Tag Archives: credit card processing

industry terms: MasterCard cross border fee

This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort. We want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: we deliver personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access.

Today we will define the MasterCard Cross Border Fee. MasterCard charges an additional fee to merchants for all transactions acquired in the United States that involve a credit or debit card issued outside of the United States. For example, if a cardholder uses a Canadian-issued MasterCard to make a purchase from a business here in Delaware, that merchant will be assessed a cross border fee for accepting an international card.

Introduced in 2006 by MasterCard, the fee was originally 10 basis points. Since then, it has been raised to 30 basis points in 2007, and then to the current level of 40 basis points in 2008. The cross border fee is initially charged to acquirers, who then pass the fee on to merchants.

If the transaction is settled in U.S. dollars, the cross border fee is 40 basis points (0.40%) above the interchange rate for that card. If settled in a foreign currency however, the fee is increased to 80 basis points (0.80%). This fee, along with MasterCard’s acquirer program support fee, are the only two volume-based fees that MasterCard charges on transactions involving credit cards issued in another region than where they are acquired.

NRF Opposes Interchange Settlement

It’s been a little while since the Official Merchant Services Blog touched on the increasingly sensitive topic of the Credit Card Interchange Settlement. We first talked about the possibility of ‘The Big Cash Comeback’ when the settlement was first announced, and later we discussed the opposition to the settlement.

Seven years after the first lawsuits were actually filed against the bank card networks and some leading banks, a tentative settlement was reached on July 13 of this year. The agreement has had many mixed reviews, and some big name retailers have come out against it, including most recently the National Retailers Foundation, the nations largest retail trade association. The NRF’s members operate 3.6 million stores nationwide, however the organization itself is not involved in the lawsuit, which includes individual and class merchants as well as trade-group plaintiffs.

Under the proposal, the main defendants, Visa and MasterCard will pay $6.6 billion in damages and temporarily reduce interchange rates to save merchants another $1.2 billion. Merchants also will get greater freedom to surcharge card transactions and could form bargaining groups to negotiate interchange with the networks. In return, the networks will be freed from future legal challenges from merchants regarding interchange rates and merchant rules, even from merchants that didn’t participate in the current lawsuit.

I think the key points here are the temporary reduction of interchange rates as well as the fact that all merchants give up their rights to sue Visa and MasterCard upon accepting the settlement. Merchants will most certainly be satisfied by the reduction of interchange rates, but the drop will only be temporary. After a few months Visa and MasterCard will raise them again, and continue to collect outlandish fees for credit card transactions. Also, not every merchant is involved in this suit. I don’t think it’s a good deal for merchants to give up any of their rights, particularly the rights to any future litigation.

The National Association of Truck Stop Operators (NATSO) released a statement on Monday, announcing their dismissal of the settlement, “We joined this lawsuit in search of real reform to a broken system, one that is shielded from normal competitive forces. This proposed settlement does not achieve this goal. It lacks meaningful fixes to a system that allowed Visa and MasterCard to set artificially high swipe fees and provided retailers and consumers with no choice except to pay.”

This statement echo’s the cries of dissenters, who say the settlement protects the status quo more than anything, and will not change the way the networks set interchange.

In conclusion, the settlement still faces harsh criticism, and Visa and MasterCard have not had much to say to those who oppose it. Only time will tell if the plaintiffs decide to accept the deal, or push back for a settlement more in their favor. Host Merchant Services will keep you informed of all the latest news involving this legal battle between the merchants and the card-issuing giants.

Industry Terms: Credit Card

Welcome to The Official Merchant Services Blog’s Knowledge Base effort. We want to bring clarity to the payment processing industry’s terms and buzzwords. We want to remove any and all confusion merchants might have about the industry. Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access. Today we decided to get as basic as possible. Our term is credit card. No, really, credit card. We noticed that we’ve been adding to this database for months now and kind of skipped over the most basic element of the industry.

Credit card processing hinges on the use of credit cards. So, without further hullabaloo:

Credit Card

A credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder’s promise to pay for them. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

Credit cards are issued by a credit card issuer, such as a bank or credit union, after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card. Merchants often advertise which cards they accept by displaying acceptance marks – generally on stickers depicting the various logos for credit card companies like Visa, MasterCard and Discover. Sometimes the merchant may skip the display and just communicate directly with the consumer,saying things like “We take Discover” or “We don’t take credit cards”.

When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering apersonal identification number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a card not present transaction (CNP).

Electronic verification systems allow merchants to verify in a few seconds that the card is valid and the credit card customer has sufficient credit to cover the purchase, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or point-of-sale (POS) system with a communications link to the merchant’s acquiring bank. Data from the card is obtained from a magnetic stripe or chip on the card; the latter system is implemented as an EMV card. For card not present transactions where the card is not shown (e.g., e-commerce, mail order, and telephone sales), merchants additionally verify that the customer is in physical possession of the card and is the authorized user by asking for information such as the security code printed on the back of the card.

Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect. The cardholder must pay a defined minimum portion of the amount owed by a due date, or may choose to pay a higher amount up to the entire amount owed which may be greater than the amount billed. The credit issuer charges interest on the unpaid balance if the billed amount is not paid in full (typically at a much higher rate than most other forms of debt). In addition, if the credit card user fails to make at least the minimum payment by the due date, the issuer may impose penalties on the user.

Merchants

For merchants, a credit card transaction is often more secure than other forms of payment, because the issuing bank commits to pay the merchant the moment the transaction is authorized, regardless of whether the consumer defaults on the credit card payment. In most cases, cards are even more secure than cash, because they discourage theft by the merchant’s employees and reduce the amount of cash on the premises. Finally, credit cards reduce the back office expense of processing checks/cash and transporting them to the bank.

For each purchase, the bank charges the merchant a commission (discount fee) for this service and there may be a certain delay before the agreed payment is received by the merchant. The commission is often a percentage of the transaction amount, plus a fixed fee (interchange rate). In addition, a merchant may be penalized or have their ability to receive payment using that credit card restricted if there are too many cancellations or reversals of charges as a result of disputes. Some small merchants require credit purchases to have a minimum amount to compensate for the transaction costs.

Costs to merchants

Merchants are charged several fees for accepting credit cards. The merchant is usually charged a commission of around 1 to 3 percent of the value of each transaction paid for by credit card. The merchant may also pay a variable charge, called an interchange rate, for each transaction.

Merchants must also satisfy data security compliance standards which are highly technical and complicated. In many cases, there is a delay of several days before funds are deposited into a merchant’s bank account. Because credit card fee structures are very complicated, smaller merchants are at a disadvantage to analyze and predict fees.

Finally, merchants assume the risk of chargebacks by consumers.

For more information on how Credit Card Processing works, view our step-by-step guide here.

Mobile Payments Made Live![2023 Update]

I’m back to once again speak about Mobile Payments and their presence in Delaware. In case you missed my last blog, it’s here. It’s really finally here. Barclaycard Mobile Wallet is an active program that participating merchants at the waterfront in Wilmington, DE, and along Main Street in Newark, are using. Right now you can use your phone to buy stuff!

So that’s exactly what I did. I set out to visit some shops and buy some stuff. To give this test run some authenticity, I decided to try and buy things I actually needed. Let’s see how the process works and how useful it is for real-time shopping!

But first, I needed to update my settings. After downloading the application, and adding a credit card to my account, I had noticed I wasn’t seeing any offers. Kara from Barclaycard saw my blog and reached out to help me.

So I needed to add another step in our process for getting the technology up and running. It may seem like a bit much at first, but trust me, it’s fast and easy to initialize.

Kara noted that I needed to add locations to my account to get the offers to show up. ZIP codes are the easiest way to do that. Wilmington’s ZIP is 19801, and Newark’s is 19711.

The Revised Set of Steps

So now, our updated steps to bring the power of mobile purchases right to your hot hands look like this:

Step 1: Visit this site and register for an account. This is key. You can’t just download the app and go. You need to register online first. Since you’re here online reading this blog, you can take a moment to click that link and get that out of the way.
Step 2: You go through the process of setting up an account. Choose a username, password, give your information.
Step 3: You add the card you want the wallet to charge.
Step 4: You can then download the app from the app store or google play store.
Step 5: Activate the app on your phone, and go through the log in process. You’ll be asked for your passcode, and to log in with your username and password, and even one of the additional security questions.
Step 6: Go to settings — the gear icon — and go to offer locations. Add locations. Use the ZIP code that works best for you (I used both). Then you go to …
Step 7: BOOM! Start buying stuff!

The Buying Stuff Part

Thanks to Kara’s timely advice, I had offers streaming through my phone immediately. Armed with mobile purchasing power and enthusiastic curiosity, I leapt from my centralized blogging and news update headquarters — taking this story live and direct to the macadam of Main Street Newark.

My first target was National 5 and 10, located on 66 E. Main Street. Boasting the world’s largest selection and lowest prices for University of Delaware merchandise, I decided to zero in on … art supplies. I needed a sketch book and a new pencil and eraser set to continue to design and draw projects like this more than I needed a new Blue Hens ball cap.

So I went to work racking up an impressive spree of supplies:

Mechanical Pencil with lead refills, 0.5 mm fine point lead size. For the nitty gritty line work.
Hi-Polymer Pentel white plastic art eraser. Because they take the pencil marks away but leave the ink behind.
5.5 x 8.5″ sketchbook, to help me rough out all my creative ideas.
And to get my purchase up over $10, four 5 x 9″ bubble mailer envelopes, so I can send slick prints of my best portfolio pieces to people interested.

Total: $11.24

I took this stash of artistic loot to the one counter that was open. When it was my turn I happily stepped up and asked if I could purchase these with the Barclaycard app, and flashed my phone at the cashier. This caused quite a stir, as it seems I was the very first customer to utilize this technology. Excitement buzzed in the air. We moved this transaction over to the other side of the area where the Barclaycard Mobile Wallet Terminal was kept. Another cashier took over the transaction, but a crowd began to form. The owner came over to see this landmark purchase of a pencil, eraser, sketchbook and some envelopes take place. Customers took notice. And then it happened.

The cashier rang up the items. I had my phone out and the app open. I was prompted to scan the QR Code on the terminal. The app took over and in a flash my payment was recorded. I approved it with the click of a button. The cashier printed out my receipt and just like that it was over. Payment made. Stuff bought. Once the wow factor wears off, the process will turn out to be very easy. As fast as swiping a credit card, with none of the hassle of keeping a card on you in your wallet. Mobile wallet finally lives up to the hype. I take my phone everywhere, as do most people. I need it for emergencies — but also to keep up with work and friends while on the go. So tucking this payment power into it just consolidates everything, making shopping a seamless part of the package.

But Wait, There’s More

I made the effort to obtain a purchase of $10 or more to take advantage of the offer I saw on my screen. But it didn’t seem to take. Later in the day I found out the offer might not be live yet. So I moved on to my next stop: Switch Skateboarding, located on 54 E. Main Street. No worries here about finding an item over $10 in price, but there were no visible offers for Switch anyways, so I put that out of my mind and focused on finding something I actually needed — wrist guards.

I haven’t been on a skateboard since I was 15 years old. But I’ve needed items that Switch sells almost regularly for the past four years because I’m a roller derby referee. I picked up a pair of Destroyer wrist guards. I chose them primarily because I already have a pair of 187 wrist guards and an old pair of pro-tec, so wanted to see if these fit any more comfortably. They cost $17.

Once again I stepped up to the counter and announced my intention to purchase this item with the Barclaycard app. There was decidedly less of a fuss about it as the staff at Switch seemed to be both more chilled out in general and ready to handle the unusual request. However, just like at National 5 and 10, there was a swapping of cashiers in terms of who handled the transaction. Switch uses a different setup than 5 and 10. The skateboard shop is working a completely virtual system, running transactions through a computer. The payment seemed even more seamless than at 5 and 10. All that was involved was opening up their gateway in their browser, inputting the details of the transaction, scanning the item’s barcode and then it was up to me. Switch has a static, standing QR Code on a card atop its counter. I had my app open and ready. When prompted I clicked the button and my phone scanned the barcode. Once again it was lightning fast. And after clicking my approval of the sale, the transaction ended.

Success. I was now armed with a fully operational mobile payment telephone, a pair of brand new wrist guards and some art supplies that I needed. This took the idea of buying things with a wave of my phone from concept to cold, hard reality. I found myself wanting to do this everywhere.

The Only Downside

As far as I was concerned I came away from this excursion with only one negative — there just wasn’t enough visible presence to let consumers know this existed. At 5 and 10, I created a crowd, but I knew going into the store I could buy things this way. The terminal itself stands out as it is different from other terminals. But I wonder if it’s all that visible since it’s not exactly a place where consumers actually look. I’m reminded of the time I spend standing in line at places like Wawa or 7-11, where I’d really like to just swipe my phone and go. I don’t even look at the terminal until I have to. How do you let people know they can do this now? Do you start to ask them, “Credit, Debit or Mobile?”

Or do you just get the word out there with more and more buzz, like this blog or a demonstration in the store at key high traffic times? Do I just keep telling my friends, “Hey, check out what I can do?”

It’s probably a mixture of all of those ideas. The technology is now here. It works. And it’s very easy to use. The ball is rolling. It just needs to pick up speed and add more snowy mass as it rolls along.

Apple’s Passbook to replace Gift cards

Today the Official Merchant Services Blog, along with the rest of the world, will take a look at the new iPhone 5 being debuted in California today. Specifically, we will look at one of the new iOS 6 features called Passbook.

Passbook is a new app, exclusive to iOS 6, the feature lets users store and quickly retrieve electronic versions of tickets, boarding passes and merchant cards all in one place according to executives at the WWDC 2012 today.

The app aims to replace almost all paper tickets, coupons and plastic gift cards that might be taking up space in a user’s wallet. Apple already has partnerships with a number of airlines, retailers and venues including Virgin Air, Delta, and Starwood Hotels.

In a demo, senior Vice President of iPhone software Scott Forstall showed how to use the app with a San Francisco Giants baseball ticket. The feature will also work with Starbucks and Apple Store gift cards. Adding to its already intriguing features, the app is dynamic, so users will be notified of any flight delays or gate changes. Users can also be alerted when near a movie theater that they have tickets to or rewards points that can be redeemed.

The app uses a special QR code that can be scanned by the participating retailer to redeem that ticket or coupon. Done with a particular card in Passbook? A virtual shredder “shreds” it on screen.

passbook iphone2

Is it a mobile wallet?

Well no, Apple hasn’t announced any kind of payment feature yet for the Passbook app, but don’t rule that out just yet. With the migration towards digitizing all of this info, as well as the time and location based triggers that give you what you need, when you need it this app is the one to watch in the festival of new software coming out of Cupertino, CA.

Passbook will roll out along side iOS 6 on September 19^th, and the iPhone 5 will be begin shipping September 21^st. As usual, we here at Host Merchant Services will keep you updated with all of the breaking news in the mobile payments world.

Industry Terms: AVS

This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort. We want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access. Today’s term is the Address Verification System, or AVS.

The system was designed by card issuers to aid in the detection of suspicious credit card transaction activity, and verify that the cardholder’s address info matches what the banks have on file. The service is provided as part of a credit card authorization for mail order/telephone order transactions (MOTO) or Internet e-commerce transactions. A code is received with an authorization result that determines the level of accuracy of the address match. This verification helps secure the most favorable interchange rates for the merchant.

Visa, MasterCard, Discover, and American Express support this service, and when paired with a CVV confirmation the result is a secure, verified transaction. To verify a customer’s address, a merchant will need the cardholder’s billing ZIP code and the house or apartment number of the billing address. The merchant does not need to enter in the street, city or state of the cardholder. While AVS is not intended for use as absolute protection against suspicious transaction activity, it is an important step in securing non-face-to-face transactions. Host Merchant Services recommends to all merchants that they secure these types of orders with both AVS and CVV.

Visa’s V.me, a new breed of mobile wallet

The Official Merchant Services Blog again looks into the mobile wallet world today, by introducing the new product from Visa, Inc. called V.me. Last week we discussed in detail the BarclayCard mobile wallet system, which has come here to Delaware at participating locations in Newark and Wilmington.

Visa plans to roll out its own version of a mobile wallet solution by the end of this year. Although the Card Issuer is the largest in the world, the entrance seems late in a game filled with tough competitors. Visa has been testing a beta of the program with five large online retailers. Buy.com, Bidz.com, Cooking.com, Modnique and PacSun are the retailers currently offering the e-commerce side of the service on their web sites. Customers have the option when checking out to sign up for the program, set up the account and add a card, all without leaving that merchant’s site. Buy.com went live with V.me first in May; the others followed suit a few months after.

The program will eventually allow mobile device users to pay for goods from participating merchants at physical locations, most likely by the end of 2012. V.me uses a ‘hybrid’ security system of the device’s secure element, as well as cloud servers to store customers’ card credentials. This technique is reportedly more secure than the Isis system of storing card information directly on a device’s SIM card. In August, Google decided to upgrade to a cloud based system of storing card data, however they kept reliance on the phone-based element to house a prepaid virtual card that initiates transactions and identifies users.

Visa will also include a location-based offers service with V.me, that will likely use geo-tagging to identify customers most visited locations, and market offers accordingly. Competitor Google Wallet, while nearly a year old, has struggled due to the reliance on NFC-based technology that is not wide spread enough yet. Other companies such as Apple Inc., and MasterCard have also announced their entrance into the mobile payment game. Apple, with its Passbook wallet feature expected in the new iOS 6 will feature QR code reading technology. MasterCard announced a mobile wallet program in May, called PayPass wallet service that claims to be open to third parties for development and flexible to a wide variety of payment brands.

In summary, Visa’s V.me is one of the mobile wallets that I’ll be eagerly waiting for, however it seems a long way off from implementation now. For Delawareans, Barclays’ Barclay Card Mobile Wallet app seems to be the only one to hit the ground running here in the First State. A watchful eye will be kept on this close race of Banks, Card Issuers and Credit Card Processors to see who will be the one to win Mobile Wallet Dominance.

Mobile Payments Descend on Delaware [2023 Update]

It’s here. It’s really finally here.

Mobile Payments are available in Delaware.

Barclaycard Mobile Wallet is an active program that participating merchants at the waterfront in Wilmington, DE, and along Main Street in Newark, are using. Right now you can use your phone to buy stuff!

For Me, This is Big

Normally I try to maintain some composure and tact when scribing The Official Merchant Services Blog but I’m a little too excited to keep calm. Mobile Payment Processing– as I noted in my last blog entry about how long it was taking Near Field Communication to get here — is a topic I’ve been fascinated with my entire time working in this industry. And I’ve reported how each new take on the technology has been inching forward, how the pieces are in place for X, Y or Z to finally break through and for U.S. consumers to be able to start waving their phones around like lightsabers, cha-chinging their way through purchases.

Got the Ball Rollin’

For the most part it’s been tiny test markets using the things that are active — test markets nowhere near me or my shopping stomping grounds. And then there’s been other technology riddled with delays. And then there’s been discussions about security issues. It just seemed like this crazy new purchasing power was not going to come to a store near me anytime soon. The Magic 8-Ball Blog I wrote back on October 18, 2011 seemed to have encapsulated the entire issue.

Me: When will Mobile Payments get here?

Magic 8-Ball: Ask Again Later.

And even just the other day I was stuck in the same morass of Mobile Payments taking too long to get going, as I reviewed the status of NFC and looked at Isis getting ready to finally hit test markets — in Utah and Texas.

Then I found out about Barclaycard and their Mobile Wallet. It’s here. It’s live. It’s working in the areas where I shop.

So Let’s Get Started

All I had to do was sign up and start trying this technology out. This blog is as close as I will probably get to real-time reporting on the Credit Card Processing Industry. I’m going through the steps to acquire this purchasing power right now. Here’s what I’m doing:

Step 1: Visit this site and register for an account. This is key. You can’t just download the app and go. You need to register online first. Since you’re here online reading this blog, you can take a moment to click that link and get that out of the way.
Step 2: You go through the process of setting up an account. Choose a username, password, give your information.
Step 3: You add the card you want the wallet to charge.
Step 4: You can then download the app from the app store or google play store.
Step 5: Activate the app on your phone, and go through the log in process. You’ll be asked for your passcode, and to log in with your username and password, and even one of the additional security questions. But then you go to …
Step 6: BOOM! Start buying stuff!

Now Where do I go to Buy Stuff?

I now wanted to witness the firepower of this fully armed and operational battle station … I mean Mobile Wallet. Here’s a list of participating merchants:

Newark

SAS Cupcakes
MainStream Nutrition
Switch Skateboarding
National 5 and 10
Caffe Gelato

Coming Soon to Newark:

Gecko Fashions*
Over Easy*
Moxie Boutique*
Cosi*

Wilmington:

Al’s Sporting Goods
Harry’s Fish Market & Grill
Dryrock Café
Veritas
FireStone
eeffoc’s
Water Street Deli
Olde World Cheese Steak Factory
Cosi
Bella Vista Pizzeria
Zaikka Indian Grill
Riverfront Produce
Harry’s Seafood
Extreme Pizza

But Wait, There’s More!

This is more than just a way to buy things with your phone instead of your wallet. This program is a combination of sales promotion and mobile payment power. Now that I’m signed up and active, I will be able to pay with mobile and receive special offers from local merchants. That’s the added value — merchants who participate in this mobile wallet community will be able to offer me deals and specials. Think of it like this: It’s a mobile wallet with a built in groupon. It’s merging the best aspects of QR-Code technology and consumer convenience.

The app functions off of the QR-Code technology that we’ve discussed multiple times in the past. This technology was already ahead of other options as it had been harnessed for marketing purposes in the previous few years. In fact, it’s the one mobile payment option I’ve already had the good fortune of experiencing back in May through Fandango. These mobile payment solutions are generally pretty straightforward. They usually consist of an application on a merchant’s device that allows them to scan a barcode, or a QR Code. The QR Code scanning is becoming extremely popular, giving companies the ability to run marketing promotions as well as purchases through the use of the QR Code and its ability to capture information. Fandango’s Mobile Ticket program allows you to purchase your movie ticket through their application and then just scan the QR Code they send to your device when you arrive at the theater. This program has been gaining increased success and popularity this summer, and as we reported, set record highs for the company with the release of the blockbuster Avengers Movie.

What Barclaycard is doing is in-line with this description. You will use QR Codes to make purchases with your phone. But the app also seamlessly fuses the marketing power into the experience. As a Barclaycard Mobile Wallet user, I have access to exclusive offers available and redeemable only through the wallet. Offers will update at least once a week. I currently have no offers, but I just signed up 10 minutes ago so I will have to check back.

Twitter Tune Up: Targeted Ads [2023 Update]

Today the Official Merchant Services Blog would like to focus on social media advertising, and the recent steps Twitter has taken in order to expand their marketing prowess and outreach.

The social media giant with its 140 million monthly active users is second only to Facebook. As we have previously reported here, Facebook had taken steps to create a realm of e-commerce unseen before in the social media world. By transitioning from the ‘Like’ button for certain pages and products, to the ‘Want’ button, in an attempt to allow users to create personalized wish lists, the move will eventually lead to more purchases through Facebook itself.

The move spurred social media innovation, and Twitter has since come up with its own targeted marketing approach. The new capabilities will allow marketers to identify, advertise and even send direct messages to consumers based on interests and likes. For example, a consumer who has indicated an interest in digital photography would see ads for cameras and other photography related products.

There are two main ways Twitter will attempt to narrow down its user base.

First, Twitter has divided its users into 350 different interest categories. They range from “education” to “investing” to “sports,” and are further divided into subcategories.

The second way involves targeting a more specific set of users, by creating a custom list of usernames that are relevant to what they want to promote. The custom segments would allow marketers to reach users who share similar interests with that username’s followers, however they cannot target that users’ entire following.

Twitter has given the example of an indie band promoter that creates a custom audience by adding the ‘@usernames’ of similar bands, ensuring an audience with a similar taste in music.

Questions still remain about the overall effectiveness of the targeted ads. For example, the click through and conversion rates are still unknown. Twitter has been testing the system using beta advertisers, who can attest that there has been “significantly increased audience reach” as well as high engagement rates.

To bring this all back home, I believe there is outstanding value in Twitters’ targeted advertising system. It will allow marketers to go beyond ‘Promoting’ their tweets, a system that would raise your post to the top of users Twitter feeds for a short time, however there was no targeting involved whatsoever. With this new system, end users see more products that appeal to them or are related to their interests in some way. Thus driving sales for that particular product, if the right target market is reached. This could be especially useful to the average small business owner, who may only rely on social media to promote the company, instead of a dedicated web page.

This could lead to a large boost in mobile commerce, through Twitter users who simply find an advertised product to their specific liking. The push is meant to increase ad dollars to Twitter from eager marketers, as well as more effectively reach its user base with relevant ads and content. It seems logical that the next step would be for Twitter to implement a direct buying feature for their 140 million users, this would further spur innovation and the competitive mobile payments market, as well as open up new E-Commerce solutions for businesses and advertisers.

NFC Taking Too Long?

When I first started writing for this website, and The Official Merchant Services Blog, a topic I was both fascinated with and completely astounded by was Near Field Communication (NFC). It seems fitting that on the eve of the National Football League’s 2012-2013 season debut — a rare Wedensday Night Football game — which features a gridiron battle between the Dallas Cowboys and New York Giants, two mainstays of the National Football Conference (NFC), that I would once again be tackling the topic of NFC. The first time I saw the acronym I thought it was talking about football.

It wasn’t.

It was talking about technology that was poised to revolutionize payment processing and make everyone’s phone their wallet. We were going to be radically transformed from a cashless society relying on plastic cards with magnetic stripes into a cashless society relying on waving around your smartphone at registers and terminals who pick up your signal and magically charge your account. One swipe of the phone, and no hassle whatsoever, as Near Field Communication did all of the talking back and forth between devices while you figured out what you were going to buy next.

But over the past couple of years, the dominance of NFC has pretty much mirrored the Dallas Cowboys own dominance of the NFC in which they play. A lot of hype, but not a lot of tangible financial results. The biggest proponent of NFC has been Google Wallet, but another giant of the NFC industry-in-waiting has been Isis. Just like the NFL season, Isis — the mobile-payment joint venture backed by AT&T Inc., Verizon Wireless and T-Mobile USA Inc. — is poised to get underway in September too.

VeriFone Systems Inc., a maker of payment terminals that Host Merchant Services offers for free to qualifying merchants that sign up with them, is working on the Isis project. Chief Executive Officer Doug Bergeron said in an interview with Bloomberg that VeriFone is preparing to introduce Isis in Salt Lake City and Austin, Texas.

Isis had initially planned to roll out its NFC-based mobile payment service in the first half of 2012. The joint venture tweaked its strategy last year, opting to use credit-card companies to handle transactions rather than the carriers themselves. This shift has taken time to implement because its been focused on ensuring payments can be made securely — the single biggest fear that consumers have voiced about mobile payments.

Are You Ready for some Mobile?

So now that Isis is on the cusp of kicking off NFC-fueled mobile payments in select areas, is this validation for the technology? It doesn’t seem that way. Google Wallet’s NFC-integration still hasn’t come to my local shopping areas. But many other mobile payment options have. I can and have bought movie tickets on my phone. This was done using the QR-Code technology which seems to have had a quicker integration into the U.S. Economy at large. It was something that many companies were already using for their marketing so utilizing the technology to work for payments was faster as it relied on infrastructure already in place, and consumer fears of security were lower since consumers had already opted in with the codes.

Toss Square’s partnership with Starbucks and PayPal’s partnership with Discover into the mix and it seems like the Mobile Payments industry has decided it wants to score an industry-wide touchdown with or without the help of NFC. In fact, Devindra Hardaware suggests in a column for VentureBeat that the industry could still make use of the ideas in NFC, but completely bypass the ground game entirely by going with an aerial assault guaranteed to score big with consumers: “There’s still plenty of room for mobile wallets to disrupt the way we pay — just look at the Pay with Square with app, which lets merchants charge you just based on your name and face. In many cases, you won’t even need to pull your phone out of your pocket.”