Tag Archives: merchant services

Industry Terms: Point of Sale

This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort. Well 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 terms is Point of Sale (POS).

Point of Sale (POS)

The location at which a payment card transaction occurs, usually by way of a device such as a credit card terminal or cash register. The term is usually associated with retail points-of-sale, but also applies to any initial point where the customer presents payment to the merchant, such as by telephone or Internet.

The location is also sometimes referred to as Point of purchase (POP) or Checkout.

Point of Sale Terminal (POS Terminal)

A terminal at the point of sale, connected via telecommunication lines to a central computer. Authorization, recording and transmission of electronic transactions are performed through the terminal. A POS terminal manages the selling process by a salesperson accessible interface. The same system allows the creation and printing of the receipt.

The retail industry is one of the predominant users of POS terminals. A Retail Point of Sales system typically includes a computer, monitor, cash drawer, receipt printer, customer display and a barcode scanner, and the majority of retail POS systems also include a debit/credit card reader.

Restaurant POS refers to point of sale (POS) software that runs on computers, usually touch screen terminals or wireless handheld devices. Restaurant POS systems assist businesses to track transactions in real time. Typical restaurant POS software is able to print guest checks, print orders to kitchens and bars for preparation, process credit cards and other payment cards, and run reports. In addition, some systems implement wireless pagers and electronic signature capture devices.

Merchant Services Assemble!

Today we’re going to take a flight of fancy with The Official Merchant Services Blog. It is Friday after all, and with a long holiday weekend about to start, we figure it’s just the perfect time to do something silly at the blog.

With the Avengers movie setting box office records, the mighty month of May has been an amazing improvement for the Merry Marvel Marching Society as the massive amounts of money multiply and their movie studio is magnified in the public eye! Excelsior!

Mobile Movie Tickets

So I was inspired to do an Avengers themed take on Merchant Services today. What sparked this inspiration was a combination of much of my recent writing on Mobile Payments, and the fact that I utilized Fandango’s Mobile Ticket app to purchase my own ticket for the big blockbuster. Apparently I wasn’t the only one to do this. According to this article at Techcrunch.com, the Avengers set a mobile sales record for Fandango. Fandango did not release the full data to Techcrunch, but the article notes that on Sunday of the opening weekend, Mobile Ticket sales accounted for 42 percent of all sales. This figure dwarfed the previous high for mobile penetration, The Vow, which had 26 percent of its opening weekend sales via Mobile Ticket.

So here’s this bristling new technology pushing Fandango’s e-commerce forward with the convenience and ease of mobile purchasing power, mixing itself into the biggest blockbuster film opening of all-time. And of course, I got to be a part of that. Toss in the offhanded fact that The Avengers is one of my all-time favorite comic books and I simply could not resist thinking … What If?

A Marvel-ous Idea

So imagine if you will, true believers, a different world … a parallel earth. A mirror universe with an ultimate world of dopplegangers. An earth-2, a 616th out of 617 variations, where the battle cry rings forth not “Avengers Assemble!” Nay. The battle cry rings forth … Merchant Services Assemble!

And the tagline to such a bold new universe goes a little something like this: “And there came a day, a day unlike any other, when Earth’s mightiest merchants found themselves united against a common threat. On that day, the Avengers Merchant Services were born — to fight the fees no single payment processor could withstand! Through the years, their rates have prospered, charging low fees, and their service has never been denied! Heed the call, then — for now, Merchant Services Assemble!”

Box Office Smash!

Find that hard to visualize? We here at TOMS-Blog will do the visualization for you! First we have a fascinating infographic that breaks down the revenue generated by a payment processor if the Avengers Movie Box Office (as compiled by May 18) had been a Merchant Account’s May Transactions. Gaze in wonder at the nigh omnipotent processing power and infinite optimization of such a bold and titanic statement of payments:

Those are some mighty revenues that could have been generated in our alternate earth, protected by our alternate Avengers. Debuting in 1963, the Avengers comic book became one of the cornerstone’s of the Marvel Universe crafted by Stan Lee and Jack Kirby. For generations the comic has wowed its readers with a roll call of the most popular and powerful heroes that the company publishes banding together to save the world from would-be conquerors and major disasters month after month after month. One of the key characteristics of the Avengers has been its revolving door style membership, with a large variety of heroes heeding the call and joining the team. The roster has changed so often throughout the years, including everyone from the re-discovered Captain America (which contrary to the film, was not an original member of the team), to Wolverine to Spider-Man. An odd statistic that reflects how inclusive the team’s membership can be is that over the years 3 of the 4 members of the Fantastic Four have been card carrying members of the Avengers. The sole exception was the Human Torch, but the original Human Torch (an android created in the late 1930s with no actual relation to the Fantastic Four member) was a member of the West Coast Team.

Assembling the Perfect Team of Services

With this in mind, I felt the best way to finish off our flight of fancy would be to craft the ultimate roster of services and products for Avengers Merchant Services, Earth’s Mightiest Processor! Who would make the cut? And what would they bring to the table?

Host Merchant Services Captain America Header

There’s no better Avenger than Captain America. He’s the heart and soul of the team, and their recognized leader. An Avengers roster based on Merchant Services would have to include the aspects of Cap that make him the legend he is. Trust and Integrity would the core foundation. And superior customer service from the super soldier himself would be the end result of that trust and integrity.

Host Merchant Services Iron Man Header

For decades the Avengers existed on Tony Stark’s dime. The technological edge that Iron Man brought to the team helped put them one step ahead of their foes and prepared them for any threat they would have to face. He supplied their headquarters, their vehicles and their government security clearance. So any Merchant Services team based on the Avengers would need to include an Iron Man. With E-Commerce pushing the payment processing industry quickly into the future, Iron Man would keep his Merchant Services team ahead of the game in those areas. Iron Man would offer the latest in payment gateway support and e-commerce tech, assisting those in need with a complete e-commerce solution.

Host Merchant Services Thor Header

The Avengers always boasted the heaviest hitters in its roster, and because of that they could always take on the toughest foes and handle the largest threats. Thor and his enchanted hammer embody this aspect of the team. Its the basic, fundamental power that Thor brings to the table that makes the Avengers not just a global criminal deterrent, but as seen in many of the comics, a more cosmic level of deterrence. A Merchant Services team based on the Avengers would place the power of Thor squarely in its core payment processing area: Retail. Powerful processing solutions that included free equipment granting every potential customer the ability to swipe cards as often as Thor swung his hammer and took to the skies.

Host Merchant Services Hulk Header

Simply put: The Hulk smashes! So an Avengers team assembled to bring the power of Merchant Services to the world would have its Hulk smash prices. The strongest pricing there is, smashing the high fees of all those who opposed the Avengers. The gamma-infused pricing model would obviously be an Interchange Plus plan. There’s no other choice more suited to the Hulk’s strength and determination.

Host Merchant Services Black Widow header

Security, backup, and data protection are all key for running a safe Merchant Services operation. So any Avengers themed Merchant Services team worth its salt would need a member focused on security. Like the Black Widow, who would make it easy for the team’s merchants to stay up to date with PCI Compliance standards and have a plan in place for Data Breach Security protocols.

Host Merchant Services Nick Fury Header

An Avengers team providing Merchant Services would need extensive resources at its fingertips. So Nick Fury, with the full backing of SHIELD would be an absolute requirement. Fury would provide a knowledge base, an active up to date feed of industry related information, and an archive of articles and resources specifically tailored to educating and supporting a Mighty Merchant Services team assembled to Avenge the downtrodden.

Host Merchant Services Hawkeye Avengers Header

The Avengers have long relied on members like Hawkeye to help the team stay on target. The sharp eyed and sharper witted archer has always helped the team stay grounded and flexible in its ability to tackle both big and small adventures. A Merchant Services team assembled to fit the model of the Avengers lineup would need a Hawkeye among its ranks that allowed it to offer extremely flexible and viable customization. Hawkeye lets the team find the right suite of services for each individual merchant it helps.

Host Merchant Services Loki Avengers Header

Face front true believers! A blueprint for an Avengers themed Merchant Services team. A team assembled to combat the tricky foes and villains of the industry that sucker merchants in with gifts and promises of savings but actually tie them down to long term contracts rife with hidden fees and surcharges and penalties. The Avengers Merchant Services team is assembled to provide trust and clarity in this parallel payment processing industry. It’s not much of a surprise to this scribe, however, that the entire roster is comprised of features found here, in this world, on this earth. Each team member reflects some amazing aspect of Host Merchant Services. A super powered formula that merchants seeking payment processing solutions can already find right here!

Industry Terms: Card-Not-Present

Card-Not-Present

A card not present transaction (CNP) is a credit card purchase made over the telephone or over the Internet where the physical card has not been swiped into a reader. We touched lightly on the topic in our Knowledge Base Entry on MO/TO found here.

CNP can be a major route for credit card fraud. If a fraudulent transaction is reported, the bank that hosted the merchant account that received the money from the fraudulent transaction must make restitution. Whereas in a swiped transaction the bank that issued the credit card is liable for restitution. Because of the higher risk, CNP transactions have a specific set of rules that is more restrictive than the rules for retail merchants.

CNP merchants must take extra precaution against fraud exposure and associated losses, and they pay higher rates for the privilege of accepting cards. Fraudsters bet on the fact that many fraud prevention features are not used for small transactions. Merchant associations have developed some prevention measures, such as single use card numbers, but these have not met with much success. Customers expect to be able to use their credit card without any hassles, and have little incentive to pursue additional security due to laws limiting customer liability in the event of fraud. Merchants can implement these prevention measures but risk losing business if the customer chooses not to use the measures.

Card Present

A type of transaction in which the card is present and is swiped through an electronic device that reads the contents of the magnetic stripe on the back of the card. Most transactions run through a payment processing terminal are of the card present type and that’s essentially what the terminal is there to do — validate the presence of the card by recognizing the consumer is present at the point of purchase.

MasterCard Site Tools

Today The Official Merchant Services Blog takes a close look today at card association juggernaut and industry titan MasterCard. A card association is a network of issuing banks and acquiring banks that process payment cards of a specific brand, and along with Visa, MasterCard is one of the big wigs in the industry — Card associations Visa and MasterCard each comprise over 20,000 card issuing banks.. They help set the standard for the payment processing industry. Other payment card association brands include Discover, Diner’s Club, American Express and JCB. Among United States consumers alone, over 600,000,000 payment cards are in circulation. Visa, MasterCard and American Express issuers co-brand with the individual card association, for example, “WellsFargo-Visa” or “Citi-MasterCard.”

Making Moves

It was reported here in our May 4, 2012 Blog Entry, that MasterCard was gaining ground in the Swipe Debit sector of revenue, potentially crowding in on Visa’s dominance. Speculation suggested that the hard cap on Debit Card Swipe fees imposed by the Durbin Amendment from October 2011 may have helped MasterCard take some of that market share away from Visa.

MasterCard has been winning deals to handle processing of debit transactions according to the company’s Chief Financial Officer Martina Hund-Mejean. Bloomberg quotes Hund Mejean as saying in a conference call to analysts: “In every quarter we’re going after business very surgically and opportunistically. You can see those results in our numbers.”

And according to Tien-tsin Huang, a JP Morgan Chase & Co. analyst in a May 1 research note, Bank of America Corp. — the biggest debit-card issuer and catalyst of post-Durbin media frenzy — switched to MasterCard.

Collaboration on Chip Cards

On May 21, MasterCard proposed the formation of a cross-industry group to foster collaboration and alignment between networks, issuers, merchants, acquirers, processors, terminal manufacturers, card manufacturers and other groups for the implementation of EMV technology in the United States. This proposal comes from MasterCard’s January Roadmap for the transition to EMV, something the entire credit card industry is moving toward including Visa and which we discussed in our February 7, 2012 Blog Entry. MasterCard emphasized this need for a payments ecosystem to be fully aligned across the board, citing the upcoming implementation of EMV standards in the U.S. as the catalyst for that need.

You can read more about MasterCard’s take on EMV at their Website Here.

MasterCard’s Web Site Tools

Speaking of their Website … MasterCard has a very useful resource available to its visitors.

It’s Demos Page, FOUND HERE, has a flash demo that goes through the anatomy of a credit card. This helps people understand the process of using them for payments by breaking the entire item down visually. As it says in the demo, a card is more than just a piece of plastic.

Here’s a screenshot of the demo in action:

CLICK HERE to view it.

More interesting to us in the Merchant Services industry, is the next demo, the anatomy of a transaction demo. It’s a flash graphic that walks you through, step by step, a transaction. It gives you an nice journey through each step your payment takes from the moment of purchase.

Here’s a screenshot of the demo in action:

CLICK HERE to view it.

The demo page is a useful resource for any readers at all interested in how payment processing or credit cards work and should at least be thought of as an addition to one’s “favorites” tab.

Mobile Commerce Concerns [2023 Update]

Today The Official Merchant Services Blog turns its tech-obsessed eyes once again to the Mobile Payment Solution sector. Recently, Host Merchant Services became fully mobile and able to offer a mobile payment solution for Android and iPhone devices. This expansion continues, and HMS now also provides a payment processing solution for iPads as well. You can read about the expanded HMS Services in our April 9, 2012 Blog Entry.

Mobile devices are ingrained in the lives of consumers these days. Like the recurring ad sarcastically states, the smartphone beta test is over. And people are wandering around everywhere with their phone bringing their social media, camera, and buying power with them.

Suri, the voice of the iPhone, is holding the hands of stars from Samuel L. Jackson to Zooey Deschanel, helping them manage such difficult life tasks as making gazpacho to putting off cleaning till the next day on one’s calendar.

Coming with this ingratiation into our daily lives are two key elements.

We’re really just one artificial intelligence glitch/accident/sabotage away from launching the type of dystopian sci-fi worldview found in Terminator, The Matrix or Magnus Robot Fighter.
We’re flying full force into a world where we’ll also start to wave our phones around like a Hogwarts Magic Wand, paying as we go from place to place, store to store.

Mobile Payments are brisk and bustling because people are buzzing to take advantage of the convenience they offer. Here’s a graphic based on data compiled by the AITE Group showing the trend in spending via smartphone in a 5-year stretch:

But it’s not all phones-n-roses. As one might expect, the state that’s home to Cyberdyne Systems and our eventual AI-overlords Skynet, has a university — the University of California — that did a study titled “Mobile Payments: Consumer Benefits and New Privacy Concerns.”

The bottom line of this study is that American consumers are still wary of what this convenient technology will bring. The study found some interesting answers to questions about consumer thoughts on their privacy.

The study found that respondents overwhelmingly oppose the revelation of contact information to merchants when making purchases with mobile payment systems and an even higher level of opposition exists to systems that track consumers’ movements through their mobile phones.

This article by Kit Eaton at Fastcompany.com dissects the numbers in the study. Eaton states that: “The numbers are stark. When asked if they thought their phones should “share information with stores when they visit and browse without making a purchase,” 96% objected to the tracking, 79% said they definitely would forbid it, and 17% said they “probably” wouldn’t allow it–meaning just 4% were indifferent or positive about the idea. When the question was instead about information sharing (phone number, address, and so on) at the actual point of sale, 81% objected to phone-number sharing–a mere 15% said they’d probably allow it and 3% definitely so. Similar figures emerged when the information shared was respondents’ home address. “

This is all well and good and you can download the study here at this link. But what the study seems to overlook is exactly how many people, many of the people most likely polled in that very study, are already well past the point of no return in terms of their privacy concerns.

Any of those who object to tracking are likely already being tracked by Google and Facebook, social media they use with ease and frequency from their smartphones.

All those who object to sharing contact information may have already shared this information easily and readily when making an online purchase in the past few years. And statistics indicate that e-commerce is booming and replacing brick and mortar in the retail sales tug-of-war.

Eaton catches on to this flaw in the study, and states in her article: “And that’s the key to unraveling this problem right there: When you do use a current-tech store loyalty card you are effectively voluntarily giving the store your personal information, and “tracking” yourself. It’s why the cards exist, of course–they’re partly there as a sales incentive, to get customers back in the door via money-off offers, but mainly so the store can collate information about customers and work out what kind of products to stock, what offers to run, and what future products to plan for.”

And Eaton even points out that in a Pew Research Survey, 71% of Americans use the internet for shopping — meaning that they’ve already typed in their personal contact information.

So essentially, Mobile Payments seem primed to take advantage of the marketplace. The worry over security is still genuine to some extent — identity theft and phasing scams and data breaches abound as we get more and more tech ingrained. But in the end, the American consumers already dove headfirst into this when they fell in love with social media. The tweets, the +1’s and the Likes have already been tracking you. So when Facebook transforms itself into Skynet, or simply when Facebook and Google go toe-to-toe with Visa in the titanic tussle for your smartphone swipes … your dollars will be as easy to find as your latest status update or check-in.

Industry Terms: Partial Authorization

Partial Authorization

Partial Payment Authorization is a specific type of transaction process based on new rules implemented by the card associations MasterCard and Discover in 2011.

MasterCard and Discover have implemented these rule changes that require merchants in the U.S. to support Partial Payment Authorization. Host Merchant Services is here to guide you through this change with a comprehensive explanation of what this means for you as a merchant. A Partial Authorization occurs when an authorization is attempted for the full amount of the transaction and there are not enough funds available to cover the full amount, so an authorization for the amount available in the account is returned. This allows the cardholder to use the card presented for the amount available and for the merchant to obtain an additional form of payment for the difference.

A brief summary of the process is that when a card is swiped and has insufficient funds, transaction processing terminals will now prompt the merchant to accept a partial authorization. As a merchant you need to pay attention to this, and note the terminal’s prompt. You then need to confirm with the customer if they are capable of paying the remaining balance. If they can, you complete the partial transaction and then finish with a transaction for the remaining balance. If they can not, you need to reverse or void the charge. If that seems a bit complicated, don’t worry, here’s the entire process in detail, followed by further resources, including step by step guides to use this with specific terminals, that you can download and print out for your convenience.

For more information on Partial Authorization, visit our FAQ on the topic:

Partial Authorization FAQ

Industry Terms: Level I, II and III Data

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 terms are Level I, Level II and Level III Data.These terms are all related to Purchasing Card Data. There are different levels of data in the merchant account business. This three level system decides whether or not a transaction is qualified. When changes are implemented in the credit card processing industry, there are also changes in the regulations on how this data is processed, and it’s a good idea to know the difference between the various levels when thinking about data security and PCI Compliance.

Level I Data

Level I card data is typically associated with consumer transactions and limited purchase data returned to the cardholder. Level I purchasing card data includes the same information captured during a traditional credit card purchase transaction. This includes: total purchase amount, date, merchant category code and supplier/retailer name.

Level II Data

Level II purchasing card data includes the same information captured at Level I, plus the following: sales tax amount, customer’s accounting code, merchant’s tax ID number, applicable minority – and women-owned business status and sales outlet ZIP code. Level-2 data elements benefit the corporate/government/industrial buyer and can often be transmitted via a standard credit card point of sale terminal due to their restricted capabilities.

Level III Data

Level III purchasing card data includes the same information captured at Levels I and II, plus the following: quantities, product codes, product descriptions, ship to ZIP, freight amount, duty amount, order/ticket number, unit of measure, extended item amount, discount indicator, discount amount, net/gross indicator, tax rate applied, tax type applied, debit or credit indicator and alternate tax identifier. Level III is comprehensive line item detail. This data is equivalent to the information found on an itemized invoice, requires greater system capability which is provided through 3Delta Systems’ payment applications.

Industry Terms: Interchange

Interchange

Interchange is a term used in the payment card industry to describe a fee paid between banks for the acceptance of card based transactions. Usually it is a fee that a merchant’s bank (the “acquiring bank”) pays a customer’s bank (the “issuing bank”).

In a credit card or debit card transaction, the card-issuing bank in a payment transaction deducts the interchange fee from the amount it pays the acquiring bank that handles a credit or debit card transaction for a merchant. The acquiring bank then pays the merchant the amount of the transaction minus both the interchange fee and an additional, usually smaller fee for the acquiring bank or ISO, which is often referred to as a discount rate, an add-on rate, or passthru.

For cash withdrawal transactions at ATMs, however, the fees are paid by the card-issuing bank to the acquiring bank (for the maintenance of the machine).

These fees are set by the credit card networks, and are the largest component of the various fees that most merchants pay for the privilege of accepting credit cards. Visa, Mastercard, and Discover are each known as card associations. And each card association has their own rate sheets known as Interchange Reimbursement Fees. These fees make up the majority of what you pay to your processor and they vary greatly depending on the card type accepted.

Download Visa’s Interchange Fees Here

Download MasterCard’s Interchange Fees Here

Interchange Plus Pricing

Interchange Plus pricing means that the acquirer charges you a variable MSC consisting of the cost price plus a fixed markup. Interchange Plus Pricing is exclusively how we quote at Host Merchant Services. Interchange Plus, also known as Cost Plus, pricing gives the customer a fixed rate over published Interchange Fees. This pricing format is normally quoted as a discount rate (percentage fee) along with a per item or authorization fee. The great thing about Interchange Plus pricing is that you always know exactly what you are paying to your processor to services your account. Think of Interchange, and all the associated fees, as an unavoidable cost. No matter who you process with, you have to pay these fees. They may be labeled differently, or wrapped up in a confusing pricing tier, but one way or the other, you are paying Interchange fees. By understanding the markup you pay over Interchange, you know exactly what you pay to your processor and exactly what is going to the card associations. That allows you to make a decision on whether or not the markup seems reasonable for the service you get and choose your processing partner accordingly.

Here’s a small graphic explaining the basics of how Interchange Plus works:

Industry Terms: MO/TO

MO/TO

MO/TO is an acronym that stands for Mail Order, Telephone Order, specifically referring to a merchant or a sales environment in which mail or telephone sales are the primary or a major source of revenues. This classification of merchant account has a specific set of rules that is more restrictive than the rules for retail merchants but the classification enables a merchant to accept a credit card payment without a cardholder’s signature. The merchant and the cardholder do not need to be in the same physical location and because of this, these types of transactions are considered to be higher risk by the card associations.

If a fraudulent transaction is reported, the bank that hosted the merchant account that received the money from the fraudulent transaction must make restitution. Whereas in a swiped transaction the bank that issued the credit card is liable for restitution.

Visa Investigation Update

On May 2 it was revealed by Visa CEO Joe Saunders that the credit card giant was being investigated by the Department of Justice for violation of antitrust laws. One of the key elements of the DoJ’s interest in Visa for antitrust violations is its new fee, the Fixed Acquirer Network Fee (FANF) which went into effect on April 1, 2012. Saunders stated that the investigation began on March 13, prior to the fees taking effect.

Saunders revealed that Visa was being investigated during Visa Inc.’s Fiscal Q2 2012 Earnings Conference Call, which prompted The Official Merchant Services Blog to take its readers through the strange roller coaster ride that was Visa’s beginning of May in THIS BLOG HERE.

The strength of Visa’s earnings in the last quarter was framed immediately by Saunders in the conference call: Credit. As Saunders says, “In the U.S., payment volumes increased 6% for all products. Our star performer for fiscal second quarter was credit. Building on that, we continue to invest in new and expanded long-term credit relationships with our largest U.S. clients to drive growth in our core business.”

The other side of that statement, however, is debit. Where MasterCard took great strides — notably adding the nation’s largest debit card institution Bank of America, which switched from Visa.

Visa claims it was hampered by the Durbin Amendment in terms of making earnings from debit in the last quarter. As Saunders said in the conference call, “So far, the situation is playing out as we expected, and in line with our updated guidance for fiscal 2012 as well as our guidance for fiscal 2013. During the March quarter, U.S. aggregate debit payment volumes slowed to 2% growth and, as expected, has continued to decline in April. Interlink is bearing the brunt of the regulatory impact.”

Saunders then took a moment to emphasize the individual differences between Visa Debit — the well known Visa check cards that get swiped through terminals around the country — and Interlink, Visa’s PIN-debit product. Saunders noted that Visa’s swipe debit grew, but grew very slowly. And then went into detail about how Interlink was the company’s worst performer in the quarter, “We posted negative payment volume growth in each month of the March quarter. More recently, between the compliance deadline of April 1 and April 28, Interlink payment volume has experienced notable deterioration. Keep in mind, though, that in the March quarter, Interlink contributed less than 10% of U.S. debit revenue and about 2% of Visa Inc.’s overall revenue and was our lowest yielding product in the U.S. market. “

At this point in the call Saunders shifted into a very general discussion of Visa’s “strategies to compete” — essentially their new fees, including FANF, the Transaction Integrity Fee and a revised Network Acquirer Processing Fee. That led Saunders to discuss the Department of Justice investigation: “On March 13, prior to the April 1 implementation date, the U.S. Department of Justice Antitrust Division issued a civil investigative demand requesting additional information about PIN-authenticated Visa Debit and elements of our new debit strategies, including the fixed acquirer fee. In March, we met with the department twice and provided materials in response to the CID. We are confident our actions are appropriate and that our response to the DOJ supports that.”

More Commentary from Visa

During the question and answer period of the conference call, Saunders stepped up to defend Visa’s new fees. Saunders says that the fees are part of “the total structure we’ve put to deal with the Durbin regulation. We are not making money per se off of that fee. The combination of discounts and incentives that we have put together, I think, actually relate in a modest loss in the amount of $100 million a year. So we aren’t doing this with the intent of raising prices.”

Then another question comes up in the call asking about the outlook the company has for recovering from the losses in Debit due to Durbin. Saunders very vocally defends the company’s fees and strategies: “Let me just follow up on that and make perfectly clear one thing, and that is that we are never going to regain all of the market share that we had in the debit card business. Nothing that we say or none of our strategies suggest that that will happen or could happen. And nothing that we have done or thought about or said anticipates that it will happen. The environment has changed by regulation. We are operating in a different world, and we are going to live forever with less share than we once had.”

The TLDR Version from Visa

So essentially Visa’s CEO has revealed the company is being investigated by the DoJ for antitrust violations because its new fees could circumvent the point of the Durbin Amendment’s reform. But Saunders states the company is cooperating with the government probe, and stoutly defends the fees as not circumventing Durbin. Saunders says the fees don’t recoup the losses that the company will incur from the hard cap, and that the company is still taking a downturn in the debit sector even with the fees in effect. He admits that these fees are part of their strategy to deal with the legislation but feels that the company isn’t violating antitrust laws.

The transcript of the entire conference call can be read HERE at Seeking Alpha. Many thanks to them for providing it for use to bloggers and media outlets.