Tag Archives: merchant services

Walmart Pay

Walmart Pay to Deepen Information about Shopper Habits

Businesses are striving to stay on top of trends in consumer behavior, and mobile payments have been a hotbed of activity. Walmart Pay just rolled out nationwide, and the company is hoping that the app will help them collect more information about how customers use their products and make purchasing decisions. Credit card processing has seen huge changes recently, and new mobile payment apps like Walmart Pay and Apple Pay are certainly capitalizing on this trend.

Mobile Applications are seeing a ton of investment from the tech sphere, and Walmart is only one of the many companies trying to launch their propriety applications for their customers. The applications are supposed to make purchases easier for consumers. The app can track purchase history, which will allow customers to reorder frequently purchased items.

The application also speeds up the checkout process in-store, which is intended to increase the frequency that customers will visit Walmart and open their wallets. Walmart Pay is also intended to provide more information to the company. Businesses of all sizes are interested in the big data trend, and this application will help them further analyze the purchases and products that customers are viewing.

Walmart Pay also incorporates mobile payments, another major industry trend. Other apps like Apple Pay have been allowing consumers to create e-wallets that allow them to pay using their smartphones. This has been a major shakeup for credit card processing firms, and there have been many startups looking to help companies take mobile payments. While mobile payments have yet to catch on in a major way in the United States, Walmart is hoping that they can help move the needle on this.

The company is rolling out the application nation-wide, after testing the product in smaller markets across the United States. The application does not yet support third-party e-wallets, but customers can currently connect the application with debit, credit and prepaid cards. The company might decide to pair with Apple Pay in the future, but for now the options are slightly more limited. Time will tell if this application sees mainstream adoption. One thing is for sure, the evolution of e-wallets and retailer applications is going to be a transformative force for firms that do credit card processing.

Wal-Mart Sues Visa

The swipe fee antitrust lawsuit that The Official Merchant Services Blog has been covering for a few years now has an update: Wal-Mart, accusing Visa of excessively high card swipe fees, is suing Visa for $5 billion. The action by Wal-Mart is being taken because Wal Mart opted out of the settlement of the class action lawsuit between merchants and Visa and MasterCard.

This follows our previous report of the Minnesota Twins also opting out of the settlement. Wal-Mart filed the suit Tuesday, March 25, in the U.S. District Court for the Western District of Arkansas, where Wal-Mart is headquartered.

Wal-Mart’s Side of the Suit

Wal-Mart, the world’s largest retailer, is seeking damages from price fixing and other antitrust violations that it claims took place between January 1, 2004 and November 27, 2012.

In its lawsuit, Wal-Mart contends that Visa, in concert with banks, sought to prevent retailers from protecting themselves against those swipe fees, eventually hurting sales. Wal-Mart stated in court documents: “The anticompetitive conduct of Visa and the banks forced Wal-Mart to raise retail prices paid by its customers and/or reduce retail services provided to its customers as a means of offsetting some of the artificially inflated interchange fees. As a result, Wal-Mart’s retail sales were below what they would have been otherwise.”

Wal-Mart contends that that the way Visa set up the swipe fees violated antitrust regulations and generated more than $350 billion for card issuers over the time period in question, in part at the expense of the retailer and customers.

Case History

The antitrust case against Visa, MasterCard and several issuing banks stemmed from the dispute relating to the percentage of credit card transaction fees that retailers must remit to the credit card processing network. The fees generally range from 1.5 to 3 percent and are shared with the bank that issued the card. Also known as “swipe fees,” these charges serve to underwrite the supporting infrastructure that allows businesses to accept and process credit cards.

Large retailers and supporting associations have repeatedly complained about the costs associated with accepting credit cards and the fees for merchant services. These grievances resulted in a number of lawsuits filed in 2005, which were eventually consolidated into a single case known as the Payment Interchange Fee and Merchant Discount Antitrust Litigation.

There were 139 parties involved as plaintiffs, and the case was active for over eight years. In July 2012, a settlement was reached that provided $6 billion in damages to affected retailers and another $1.2 billion for a temporary reduction in interchange fees. As a further concession, Visa and MasterCard eliminated certain rules for merchant services that prohibited surcharging, which is a practice that allows retailers to recoup credit card costs by passing them on to the consumer.

After a settlement was reached in the case, major retailers such as Target, Nike, Home Depot, Lowes, Starbucks and Best Buy ultimately opted out of the settlement. Major trade organizations, including the National Restaurant Association (NRA), have voiced significant opposition to the agreement. In fact, the NRA strongly encouraged its constituent members to reject the settlement and highlighted the potential negative impact it could have on the emerging mobile payments market.

The Saga

To review the full extent of this ongoing saga, you can read our previous coverage of this settlement:

coin summit

Here Comes CoinSummit! [2023 Update]

Today marks the start of CoinSummit San Francisco, a two-day event ”connecting virtual currency entrepreneurs, angel and VC investors, hedge fund professionals and others who are looking to learn and network in the virtual currency industry.” CoinSummit will take place on March 25-26 2014 at the Yerba Buena Center for the Arts in San Francisco.  Many in the bitcoin community have been waiting for this event for a while.

The event with feature notable entities in the virtual currency community that include Marc Andreessen of Andreessen Horowitz, Brian Armstrong of Coinbase, Nic Cary of Blockchain.info, and Tony Gallippi of BitPay.

The Official Merchant Services Blog has been tapped into the ongoing saga of Bitcoin since this article in November — delving into the fascinating gimmick of Bitcoin mining. Traversing the ups and downs of this unstable and chaotic currency led to the crazy month of February and then the fall of Mt. Gox. Since that fateful day, the virtual currency industry has been scrambling. And now we have this much anticipated summit of industry experts discussing the details and potential future of BitCoin and its competitors.

Don’t Miss a Moment of the Action

For those interested, a live stream of the event begins at 9 AM Eastern time today, and can be viewed here.

Points of Interest

So some of the things we’ll be hoping the Summit delves into are: The Mt. Gox crisis, its aftermath and the future of the currency exchange. Of course industry insiders are all going to be sharing their thoughts, rants and frustrations about MtGox. Many will be raging about the losses incurred by the public and so many bitcoiners, and how badly Mark Karpeles has handled this debacle. But more importantly the issue of malleability will be explained and also how the currency and its exchanges can survive well into the future.

Which leads right into the fact that the crisis didn’t imply a complete price crash for BTC, even after hundreds of millions of dollars in permanent losses. How will exchanges guaranty transparency? Audits? Open balance sheets? These are critical issues if Bitcoin is to be adopted by mass markets. So let’s hope the summit dives right into the answers for those questions.

And then there’s the heavyweight presence to consider. The “big 4″ (Coinbase, Blockchain.info, Bitstamp, and BitPay) will all be present at this summit through its founders. Let’s see if the industry leaders explain their current strategies and growth trends.

The competitors also have some spotlight. Ripple, DogeCoin, Litecoin, and Ethereum will be pitching the advantage of alternative options, but also talking about the future of Bitcoin through smart contracts and smart property, two functionalities many think will catapult BTC prices to new levels.

That’s a quick roundup of what to expect at CoinSummit San Francisco.

pay pal

PayPal President Hacked [2023 Update]

Twitter, the modern equivalent of Mad Libs and the yellow journalism of the late 19th century, has revealed to us a gem of irony that makes the whole Target getting hacked story seem that much more poignant.

No one is safe in this bold new era of credit card hackers and identity thieves. Not even the president of a major payment processing company.

PayPal President David Marcus has been the victim of credit card fraud, he said on Monday. The leader of the online payments company revealed via Twitter that his credit card information had been stolen on a trip to the United Kingdom and he’d racked up a “ton” of fraudulent transactions on his account.

Smart Chip Didn’t Help

Marcus speculated that thieves probably skimmed the info from the magnetic stripe on his card, even though his card had an EMV chip, a technology that makes cards in Europe more secure than the ones commonly used in the U.S.

EMV® chip technology– or EMV — is a worldwide standard for credit and debit card payments based around the use of chip card technology. The acronym stands for Europay, MasterCard, and Visa, who collaborated to create the technology. The goal of this project was to create a card that worked based off of a microprocessor chip that is read by the payment terminal. Because the U.S. has yet to widely deploy embedded chip technology, the nation has increasingly become the focus of hackers seeking to steal such information. The stolen data can easily be turned into phony credit cards that are sold on black markets around the world.

Is it Just a Marketing Ploy?

Marcus adroitly used the incident as an opportunity to plug his own company, suggesting that the fraud wouldn’t have happened if the merchant had accepted PayPal. His company is currently trying to expand its presence as a payment option in physical stores, putting it in direct competition with platforms like Square and Google Wallet.

It also comes right when data breaches are major news in the payment processing industry. On December 19 2013, Target confirmed a sophisticated data breachoccured. In their press release they stated: “Approximately 40 million credit and debit card accounts may have been impacted between Nov. 27 and Dec. 15, 2013. Target alerted authorities and financial institutions immediately after it was made aware of the unauthorized access, and is putting all appropriate resources behind these efforts.  Among other actions, Target is partnering with a leading third-party forensics firm to conduct a thorough investigation of the incident.”

So Marcus’ misfortune happens right at the time identity theft, credit card fraud and hackers are on everyone’s mind. With EMV chip cards being touted as one of the best solutions to the hacking problem, Marcus’ mishap even taps into that buzz.

The Bitcoin Roller Coaster

Back in November, The Official Merchant Services Blog dove into the Bitcoin currency craze with an in-depth look at Bitcoin mining.
Bitcoin, introduced in 2008 by a programmer or group of programmers under the name Satoshi Nakamoto, has no central issuing authority and uses a public ledger to verify encrypted transactions. It is a virtual currency that can be bought, sold and mined electronically.

The Hammer is Dropped

We focused on the technological gimmick that is Bitcoin mining – essentially powering multiple computers to create the virtual currency from virtually nothing. The rest of the media since then has been concentrating on the other aspects of Bitcoin, including its use as a money laundering tool. In that same month of November, Federal prosecutors in New York filed charges against Ross William Ulbricht for running the Silk Road website, where customers allegedly used Bitcoins to buy and sell drugs.

And on February 9, Florida stepped into the spotlight concerning virtual currency and money laundering. Bitcoin traders. Florida prosecutors have charged three men, saying that their use of a site called localbitcoins.com violates laws against unlicensed money transmitters, according to a report in the Krebs on Security blog.

Bitcoin Banned in Russia

More bad news for Bitcoin came from Sochi Olympics host country Russia. The country banned Bitcoin altogether. Russia’s Prosecutor General’s Office recently made its stance on Bitcoin abundantly clear. “Systems for anonymous payments and cyber currencies that have gained considerable circulation — including the most well-known, Bitcoin — are money substitutes and cannot be used by individuals or legal entities,” the office said in a recent press release reported by Reuters. Any use of Bitcoin will be considered “potentially suspicious,” as the Russian government has linked Bitcoin usage to illicit activities.

Russia is only the latest country to release a statement detailing its position on Bitcoin. In early December, China barred financial institutions from using Bitcoin, though it didn’t ban the currency outright. In late January, Canada released a statement that said Bitcoin is not legal tender in the country. Countries like these have expressed skepticism in Bitcoin not only because of its links to money laundering, but also for its overall volatility.

Market Troubles

Bitcoin has plunged more than 8 per cent after a Tokyo-based exchange halted withdrawals of the digital currency, citing technical malfunction. Mt. Gox, a popular exchange for dollar-based trades, said in a blog post it needed to “temporarily pause on all withdrawal requests to obtain a clear technical view of the currency processes.”

It promised an “update” – not a reopening – on Monday, February 10, Japan time. Bitcoin exchange Mt. Gox said customers can take out cash “as normal” and it’s working to resolve technical issues that prompted it to halt withdrawals of the digital currency.

“It’s not about cash at all, only about Bitcoin,” Michael Keferl, a communications officer for Tokyo-based Mt. Gox, said. “There is a problem in the way transactions are verified.”

Things then rebounded. The price of Bitcoin rose 0.3 percent to $683.66 at 9:07 a.m. London time, according to the CoinDesk Bitcoin Price Index, which averages prices from exchanges including Mt. Gox.

Bitcoin App Dropped by Apple

On February 5, Apple struck a blow against Bitcon. The Blockchain app, downloaded 120,000 times during its two years in Apple’s iTunes App Store, was the most popular way for people and companies to transfer bitcoins from one another. Apple removed it from the store on February 5. Blockchain immediately shot back with a statement, accusing Apple of getting overly aggressive with future competitors. Apple is rumored to be developing its own mobile payment system.

And Speaking of …

With the crazy ups and downs of Bitcoin, one thing is undeniable: Virtual currency is a profitable new marketplace. Which means Apple isn’t the only group trying to develop their own alternative. An untraceable currency called Zerocoin is being designed by Johns Hopkins University researchers to compete with other virtual moneys such as Bitcoin. The researchers say that if virtual currencies are going to exist, there should be one that provides the same kind of privacy that people have when exchanging traditional forms of money.

What Does This all Mean?

The virtual currency movement has the potential to be the next stage in the evolution of payments and transaction processing.
Advocates say such digital currencies, made possible by complex computer formulas, will eventually be widely embraced by users who want to exchange money instantly and directly, without a bank as middleman.

While it may seem like the wild west in terms of security and long term viability, the concept of virtual currency is actually well in line with what we’re already surrounded with as consumers. By and large we continually swipe plastic through card readers when we buy everything from a coffee at Wawa to a down payment on a new automobile. So a paperless and coinless world is already one in which we exist. It’s not hard to envision a next step where the currency itself is virtual.

But that does leave security issues which are relevant and real. Relying on even the best encryption still leaves risk and susceptibility to fraud.

However, it seems governments are still playing catch up to the technology itself. Focusing on money laundering and the instability the anonymous exchange of currency brings to the banks themselves, as well as the sale of illegal goods and services. All of which are certainly part of their purview. It’s just a weird transition period as the infrastructure of the old school banking system doesn’t seem all that prepared to deal with the fluidity of a virtual currency snaking through the world’s consumers.

In short, it’s an interesting time to bear witness to the evolution of money and the marketplace. Governments will catch up with virtual currency. And consumers will embrace convenience more and more until we face a world that may actually give up on paper and coins completely, in favor of your PIN numbers and some encryption codes that store the value of you.

Heartland Payments Sues Mercury

According to a story in the payment processing industry periodical Digital Transactions, Heartland Payment Systems Inc. filed a federal lawsuit on Wednesday against Mercury Payment Systems LLC. The suit alleged deceptive pricing by Mercury allowed Mercury to lure scores of merchants — well, 30 — away from Heartland and attract prospects to Mercury that had been weighing the two companies for payment-processing services.

Heartland filed  suit in U.S. District Court for the Northern District of California, San Francisco. The suit charges Durango, Colo.-based Mercury with false advertising, unfair competition, and intentional interference with contractual relations under the Lanham Act and related California law.

Specifically, Heartland alleged Mercury used inflated network fees to more than compensate for acquirer pricing that undercuts pricing from Heartland. This practice, Heartland alleged, made Mercury’s overall pricing appear to merchants to be lower than Heartland’s, when in fact it is higher. The practice has caused some 30 merchants to abandon Heartland in favor of Mercury over the past six months, Heartland said in the suit.

Heartland  examined roughly 300 Mercury merchant statements and found what it claims is deceptive pricing in 75% of those statements, the company said in its complaint.

In response to Heartland’s allegations, Mercury issued this statement on its website: “Mercury will vigorously defend against the lawsuit filed by Heartland. Mercury Payment Systems’ rapid growth in the electronic payments market is directly attributable to the value and flexibility we provide our merchants and partners, and we stand by our business and pricing practices. We are proud of our consistently high satisfaction rates and low merchant attrition rates among merchant acquirers over the past 10 years.”

Mercury chief executive Matt Taylor told Digital Transactions News Mercury does not engage in deceptive practices.

The Heart of the Matter

Here’s one example Heartland used in their complaint: A restaurant chain, compared pricing from various payment processing companies, including Heartland and Mercury.

Heartland indicated it would charge interchange fees at cost, plus seven (7) cents per transaction plus 0.02% of the dollar value of transactions and a $7.50 monthly service fee – all competitive or standard industry rates. Mercury’s bid indicated the same except for a 6.5 cents per transaction fee, half a cent below Heartland’s bid.

As a result, 50 of the chain’s 57 outlets switched from Heartland to Mercury for payment processing. Review of a 2013 merchant invoice from Mercury clearly demonstrates that Mercury was charging a falsely inflated interchange fee of four (4) cents per transaction, making their effective per-transaction fee 10.5 cents instead of their contractually agreed rate of 6.5 cents.

What Are Network Fees?

Network fees are assessed by Visa, MasterCard, and other card networks. Unlike interchange, which is set by the networks but flows from acquirers to card issuers, network fees flow to the networks themselves. In so-called interchange-plus pricing, both interchange and network fees are commonly understood to be pass-throughs to merchants.

When markups on network fees occur, merchants are often unaware of them because of the complexity of merchant statements, which discourages close analysis.

The Bottom Line

Heartland’s suit asks for relief in the form of three times damages as determined by the court as well as three times lost profits. It also asks for an injunction to stop Mercury’s alleged pricing tactics.

Remember When?

This revelation about Heartland comes at a time when the payment processing industry is still reeling from the news of the Target Data Breach.

The major hack of discount retailer of Target that stole credit and debit card data from 40 million accounts right smack dab in the middle of the holiday shopping season.

The sophisticated hack reportedly took place over several weeks — starting on Black Friday and possibly extending all the way through December 15th — and is said to involve nearly all Target stores in the United States. News of the hack was initially reported by noted security blogger Brian Krebs, who also broke the news in 2012 of the Global Data Breach.

Which is a reminder of Heartland itself, because in 2009, credit card processor Heartland Payment Systems disclosed that thieves had broken into is internal card processing network, and installed malicious software that allowed them to steal track data on more than 130 million cards.

Hacker

Hackers find new target: Mariott [2023 Update]

hackers

Holiday Inn, Marriott Hotels Suspected Targets of Data Breach

The Official Merchant Services Blog has breaking news regarding the ongoing series of credit card data breaches. One the heels of the major hack of discount retailer of Target that stole credit and debit card data from 40 million accounts right smack dab in the middle of the holiday shopping season, there’s yet another target of hacker greed: Holiday Inn. Lodgers at Holiday Inns, Marriott and Renaissance hotels may have had their payment card details compromised for much of 2013 as revealed a hotel management company  on Monday.

White Lodging Services, a hotel management company, warned in a news release it suspects point-of-sale systems at restaurants and lounges on 14 of its properties were compromised between March 20, 2013 and Dec. 16, 2013. Guests who did not use their card at restaurants and lounges, as well as those who used their room account for purchases from those outlets, were not affected, the press release revealed.

The Merrillville, Indiana-based company said it manages hotels like Holiday Inn under agreement with hotel owners. The company is a separate entity from the specific hotel brands it operates. White Lodging Services said it has contacted federal law enforcement and initiated a forensic review of its properties. It runs more than 169 hotels in 21 U.S. states.

databreach1

The Full List

The full list of the food and beverage outlets affected by the suspected breach were located at the following hotels:

  • Marriott Midway, Chicago, IL
  • Holiday Inn Midway, Chicago, IL
  • Holiday Inn Austin Northwest, Austin, TX
  • Sheraton Erie Bayfront, Erie, PA
  • Westin Austin at the Domain, Austin, TX
  • Marriott Boulder, Boulder, CO
  • Marriott Denver South, Denver, CO
  • Marriott Austin South, Austin, TX
  • Marriott Indianapolis Downtown, Indianapolis, IN
  • Marriott Richmond Downtown, Richmond, VA
  • Marriott Louisville Downtown, Louisville KY
  • Renaissance Plantation, Plantation, FL
  • Renaissance Broomfield Flatiron, Broomfield, CO
  • Radisson Star Plaza, Merrillville, IN

 

White Lodging last week told the New York Times it was investigating a potential security breach, covered in a report from security writer Brian Krebs. The same Krebs who broke the news on the Target Data Breach as well as the Global Data Breach.

What Was Hacked?

The unlawfully accessed data may have included names printed on customers’ credit or debit cards, credit or debit card numbers, the security code and card expiration dates.  Guests who used or visited the affected businesses during the nine month-period and who used a credit or debit card to pay their bills at the outlets might have had such information compromised and are encouraged to review their statements from that time period.

One idea posited on how this happened is RAM scraping. Attackers are planting malicious software, known as “RAM scrapers,” on POS devices, which capture unencrypted card details after a customer has swiped a card, defeating other security measures in place intended to protect sensitive details. White Lodging said customers’ names as printed on credit or debit cards, the card numbers, the cards’ security code and expiration dates may have been unlawfully accessed.

What’s Next?

Financial institutions have reissued some payment cards and are monitoring other credit and debit cards for unauthorized activity, the company said. White Lodging is also arranging to offer one year of complimentary personal identity protection services to all affected cardholders.

The unfolding disclosures have drawn the attention of the U.S. Congress. The House Energy and Commerce Committee is scheduled on Wednesday to hear from senior executives from Target and Neiman Marcus along with the U.S. Secret Service about how data breaches can be prevented.

Host Merchant Service’s PCI Compliance Initiative

Looking at the threat of a data breach, Merchants must wonder what the solution can be. Is there protection available? PCI Compliance is a great foundation for transaction security. The standards and protocols set up by the PCI-DSS Council are the first step a merchant needs to take to protect their data. And Host Merchant Services offers a PCI Compliance Initiative that helps its merchants quickly and seamlessly take that step.

Also, one thing to consider if you are a merchant and you are worried about data breaches affecting your bottom line: Host Merchant Services Data Breach Security Program. Click that link to download a PDF explaining the value-added service HMS provides its merchants that goes above and beyond just simple PCI Compliance and helps ensure a merchant’s peace of mind.

 

Credit Cards

Can Chip Cards Stop the Hax? [2023 Update]

The massive data breach at Target is a big shining beacon illuminating exactly how behind the times the United States remains when it comes to credit card security — namely EMV® chip technology.

EMV is a worldwide standard for credit and debit card payments based around the use of chip card technology. The acronym stands for Europay, MasterCard, and Visa, who collaborated to create the technology. The goal of this project was to create a card that worked based off of a microprocessor chip that is read by the payment terminal. Because the U.S. has yet to widely deploy embedded chip technology, the nation has increasingly become the focus of hackers seeking to steal such information. The stolen data can easily be turned into phony credit cards that are sold on black markets around the world.

In fact, KrebsOnSecurity, the website that broke the news of the Target hack, has reported that the card information stolen in the Target Data Breach has been showing up on the black market. Credit and debit card accounts stolen during the security breach have reportedly flooded underground black markets, going on sale in batches of one million cards. The cards are being sold from around $20 to more than $100 each.

Over the last decade, most countries have moved toward using credit cards that carry information on embeddable microchips rather than magnetic strips. The additional encryption on these aptly named smart cards has made the kind of brazen data thefts suffered by Target almost impossible to pull off in other countries. Which is why as of Q4 2012, there were roughly 1.62 billion EMV cards in consumers’ hands and 23.8 million terminals deployed throughout Europe, Asia, and Africa. About 80 countries have adopted the technology as a standard. By comparison, about 1% ofcredit cards issued in the U.S. contain such technology, making the United States a tasty target for hackers.

“The U.S. is one of the last markets to convert from the magnetic stripe,” Randy Vanderhoof, director of the EMV Migration Forum told the LA Times. “There’s fewer places in the world where that stolen data could be used. So the U.S. becomes more of a high-value target.”

The credit card industry reports the U.S. accounted for only 24 percent of global credit card payments by volume in 2012, but it accounted for 47 percent of the fraud.

So Why No Chips in the U.S.?

According to experts the reasons the U.S. lags so badly in adopting smart cards are complicated. In part, there hasn’t been the political will to demand that businesses and financial institutions make the change. One might think the Target data breach would spur politicians to action or at least get consumers to light a fire under those politicians. But the Target hack is just one in a growing list of data breaches, and the 40 million compromised cards are rather mundane.

In April of 2011, the Playstation Network was hacked, compromising the vital information of 77 million accounts, and 24.5 million Sony Online Entertainment accounts. This has been touted as one of the largest personal data heists recorded in history, and prompted Sony to shut down its services for a month. In 2009, credit card processor Heartland Payment Systems disclosed that thieves had broken into is internal card processing network, and installed malicious software that allowed them to steal track data on more than 130 million cards.

If neither of those data breaches could spur on the adoption of EMV cards, it’s unlikely the Target hack will move the needle. The inertia built up against the smart cards then must be due to some other reason Analysts also say the payment processing system in the U.S. is more complicated, with merchants, credit companies and banks reluctant to spend the big bucks it would take to convert a system with 1 billion credit cards to EMV from magnetic stripes. But that’s still too murky.

The primary reason such technology has taken so long to make its way into the U.S. is far more simple: Chip-embedded cards are more expensive to produce. Each merchant would have to purchase new equipment to hand them.

What the Future Holds …

The good news for consumers is that the U.S. is indeed moving to embrace smart credit cards. The Official Merchant Services Blog reported almost two years ago that the United States was moving slowly but surely toward adopting chip cards. Visa took the lead in the U.S. push, reporting that as of December 31, 2011, the credit giant had issued more than 1 million credit cards that use “chip” technology to store consumer payment information. Visa made an announcement in August 2011 hat it planned to start issuing more EMV — Europay, Mastercard, Visa — smart cards to push the industry toward better security and an easier transition to mobile payments.

In the last couple of years major card issuers have laid out road maps for upgrading the card technology, and many have set out to achieve this by October 2015.

TransFirst, Host Merchant Services’ acquirer and one of the premier providers of transaction processing services and payment processing technologies in the U.S., issued a mandate in response to the EMV push. TransFirst said that Visa will require U.S. acquirer processors and sub-processor service providers to be able to support merchant acceptance of chip transactions no later than April 1, 2013. Visa also intends to institute a U.S. liability shift for domestic and cross-border counterfeit card-present point-of-sale transactions effective October 1, 2015, and for fuel-selling merchants by October 1, 2017.

Ocotber 2015 was chosen because at that point major credit card companies will change their rules about who is liable for fraudulent purchases caused by security breaches. Under the new rules, the entity in the payment chain — merchant, credit card, banks — deemed to have the weakest security will be liable. Credit card companies can’t make anyone adopt the technology, but they’re giving them a hard nudge.

The Bottom Line

While the Target Data Breach once again brings up the topic of credit card security, it seems like the U.S. is still poking along with its slow adoption of EMV chip cards. Hackers will still continue to target the low hanging fruit that the largely magnetic stripe based U.S. credit card industry still works with. But EMV chips and increased digital security of cardholder information is coming. October 2015 looms closer and closer.

Marketplace Fairness Act Looms

Marketplace Fairness Act Looms [2023 Update]

With the 2014 holiday shopping season about to grind down to the home stretch, the sales figures are already rolling in. And once again, online transactions have maintained their brisk and healthy growth from years past.

Cyber Monday chalked up record sales, rising a reported 17 percent from 2012 according to USA Today. Cyber Monday, the Monday after Thanksgiving, has been embraced by the media as a flashpoint date for online retail sales during the traditional holiday shopping cycle. The convenience of online shopping versus the hassle of holiday shopping traffic gets the consumers interested. Combining that convenience with the staggeringly low sale prices of the time period and suddenly the appeal of online shopping becomes apparent for folks looking to get their holiday shopping done inexpensively and hassle free.

So with the boom in online shopping, there exists a disparity in sales tax in some instances. This isn’t something that comes up too often in Delaware, the original home base of Host Merchant Services. But many states have sales tax for purchases, and are finding it difficult to compete with the surging online retail business.

While legislation in some states requires sales tax be paid on some online transactions, most sales are still untaxed. In many states that translates into a 5-10 percent price advantage for the online vendor. But it also is a 5-10 percent disadvantage for local brick-and-mortar stores that not only collect sales taxes, but also pay property taxes, employ local residents and support local causes.

Thus there’s been a movement to level the playing field by attacking the sales tax disparity. The Marketplace Fairness Act is the solution to the sales tax disparity. The marketplace fairness act is:

“Marketplace Fairness Act of 2013 – Authorizes each member state under the Streamlined Sales and Use Tax Agreement (the multistate agreement for the administration and collection of sales and use taxes adopted on November 12, 2002) to require all sellers not qualifying for a small-seller exception (applicable to sellers with annual gross receipts in total U.S. remote sales not exceeding $1 million) to collect and remit sales and use taxes with respect to remote sales under provisions of the Agreement, but only if such Agreement includes minimum simplification requirements relating to the administration of the tax, audits, and streamlined filing. Defines “remote sale” as a sale of goods or services into a state in which the seller would not legally be required to pay, collect, or remit state or local sales and use taxes unless provided by this Act.”

Which means out-of-state online, catalog or remote would need to collect sales tax at the time of the transaction, just as local retailers are required to do. For this to happen each state would have to simplify their sales tax laws, making it easier for national vendors to calculate the tax and manage it.

The Marketplace Fairness Act would pave the way for states to require online sellers from out of state to begin paying the sales tax they’ve escaped for years. Senator Dick Durbin (D-Ill.) said “The Marketplace Fairness Act would level the playing field for small businesses by allowing states — if they so choose — to treat brick and mortar retailers the same as remote retailers.” Durbin, who is sponsoring this bill, is best known for authoring the Durbin Amendment, a piece of legislation that caused much controversy in the Payment Card Industry when enacted.

The act passed the Senate. But has yet to be voted on in the House, with all signs pointing to it not passing the House.

There’s been an uptick in media coverage and analysis of this bill. Essentially the verdict is that the increased sales volume from the holiday shopping season is going to push the political infrastructure to once again address the issue of state sales tax and online merchants.

And that raises the most interesting question of all for the credit card processing industry:  Is the global aspect of online shopping going to take a huge step towards pushing sales tax to a federal layer and remove it from the states? 

That’s a very big picture outlook on the issue. But as online shopping becomes more and more prevalent, the issue gains traction. The world is becoming a pretty tiny place due to the saturation and convenience of communication. You can video-call people on the other side of the globe instantly with your smartphone right now. Mobile Wallets and NFC are seeking to make it so that you can wave your magic wand, or iPhone, and pay for things instantly. State based sales tax laws look to fall behind the curve of quick evolving technology. Five, ten, even fifteen years down the line the way we make purchases and the marketplace wherein we make those purchases may have evolved past the scope state sales tax. The Marketplace Fairness Act seems to be just a precursor to a larger movement afoot in the retail sales industry.