Web Cam Credit Card Processing

Webcam Credit Card Processing

Credit Card Processing

It may sound strange but Webcam Credit Card Processing may indeed be on the way.  For those who accept credit card, technology keeps changing at a seemingly record pace.  Not all the new technologies will stick and some may leapfrog each other to gain traction in the marketplace but Webcam online credit card processing is certainly intriguing.
At first glance it would not seem to be the most secure process but we need to get used to the idea that electronic payments are here to stay and may be completely secure.  This particular method of credit card processing is based on secure video streaming which has become quite popular of late.
If we think about it, the way we pay for things has changed dramatically over the last decade.  Ten years ago most of wouldn’t dream of entering our credit card data into a web form but not it is second nature.  Paypal has created an online intermediary for credit card processing with some recourse for both merchant and customer.  Privacy policies have evolved to acceptable levels because the volume of online credit card processing demanded such a change.
This new video streaming is perfectly timed because of all the news of hacking and fraud taking place in the industry.  I cannot see how it would be foolproof but anything promising more security will lead to more people using online credit card processing under the guise of security.  This technology my prove only to be a just a convenience for consumers.  But it certainly is cool.
To use it, a merchant will have to enable special software which for all intents and purposes will turn the webcam of any desktop into a credit card reader.  The customer will hold their credit card in front of the webcam an after it is read, be prompted to enter the three digit CCV security code on the back of the card.  Then when the system accepts the card, the transaction is complete.
The enhanced safety measures are that the customer will never have to give their card to anyone else and it would be very difficult for criminals to copy down the account number, expiration dates and CCV security code without the card ever leaving the customer’s hand.  We are assuming here that this software is hack proof.  It may very well be but chances are that the merchant’s computer could be susceptible to hackers is more likely.  In general, securing business computers costs money and until Visa and other credit card providers require top level security for merchants, it would be impossible to tell which merchants are in compliance with security measures and which ones are just “saying” they are.
Most data leaving a business system through a merchant account is already encrypted and relatively safe and secure.  Secure video streaming technology is also encrypted which is what makes this data transfer relatively secure.  There are no paper trails or receipts to shred and the only real future security issue would be how a merchant stores yours financial data and purchase information for returns and exchanges.  Again, chances are the merchant doing the credit card processing has no bad intentions but there are those unscrupulous individuals looking to take advantage of a merchant with inferior security measures for their systems.

Watch Out For Credit Card Fraud

Credit Card Procesing Fraud

When we think of modern day credit card processing we think of high tech security features which make fraud almost impossible. Right? Wrong!  It seems that no matter who much we improve our credit card processing there are always some evil geniuses out there plotting to beat the system.
But in some cases, the plotters seem less than ingenious.  The hack pointed out at the Black Hat security conference seems rather a simple idea but defeats a high tech security system.  The guys over at Aperture Labs created less than 100 lines of code which can swipe credit card information for a system called Square.  That’s what we call and easy hack.
The Square is a payment system which supposedly was a safe way to do credit card processing from mobile devices like Androids and Iphones.  These devices would effectively turn into credit card processing machines with the use of Square, but now it doesn’t seem like such a good idea.
Well here is how the credit processing fraud is done. Aperture Labs figured out how to move funds from a stolen credit card in the bank account set up in association with Square.  This was done without have to even swipe the credit card physically with the Square card reader called the “dongle”.  They only needed to use the code they came up with to take all the information on the magnetic strip and turn it into an audio file.  This code allows you to somehow feed the info from the magnetic strip into the microphone for conversion.
So this new sound file which contains the card information is played as a series of coordinated sounds which are fed into the Square device by audio cable and understood by the Square application.  A very easy work around for people in the business but not something normal folks down on their luck would have figured out on their own.  But it is pretty interesting that Aperture was able to turn this credit card processing system designed to swipe actual cards to complete a transactions into one that can accept electronic payments.  Nice work fellas.  Now criminals don’t even have to go to the trouble of creating a plastic fake credit card, or even know the Personal ID number set up for the real card.
If this was not enough bad news for the poor Square Credit Card Processing App, Aperture Labs hit them with another goof. While testing they figured out that Square card reader can be used to make a cloned card because the data a criminal would need from the Square is not encrypted.  I thought everything was encrypted these days?
Here’s how they did it.  This was even lower tech than the low tech hack above.  By inserting the Square dongle cable into the mobile device via the audio input, the special code created by Aperture turns the new sound file into readable data which is used to make a credit card.  Hmmm.  So this makes Square a doubly ineffective technology for mobile credit card processing doesn’t it?
The real problem here is what this does to the skimmer market.  Skimmer products are available online for people who want to do bad things but this Square situation makes the difficult task of skimming into something very simple.  It lowers the barrier to entry into the skimming profession because you now need no skill are understanding of the complicated processes used in card card processing.
Of course Square is working on a fix for the problem which they have known about for sometime.  But, they didn’t really feel it was an effective method for fraud and wouldn’t cause problems.  But, when your technology is demonstrated at something called a “Black Hat” anything, it is time to make the fix.

Credit Card Processing Loophole In CA

Credit Card Processing Loophole In California

Recently we discussed how Anthem Blue Cross in California cannot charge the $15 convenience fee to accept credit cards from policy holders to pay their premiums.  It is a violation of California law for private businesses to charge credit card processing fees to their customers to accept credit cards instead of cash.  The can discount amounts if a someone uses cash or check but cannot make it more expensive to use credit.
They attempt to do this to make up for lost revenue for the merchant account fees they must endure for providing the ability to accept credit cards as a form of payment.  In the past it was something that companies were willing to write off but in tough economic times it doesn’t sit so well.  In Anthem’s case they tried to charge what they call a “convenience fee” and it was a miserable failure.  They were negligent with their attempts to inform policy holders and many on autopay plans ending up $15 short on their premiums and lost coverage.
The fee has been done away with but many wonder how Anthem could get away with this in California and the truth is they cannot.  But others can.  There is definitely a credit card processing loophole in the State and here it is.  Private companies cannot charge a premium for credit card users but public ones can.  A college like UCLA, for instance, charges a 2.75% fee for allowing students and parents to pay with a credit card.  Certain counties are charging an extra fee for Credit Card Processing on property taxes and California utilities companies can also charge for the convenience.
In the broadest sense of the word none of the above are considered retailers by State Law and therefor exempt for laws governing retailer’s charging above the price the credit card processing.  Utilities are not, however, allowed to collect any more than the actual cost of their actual merchant costs due to tougher regulations but others can.  UCLA says it spends over $6.5million in merchant account fees and now by passing them on to students, they save that money.  It is unclear whether UCLA is profiting by charging a flat 2.75% fee.
For most of us, the best example of two tier pricing is at the gas pumps but the standard party line on this from the oil industry is that they are offering a discount for cash or check and this discount is offered to all customers.  If they admitted to raising the price for credit this would be against California’s credit card processing laws.

Credit Card Processing Lobby

Credit Card Processing Lobby In Washington

In one of the most interesting news stories about credit card processing this year, what I had long suspected turns out to be true.  It has to do with the credit card processing and their strong lobby.  It is important to know what goes on in Washington and how it affects small business.
This story in particular focuses on American Express and how they spent over $600,000 in the second quarter of 2011 lobbying Washington in an effort to ease regulations regarding credit card processing and, more specifically, debit card fees.  As many of us already know, new legislation was passed which regulates the amount of fees a merchant can be charged for accepting debit cards on a per transaction basis.
This type of legislation has been a long time coming and is an attempt to keep merchants who accept credit cards from being victimized by enormous fees for offering a service that customers have come to expect, and expect it at no additional cost to them.  Merchants are forced to declare minimums when they accept credit cards for small purchases because their profits may actually go straight to their merchant account providers and theoretically they could lose money on every purchase.
In a lot of cases maximum amounts are also be because the percentage fee from a transaction may represent far more than any credit card processing company deserves just because a transaction is so large. With regard to debit charges, the new law states that a merchant can only be charged 21 cents plus 5 basis points times the amount of the transaction.  A great deal for merchants and terrific news for consumers, but the banking industry is upset about this.
Issuing banks will need to make up this lost revenue somewhere and of course, customers will have to pick up the bill.  Free checking will completely disappear, if it hasn’t already, and debit rewards loyalty programs have disappeared almost faster than they hit the seen a few years ago.  The winners and losers will really be determined after consumers change their spending behavior at the credit card terminals but the banks want to make sure that they are somehow the winners in all of this.

Should There Be A Credit Card Processing Lobby?

The interesting thing about the American Express lobbying spend during this time was that American Express does not even issue debit cards and are not directly affecting by the new rules.  However, they clearly see the writing on the wall and probably fear the consequences of how these new laws can now regulate Interchange which is an amount that banks can charge each other for credit card processing.  American Express also lobbied other legislation regarding customer tracking and tighter privacy protections and their position, as with most banks, does not bode well for the consumer.
Change in the credit card processing industry, and banking in general, is costly.  New technologies which constantly need to be upgraded to protect against vulnerabilities require massive capital and are never ending so it is understandable that these industries resist change.  But is it for the right reasons?  These moves are clearly an attempt to protect their bottom lines and show little concern for transactional safety and the price merchants must pay to accept credit cards to compete at a customer service level.  The Lobby was originally developed as an organized way for the people to talk to Government but it has evolved as a way for big businesses to slow down Government by filling the pockets of voting legislators.
Credit Card Processing should only get better, more efficient and less costly for both merchants and consumers but if issuing banks have their way, it will be anything but.

Credit Card Processing Rewards

Recently most of the credit card processing news we have been hearing about has focused on the Durbin Amendment and the reduction of debit card fees.  As a result, banks are trying to recover their potential lost revenue by pretty much annihilating all the debit rewards programs which changing the way consumers handle their spending.
Debit card programs were so attractive to consumers at one point that they made more sense to use as opposed to cash.  Points and dollars were adding up so fast creating a too good to be scenario for consumers.  But just as that wave has come and gone, it looks like credit card processing just got a little bit interesting again.  We are seeing credit card programs riding the new wave for spenders.
Not long ago, the only company really focused on credit rewards was Discover which had a generous 2% cash back feature on transactions.  But over the coming months we will hear more and more about other companies following suit and consumers will cash in.  Why?
Finally credit card processing companies are trying to lure in customers with great credit.  Customers like this have great repayment records but still carry balances which translates into revenue for the issuer.  Competition for this breed of client is competitive and banks will have to offer more than just mediocre customer service to look attractive.

Who Benefits From Credit Card Processing Rewards?

This move will also entice consumers to start using credit again.  The debit card programs bit into the market and in many respects retrained spenders to spend with either cash or debit.  Credit transactions were an afterthought because they could not compete with rewards programs nor the frequent discounts offered by merchants on cash transactions.
The new cash back credit cards have evolved a bit and will offer tiered rewards for certain types of spending.  General transactions will have the lowest value while groceries and fuel will each respectively be higher.  Some issuers will offer up to 5% cash back on specialty categories throughout the year in partnership with major retailers.  For example, Spring might be lawn and garden season while Summer might see higher rewards for home improvement spends.
It all sounds like great fun and great deals for savvy consumers and those who literally play their cards right will cash in.  Airline Miles and sign up bonuses will loom large before Christmas in order to get people spending on their new cards in time for the holidays but these offers are not for everyone.

Great Credit Will Get You Credit Card Processing Rewards

Those with bad credit need not apply.  Credit card processing companies are in it for the money and they are willing to part with a little to keep the type of customers they profit most from.  Poor credit not only is risk heavy, but believe it or not, revenue often suffers.  Charge offs and collections eat into the profits of credit card processing companies so they would much rather deal with client who spends often and repays bit by bit but does so on time

Credit Card Processing And Durbin's Amendment

In just over a week the Durbin Amendment goes into affect targeting credit card processing fees.  It has been a long time coming but will it provide the relief that it is intended too?  The common belief is yes but if we dig a little deeper, questions will arise.

The whole thing started as a result of the credit crunch which rocked the economy in 2008.  Last year the Dodd-Frank Act was passed which attempted to reel in financial regulations which Wall Street sorely lacked.  This new Amendment focuses on Credit Card processing fees which of late, have become overly burdensome for small business owners.  The fees they must pay to their merchant account providers is dipping into their profits and must ultimately passed on to consumers.

To make a confusing piece of legislation as simple as possible, let us define a generalization for the entire Dodd-Frank Act as it applies to humans.  It was simply a reaction to the credit crunch of 2008 and contains what is considered to be the most drastic attempt at policing financial regulation ever.  Whether it works or not or is simply nothing more than political posturing is yet to be determined but we will only concern ourselves here with the Durbin Amendment to Dodd-Frank.

This Amendment is focused on credit card processing, mainly debit cards and how big banks have been muscling merchants and forcing them to accept less than competitive merchant services because of their sheer size and power.  Currently, big banks are able to impose penalties on merchants for giving customers incentives to pay by cash or using other payment networks to pay for items.

As consumers we often believe the price of something is what we pay for it but it is a little more complicated than that.  Merchants must pay transaction fees to accept credit cards and these fees dip into their profits when accepting a credit card as opposed to cash.  This is why there are always little signs on the register telling us that we must spend a minimum for a merchant to accept credit cards, or sometimes they tell us that it will be a dollar or so surcharge before they swipe our card.  This money does not go to the merchant, but the merchant services provider.

In a lot of cases a merchant has to declare a minimum or even maximum sale to avoid the pitfalls of they may face from their merchant services provider and the Amendment aims to stop this.  Merchants are even penalized for loyalty programs, accepting checks and processing gift cards so this legislation was needed to provide relief for merchants drowning in fees.

The Durbin Amendment clearly states the maximum a merchant services provider can earn on a transaction and for those keeping score it goes like this.  For a debit card transaction highest interchange fee an issuer can charge 21 cents plus a max of 5 basis points multiplied by the amount of the transaction.  This Amendment also focuses on interchange, which simply put, is the fee a merchant's bank has to pay to its customer's bank to pull the money due from the customer's account. 

The intent of the Durbin Amendment is to bring direct relief to merchants but many critics say the banks will resort of other tactics to make up the lost revenues.  We have already seen the disappearance of debit rewards programs for consumers and the days of free checking accounts are all but gone.  An assortment of new fees we have never even heard of will undoubtedly pop up on or about October 1st so while there are major changes around the bend for credit card processing, ultimately we will have to watch the spending behavior of consumers to gauge its success.