In Miami, Florida, a new policy will soon be implemented of no cash fares.  Instead, passengers will load funds onto special debit cards.  The cards will be “contact less”, meaning the rider merely taps the card against a terminal and fare is paid and deducted from their card balance.  Miami operates an extensive public transit system over one of the largest counties in the United States, and their system includes not only hundreds of buses but the elevated Metrorail train and downtown driverless elevated People Mover system.  The cost to count and process the vast daily load of coins and paper dollar bills has become prohibitive.  Passengers may still purchase weekly or monthly unlimited-ride passes as well.

These are only two examples of a growing and worldwide trend.  Handling cash requires extra security and background checks on employees and there is always the risk of robbery of the store or perhaps while making late-night bank drops.  Banks usually charge commercial customers to obtain rolls of coins and bills needed to stock cash registers and make change.

The cash register itself is now more and more replaced by a point of sale system (POS) that has the capability to scan bar coded merchandise and swipe plastic payment cards including credit, debit, gift and loyalty cards and get instant approval through a high-speed Internet connection.  The steel “cash” drawer below is becoming almost an afterthought and more often a storage drawer for signed customer receipts.

The Internal Revenue Service always more closely scrutinizes the tax returns and accounting records of traditional “all cash” businesses which have often been found to be hiding income or involved in illicit money-laundering schemes.  Accounting is simplified when all payments are processed electronically and direct-deposited into the business checking account, and those banking records easily integrated into any standard accounting software program.

And if cash is dying or dead, paper checks are definitely terminal.  Those businesses that do still accept checks from their customers almost always now utilize a process of check verification that compares the bank account number and customer drivers license to a national bad check database and then approves and electronically processes the transaction as an ACH debit out of the customer’s checking account that is direct-deposited into the merchant’s own business checking account.  The paper check is then handed back to the customer as a receipt.  No need for a daily trip to the bank to deposit checks!  This process of electronic check conversion is secure and has eliminated the risk of bad checks but is still more time-consuming than accepting the customer’s check card, and for this reason many businesses no longer accept checks at all.  Even business checking account customers are usually provided by their bank with a debit card for making purchases.  In addition, monthly invoices are often encouraged to be handled as automatic debits from the customer’s account, or paid via their bank’s online bill pay system.

For both consumers and businesses alike, the new federal Checks 21 regulation has made life easier.  A paper check may be scanned in and emailed or transmitted to their bank and deposited with Remote Deposit.  The new regulation states that such an electronic image of a check is just as valid as the presentation of the original check.  Bank of America’s ATM system now directly scans in deposited checks, no envelope is used, and the deposit instantly credited.

We are in the twenty-first century and truly entering a cashless world.  A business that is not utilizing these and other forthcoming electronic payment systems is wasting time and money and will find themselves increasing inefficient and competitively disadvantaged.

Your go-to expert and free consultant for electronic payments processing is your account executive with your merchants services provider.  They are familiar with all of the above strategies and can set up your accounts and provide all necessary hardware and software.

Gift Card & Loyalty Card Programs

What does this mean to you, the merchant?  Well, with more debit cards coming into use, you will see an increase in the number of your own customers that will present a debit card for payment at the register, versus a credit card.

In today’s economy many people have maxed out their credit cards or have damaged their credit and can’t qualify for an actual credit card.  Then there is the growing sector known as “The Unbanked”, individuals who are not in the banking system, either by choice or due to credit problems.  These people often carry pre-paid debit cards purchased at check cashing stores, etc.  They load cash onto the cards and use them just like any bank-issued debit card.  The cards carry either the Visa or Mastercard hologram.

Debit cardholders may elect to have you swipe their card as either debit, requiring the customer to enter their Personal Identification Number (PIN), or have you swipe their card as “credit”.

Most merchant normally actually ask the customer, “Debit or credit?”  This is not the way to save yourself money on transaction processing costs.  As most merchants know, the cost is much less to process a transaction as debit than credit.  Debit transactions do not run through the Visa or Mastercard interchange network, and thus bypass their fees.  A typical credit card transaction might cost a merchant 1.6% and 20 cents transaction fee.  To process that same transaction as a debit, the cost is typically 0.7% and 30 cents.  The difference will average roughly $100 savings per $10,000 in sales. ( In this example, 1.6% would represent a transaction at the lowest tier, known as Qualified.  If the card has rewards, such as cash back or airline miles, it would run as Mid-qualified at around 2.7% or more.  A business or corporate or foreign card at 4% or more.)

So why would you leave the choice of processing to the customer?  They don’t care, trust me.  What you should be doing every time you take a debit card is swiping it as debit and presenting the PIN keypad to the customer so they can enter their PIN.  If you ever get a customer who for some odd reason really prefers to run the transaction as credit, just hit your cancel button and re-swipe as credit.  Some pre-paid debit cards do carry a transaction fee to the cardholder for credit swipe transactions and I have met people who incorrectly believed their bank would charge them a fee for a PIN debit transaction.

Being proactive like this can save you thousands of dollars a year, and with debit card use on the rise, processing debit cards properly will become ever more critical.

What’s that you say?  You don’t have a PIN keypad?  Well, contact your account executive with your merchant processor and order one today.  They cost anywhere from $100 to $300 and are often available refurbished.

Many credit card terminals actually have a PIN pad function built in, the customer enters their PIN directly on your terminal keyboard.  Check if your terminal does this.

One final remark about the savings by processing a debit card as debit versus credit.  Depending upon what your merchant services provider (MSP) is charging you for debit card PIN-based transaction versus credit card, there is a price point below which you may save money by choosing to swipe a debit card as a credit card.  Example:    You sell ice cream cones.  Average sale ticket is $10 for a family’s purchase.  To process as a PIN-based debit,  the cost to you will be .70% plus 30 cents.  That comes out to 7 cents and 30 cents= 37 cents to process as debit.  As a credit sale it would be 1.6% and perhaps 15 cents so that comes out to 16 cents plus 15 cents = 31 cents.  6 cents lower that a PIN-based debit sale.  Not a big difference for one sale, but multiplied out to a month’s sales volume it amounts to a bit of money you might be wasting.  You will have to run your own numbers depending on your own processing costs.

What’s that you say?  You don’t know exactly what you are paying to process plastic?  Well, you need to find out!

My own company, the merchant services provider for whom I am an account executive, offers a free analysis of your recent merchant account statement.  We break down what you pay for all three tiers of credit cards (known as Qualified, Mid-qualified and Non-qualified) as well as the various monthly fees that may be tacked on, and we the, side by side, show you what we propose to charge and what your bottom-line savings could be by switching your merchant processing to us.  All in one neat and easy-to-read page.  Free.  I have looked at many merchant account monthly statements in my time and most can be very confusing to the customer.

We are entering a cashless era in society and the ability to take electronic payments – credit and debit cards, gift and loyalty cards, electronic check processing and more – is a crucial aspect of running your business, and managing the associated costs is just good business.

There is a rise in the customer category referred to in the financial institution business as “The Underbanked.”  These are customers who are unable to obtain a regular bank checking or savings account.  The category includes many immigrants with varying degrees of legal documentation of their immigrant status,  and as a result are hesitant to “involve”  themselves in the mainstream banking and credit systems.  The underbanked also include persons who have ruined their own ability to obtain a bank account through bankruptcy, indebtedness, bouncing checks, etc.  For these individuals, a prepaid debit card, often issued by a check cashing store, is their only remaining option.

Even among mainstream bank customers, there has been a rise in their use of the debit versus the credit function of their bank check card, especially for small purchases.  One reason for this is that many small merchants prefer and encourage that customers select “Debit” for purchases under $10, as this is frequently less expensive for the merchant to process.

Which brings us to the first of two points I want to make within this article.  That you, as a retail merchant accepting electronic payments from your customers should now be equipped with a PIN pad connected to your card terminal so customers can enter their personal identification number and you can pay less for that transaction than you would to process it as a credit card transaction.  The reason for this is that debit transactions bypass the VISA and Mastercard network and thus you avoid their interchange fees.  The average cost to process a credit transaction may be around 1.7% and 20¢ per transaction.  That same transaction processed as a PIN debit might only cost .70% and 30¢ .  Roughly 1% less.  Or $10 for every $1,000 in sales.

If you do not currently own a PIN pad, contact your merchant processor account executive about buying or leasing one.  They sell for about $200 or less.

Second point I want to make within this article:  Clients thinking about installing their own ATM in their retail location often ask me, do I think that the ATM market is saturated?  While my honest answer has to vary depending upon that client’s location, the number of other ATM’s nearby, etc., I  can state that in a good traffic location there is still plenty of room to make excellent revenue from an ATM, and the reason for my optimism is the fact of rising possession of debit cards and rising use of them not only in the United States but Europe as well.

There is really no good reason not to install an ATM in a retail store with good traffic.  If the store has enough traffic to itself survive and stay in business, then you will be able to generate enough additional revenue from an ATM to not only pay for the machine but to profit.  And, don’t forget, statistically, 35% of cash withdrawn from those machines ends up being spent right there in your store,so you enjoy that sales increase and resultant profits, too.

It’s called “Pay At The Table” and it is gaining rapid popularity with both diners and restaurant staff.

It involves the deployment of small wireless credit card readers with either a built-in printer or a small printer worn on the waiter’s belt that connects by Bluetooth or infrared with the card reader.  Some readers use General Packet radio Service (GPRS) or cellular signals to send the card data to the processing gateway for authorization.  Other wireless devices send the data over to the actual credit card terminal at the cashier or server station, which then gets the transaction authorized and signals the OK back to the portable printer to print the receipt.

Whichever means of technology is used, the concept itself carries great benefits for both the diner and the restaurant.

Take a restaurant that is processing $300,000 per month in credit card sales.  They will be paying about $7,500 per month in transaction fees.  Statistically, 50-60% of the cards they process are not actually credit cards but debit cards (check cards).  The transaction cost for a debit transaction where the customer enters their PIN is about half of the cost to process that card as a credit card transaction.  When the waiter removes the card from the table, and processes it at a remote station, there is no way to run the card as debit.  Now – process those cards at the table in front of the customer, hand him the mobile terminal with built-in PIN pad to enter their PIN and you have cut the $7,500 monthly credit card processing fees almost in half!

From the customer’s standpoint, they feel more at ease not to have their card physically taken away from them, they have all heard those stories about criminal waiters stealing card numbers. (And it does happen.)  In a survey conducted by Verifone, a manufacturer of credit card processing equipment, 87% of diners surveyed said they felt a “high” sense of security having their transaction processed right at their table, and their card never leaving their sight.

Wireless terminals are turned in at the end of the server’s shift.  The server prints out a transaction log that is then matched up with the guest checks for accounting purposes.  The terminals process transactions in “real time” and do not need to be “batched out” like a traditional black box credit card terminal.

Wireless terminals have been in use for a few years already by businesses such as pizza delivery restaurants, mobile locksmiths, home contractors, etc.

Wireless terminals can be leased for about $30 per month or purchased for about $800.  They do require a wireless service airtime fee of about $18 per month.

Machine revenue results from a ’surcharge” a machine user pays when they perform a withdrawal or other transaction (such as a balance inquiry) at the ATM.  Surcharges range from 99¢ to $3.00, commonly.  The average surcharge is $2.00.  This surcharge revenue is paid to the machine owner, usually on a monthly basis.   Ten transactions daily would yield $750 per month revenue if the surcharge was $2.50.  As may be seen, the up-front investment can be quickly regained, within a matter of months.

As a retailer with an ATM, you have an additional profit stream: statistically, 35% of cash withdrawn from the ATM machine in your store will be spent with you in your store.  So you have increased sales, and the profit from those sold items, to add to your pocket.  As an investor, this is a benefit you will want to point out to potential retail location partners when you approach them.

The initial investment for an ATM is around $2,500.  Installation by a qualified technician is another $350.  Those are the one-time fixed costs.  There will be some sort of monthly cost to access the ATM network, whether by dial-up phone line, cellular or broadband wireless.  As an investor you may arrange to split this cost with the location owner, or absorb this cost yourself.

Most machines now permit the owner to access the machine’s transaction online, and even receive alerts by email or text message, such as when cash is running low.

Cash is loaded into a cassette (that may be removable) and is usually single-denomination ($20 bills).  Whatever cash is dispensed from the machine today will be refunded to the machine owner’s bank account every day via ACH direct deposit.  The average location may be adequately stocked with $5,000 in cash and replenished daily.  An owner may possess extra cash cassettes in order to quickly visit each owned ATM and simply swap out the half-empty cassettes for full cassettes.  Removable cassettes also reduce time that the ATM is unlocked and open and vulnerable to theft or robbery.

For an investor with many placed machines, use of an armored courier service is an option.  The service will perform all machine cash reloading for you.

You will want to insure your machine.  If you are the retail location owner, this usually involves a telephone call to your business insurance agent to add the machine to your current business policy.  If you are going to be an investor with machines in different locations, policies are available to cover theft, vandalism or robbery.  Different insurance companies will require some security procedures to be in place, usually regarding secure installation; this will be handled by the certified installation contractor when machine is first delivered and installed.

Electronic rocessing has now become so standardized that last year Visa announced they were going to phase out the embossing of card information on the card surface and future cards will be “flat”, the card information printed but only accessible magnetically with the stripe on the back.   Other card associations – Mastercard and the rest-will follow suit shortly.

Few merchants still manually take imprints of cards anymore, with the exception of merchants accepting card payments for delivery of goods or services ordered by telephone – such as a pizza restaurant, for example.  They do so to verify that the physical card has been presented to the merchant during the transaction, in order to prevent fraudulent chargebacks.

In my own wallet I have an ePassporte Visa Electron card and the numbers are flat.  No imprint can be taken.

And no imprint any longer needs to be taken.  The new standard is to always swipe the card through a terminal, whether that terminal be in the store, next to or part of the cash register or point of sale system, or via use of a wireless terminal a driver carries with themself to the customer for payment at time of delivery.

If your business takes orders by telephone or mail and you are manually keying credit card numbers into your terminal, you are costing yourself a lot of money in additional card processing fees.  Manually keyed-in transactions are processed as “non-qualified” transactions at a rate more than double your basic rate, due to risk of fraud by the card not being physically present.

The fact is, card imprints are no longer a safeguard against fraud, because any criminal can create phony credit cards and use an Addressograph machine to emboss stolen credit card numbers onto them.  Encoding a magnetic stripe on the back, however, is almost impossible to counterfeit.  The stripe contains not only the card number but other coding which, when swiped through a terminal, verifies to the bank that the actual card is present and being swiped, not manually keyed in.

What can a merchant do?

Short of purchasing some sort of portable photocopier to copy the customer’s card and perhaps I.D., the only thing to do is to catch up with 21st century technology and equip your drivers or delivery personnel with wireless credit card terminals.  The terminals may be purchased or leased from your credit card processor and they pay for themselves quickly, because now all transactions they process will be under a lower  rate, as card-present transactions.

These terminals include a printer so you can get a signed receipt from the customer after the transaction is put through and authorized, and you print a second receipt copy for the customer.  Just as if the customer had been physically in your store.

I have equipped many mobile merchants with these devices: food delivery, locksmiths, massage therapists, computer technicians, handymen, plumbers and other repair personnel – the list is growing every day as more businesses go mobile and deliver their goods and services to customers.  The terminals are also great for fairs, shows, conventions and other locales with no landline telephone access available.

ATM Cash Machines Help to Increase Your Sales
ATM cash machins allow your customers to access all of their available cash from bank cards, credit cards, etc., so when customers have more money, they spend more money.

ATM Cash Machines Reduce Bad Debt
Cash does not bounce. When a customer uses cash from an ATM cash machine it cuts down the charge backs, disputes, bad checks, and the stress associated with these.

ATM Cash Machines Reduce Costs
By directing your customer to the ATM cash machine, you can greatly reduce the credit card fees you are currently paying.

ATM Cash Machines Save Time
ATM cash machines can save a customer embarrassment and employees time. An ATM cash machine also deposits directly into your bank account, which saves time and work. You will usually have your cash withdrawn from your ATM re-deposited into your bank account in 24 hours, along with your ATM surcharge fee the customer pays.

Improved Image
By providing new and unique services for your patrons, your image is improved. One reason people patronize your store is value. An ATM cash machine adds to the overall value of your store. People may visit your store to use your ATM and then stay and spend cash in your store!

ATM Cash Machines Increase Customers
Your customers will no longer have to stop at your competitors to get cash (and spend it there). You will have customers stopping at your place of business because you can accommodate their needs.

ATM Cash Machines Increase Profits
With surcharge fees, you should earn enough to cover the cost of the ATM cash machine. The real profit comes from the additional sales from the thousands of extra dollars available in your store.

ATM’s pay for themselves.  Ownership is usually by a lease.  Various lease terms are available, out to 60 months and monthly lease payments may be as low as $45.  These lease payments are, of course, tax-deductible.

An ATM may also be placed in your location at no cost if you have provable heavy foot traffic.  You will receive a portion of the ATM surcharge fee and not have the worry of ownership, loading cash, etc.

If your location gets 500 customers per day, and 2% of them use your ATM at a surcharge of $2.50 (typical) you will earn $750 per month from your machine.

James Hussher is an account executive with a national bankcard processing company.  Contact James at 954.513.0762 or james at creditcardmerchantnews.com (email addy split to defeat the spambots!)

• A Qualified credit card transaction is your lowest rate, also known as your Discount Rate.  This tier usually includes credit cards issued by a U.S. Bank to individuals and that DO NOT have a rewards program of any kind associated with the card, and the card has been swiped through your store terminal; the card is physically present.
• Mid-Qualifed tier cards are also physically present and swiped though your terminal.  These cards DO have a rewards program of some sort for the cardholder (airline miles, cash back, etc.) and those goodies are costed to you, the merchant.  Mid-Qualified also includes most business credit cards.
• Non-Qualified tier transactions are usually when the card is NOT physically present, such as for mail, telephone and internet orders.  These type of transactions carry the highest fraud risk and therefore carry a higher fee to you, the merchant.  These transactions include manually keying in a customer’s credit card number into your terminal.

Be aware that some merchant service providers may choose to classify business/corporate cards into the Non-Qualified tier.  If you are using such a provider, and you accept a lot of business cards, you may wish to switch to a provider that does not bump this type of credit card up to Non-Qualified rate.

A: You may benefit from our Trinity package.  This will allow you to use your PC at your sales counter as a virtual credit card terminal, saving the cost of purchasing a stand-alone terminal machine.  Trinity also allows you to process credit cards from your online store with our shopping cart software, and, third, even allows you to accept payments on the go with your cell phone!