benefits to small business. If you’re not setup to take advantage of the savings, what are you waiting for? Apply now!

Durbin Preparations Continue [2023 Update]

The Official Merchant Services Blog is staying on top of the Durbin Amendment. Today’s article that we analyze comes from the New York Daily News.
The first thing that stands out about this article compared to many of the others on the impending Durbin date of October 1, is the casual, but easy to relate to lead of the story. The New York daily news appeals to its readers with some examples of other common cost increases that everyone who might pick up this story can relate to: An increase in toll costs and an increase in Netflix subscription costs. With those two things firmly entrenched in the reader’s mind, the article then shifts into discussion about the Durbin Amendment. And like Host Merchant Services said back when it analyzed the legislation, the New York Daily news makes the point that consumers are going to feel the heat from the cap on swipe fees.

Key Summation of the Durbin Amendment

The key summation of the Durbin Amendment from this article is short and to the point:

“The new legislation, called the Durbin Amendment, roughly cut the amount banks can charge retailers who swipe your debit card – known as an interchange fee – in half.

That’s great for retailers, who were paying an average of 44 cents per transaction, but bad for banks. In some ways, at least, it’s bad for customers, too.”

The Daily News article points out two banks are shifting the burden directly to its customers: Wells Fargo, which is testing a $3 monthly fee for debit card users in 5 states, and SunTrust which has already announced it is launching a new account type, Everyday Checking, that charges $5 a month for debit card use. These examples show that the banks are simply making a lateral move with the fees, so that they are no longer found under the scope of Durbin, but are still being extracted from consumers.

These examples follow suit with the current media landscape that is finding more and more banks ready to unveil new programs and changes to their services all related to the Durbin Amendment. But the article does go on to explain that some of these changes are still in the testing phase, and a detail oriented customer may be able to find ways to avoid these debit fees by taking advantage of other services and perks their bank provides.

The next big thing the article mentions is banks scaling back on debit card rewards programs. Host Merchant Services found this to be a likely reaction to Durbin Amendment changes as well when it analyzed the legislation.

The article concludes, however, with some information that recent articles about the legislation have been less inclined to delve into: Credit cards. The legislation primarily attacks debit card swipe fees, and this opens up a lot of potential for the big credit card companies to vie for consumers to switch from debit to credit. And the article makes a final point about how smaller banks can end up exempt from the changes. So it leaves the reader with a lot of different options on how to deal with any challenges they may face with their purchasing choices on October 1.

HMSExpress is the answer

Here are a couple of questions asked on entrepenuer.com in an article titled How Can I Streamline My E-Commerce Operation?

The questions asked were:

Is it possible to allow customers who have an account on my website to pay with the click of a button without having to fill out their credit card information each time? Continue reading →

Advantages of Online Credit Card Processing

The e-commerce industry’s existence hinges on thriving and healthy online credit card processing. People who own businesses today utilize online payment gateways and online credit card processing because of an increasing number of consumers that shop online and own credit cards. Here are some points outlining the advantages of obtaining online credit card services like those you can find at Host Merchant Services: Continue reading →