TRMG

1
TRMG
IS THERE..
..A BETTER WAY
To Get PAID?

• St. Louis October 9-11, 2011

2
Trends in Payments
St. Louis October 9-11, 2011
3
Most Common EFT Payment Types
EDI (Electronic Data Interchange) - usually
used by large companies for large payments WIRE
Transfers - usually used for same day payment -
international payment - final payment ACH
(Automated Clearing House) - universal
usage Credit Card - primarily used for smaller
payments - customer convenience -
perks
St. Louis October 9-11, 2011
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Obstacles To Change

• One size DOES NOT fit all
• Difficult Integration with Operating Systems
  ERP/Accounting/Payment Process/Technology
• Customer Willingness/Ability to Adopt
• Paretos Principle ??

St. Louis October 9-11, 2011
5
Pareto's Principle
Part of the Problem
Vilfredo Pareto-Italian Economist

• aka the vital few and trivial many
• Dr Joseph Juran, PHD .1906
• aka
• The 80-20 Rule

St. Louis October 9-11, 2011
6
PULLED ACH Single Payment Entry
16354
084000084
156564163
(OPTIONAL)
5525.50
ABC Plumbing
Apply transaction to invoice 1165339
info_at_abcplumbing.com
St. Louis October 9-11, 2011
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Remittance Upload
Eliminate the labor intensive process of entering
your remittance information. Now you can simply
attach a file containing this critical
information along with your payment!
Transaction 646053
St. Louis October 9-11, 2011
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PULLED ACH Multiple Invoice Entry
Transaction 646054
16354
084000084
156564163
(OPTIONAL)
995
1001.50
997
100.00
999
500.50
ABC Plumbing
No. of Invoices 3
Apply transaction to invoice 1165339
Amount 1602.00
Deduct late fees on all invoices
St. Louis October 9-11, 2011
9
PULLED ACH Scheduled Payment Entry
Transaction 646055
16354
084000084
156564163
(OPTIONAL)
ABC Plumbing
5525.50
Apply transaction to invoice 1165339
St. Louis October 9-11, 2011
10
Transaction Report
Lonardo Food Services
Goodsteins Crown Molding Inc.
Halpern Industries
94156
Fountains Fence, LLC
St. Louis October 9-11, 2011
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PULLED ACH CTX Formatting
Transaction 646054
16354
084000084
156564163
(OPTIONAL)
995
1001.50
997
100.00
999
500.50
ABC Plumbing
No. of Invoices 3
Apply transaction to invoice 1165339
Amount 1602.00
Deduct late fees on all invoices
St. Louis October 9-11, 2011
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CTX Reporting (EDI-820)
Paper is no longer needed to store or transfer
data. Computers may now retrieve and exchange
payment remittance advices.

• Significantly reduce lockbox fees
• Automated cash applications
• Automated posting
• Eliminate admin tasks such as data entry
• Improve efficiency of A/R operations

St. Louis October 9-11, 2011
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PUSHED ACH Via YOUR COMPANY WEBSITE
St. Louis October 9-11, 2011
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PUSHED ACH Sample Registration
User


Online Bill Pay Customer
paymentconfirmation_at_abc.com
St. Louis October 9-11, 2011
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PUSHED ACH Payment Entry
Transaction 646053
16
084000084
156564163
(OPTIONAL)
1001.50
995
100.00
997
999
500.50
No. of Invoices 3
Amount 1602.00
ABC Plumbing
Apply transaction to invoice 1165339
Deduct late fees on all invoices
St. Louis October 9-11, 2011
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PUSHED Credit Card Entry - Option
Transaction 646053
16
1525 SW
33193
Miami
ABC Plumbing
41111111111111
4141
1001.50
995
997
100.00
500.50
999
No. of Invoices 3
Amount 1602.00
Apply transaction to invoice 1165339
St. Louis October 9-11, 2011
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Credit Card Merchant Services
Reduce your processing fees and the cost of
accepting payments by credit card.
St. Louis October 9-11, 2011
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Ecosystem of a credit card transaction
Three key entities manage the payment system.
OTHERS
St. Louis October 9-11, 2011
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Ecosystem of a credit card transaction
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• If a customer is going to pay by credit card, can
  I force them to make the payment right away
  without extending terms?
• YES, the merchant is not required to offer
  delayed payment via card. You may establish a
  policy whereby cards are accepted only when the
  customer is paying in full at the time of the
  transaction. This policy must be applied to all
  types of cards.

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• If a customer has been extended terms and then
  wants to pay an invoice 30 to 60 days later, can
  I refuse to accept their card and require that
  they pay with another form of payment other than
  credit card?
• Yes, you may take cards just for payments in full
  provided that it is clear to customer at the
  outset (card acceptance terms must be clear)

St. Louis October 9-11, 2011
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• Can terms for credit card paying customers be
  different than those paying by check?
• You must honor all valid cards without
  discrimination when properly presented for
  payment. A merchant must maintain a policy that
  does not discriminate among customers seeking to
  make purchases with a card.
• Mastercard 5.8.1

St. Louis October 9-11, 2011
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• If I accept cards for regular sized payments that
  are usually 1,500, and then a new customer wants
  to place an order that will cost 50,000 and
  wants to pay by credit card, can I refuse to
  accept payment by credit card because it is a
  sizable payment or can I renegotiate terms or the
  price?
• You must not require, or indicate that it
  requires, a minimum or maximum transaction amount
  to accept a valid and properly presented card.

St. Louis October 9-11, 2011
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• Can I pass the cost of the credit card processing
  along to my customer in the form of a fee?
• No, Visa and MasterCard regulations do not allow
  you to charge a fee or pass back the interchange
  to the cardholder for accepting their card for
  payment.

St. Louis October 9-11, 2011
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• Can I charge my customer a Convenience fee?
  VISA
• Charged for a bona fide convenience in the form
  of an alternative payment channel outside the
  Merchants customary payment channels
• Disclosed to the Cardholder as a charge for the
  alternative payment channel convenience
• Added only to a non face-to-face Transaction1
• A flat or fixed amount, regardless of the value
  of the payment due
• Applicable to all forms of payment accepted in
  the alternative payment channel
• Disclosed prior to the completion of the
  Transaction with an option for the cardholder to
  cancel the transaction
• Included as a part of the total amount of the
  transaction (single transaction which has
  Convenience Fee Amount and Principal Payment
  Amount combined in the total amount field)
• Not added to a recurring transaction.

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• Can I charge my customer a Convenience fee?
  Mastercard
• A merchant must not directly or indirectly
  require any MasterCard cardholder to pay a
  surcharge or any part of any merchant discount or
  any contemporaneous finance charge in connection
  with a MasterCard card transaction.
• A merchant may provide a discount to its
  customers for cash payments.
• A merchant is permitted to charge a fee (such as
  a bona fide commission, postage, expedited
  service or Convenience Fees, and the like) if the
  fee is imposed on all like transactions
  regardless of the form of payment used. 
• Common Convenience Fee practices associated with
  MasterCard include
• The Convenience Fee can vary based on the amount
  of the transaction
• MasterCard believes the best practice is to
  utilize the two-transaction method where there is
  a separate transaction for the Principal Payment
  Amount and a separate transaction for the
  Convenience Fee. However, if the merchant is also
  accepting Visa for a non-tax, a single
  transaction is required. To simplify processing
  in this case, a single transaction method would
  be used for all card types.

St. Louis October 9-11, 2011
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• If I cant charge a fee to cover the credit card
  processing fees, is there a way to reduce the
  cost of processing fees?
• Process directly with the Processor not ISOs
  (which may include Banks)
• Consider including the cost of processing in the
  cost of goods so that cash discounts may be
  offered
• Review processing procedures and policies
  regularly to assure best practices

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• Negotiate for better rates with your processor
• Bundled vs. Unbundled pricing model
• Make sure you are set up with the correct MCC
  code with your processor
• Make certain that your processor does not
  practice padding of the Interchange fees
• Make sure there are no hidden fees
• Make certain you are being billed on NET
  processing.

St. Louis October 9-11, 2011
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• CNP transactions should most often include the
  use of a PC for processing.
• Make certain that all necessary data is being
  included with the transaction
• Use of Level III processing
• Use of Level III large ticket

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Level I, II and III Data Requirements
Level-I and Level-II data elements can be
transmitted via a standard credit card point of
sale terminal. Level-III line item detail
requires greater system capability, which is
provided via Fifth Third-partnered payment
processing applications.
St. Louis October 9-11, 2011
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Sample Transaction CostsInterchange Expense
Visa Purchasing Card 500 transaction

• Purchasing B2B Rate (Level I) 2.10
  .10 10.60
• Purchasing Level II Rate 2.05 .10 10.35
• Purchasing Level III Rate 1.80 .10 9.10

14 reduction in cost by processing Level III
versus Level I data
MasterCard Purchasing Card 500 transaction
Purchasing Data Rate I (Level I) 2.65 .10
13.35 Purchasing Data Rate II (Level II) 2.40
.10 12.10 Purchasing Data Rate III (Level
III)1.80 .10 9.10
32 reduction in cost by processing Level III
versus Level I data
Interchange only -- Not showing all interchange
categories
St. Louis October 9-11, 2011
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Breakdown of Cost
Total Cost 12.46
Interchange represents 85 of the cost of this
transaction. Based on Average Ticket currently
qualifying for the Visa Commercial B2B
(Purchasing, Business, Corp) rate
St. Louis October 9-11, 2011
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Sample Transaction CostsInterchange Large
Ticket Expense
Visa Purchasing Card 7500 transaction

• Standard Rate 2.95 .10 221.35
• Business Electronic 2.40 .10 180.10
• Business Card Not Present 2.25 .10 168.85
  most commom
• Purchasing Level II Rate 2.05 .10 153.85
• Purchasing Level III Rate 1.80 .10 135.10
• Large Ticket .95 35.00 106.25

Effective Rate 1.41
48 reduction in cost by processing Level III
versus Level I data
Interchange only -- Not showing all interchange
categories
St. Louis October 9-11, 2011
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Sample Transaction CostsInterchange Large
Ticket Expense
Visa Purchasing Card 25,000 transaction

• Standard Rate 2.95 .10 737.60
• Business Electronic 2.40 .10 600.10
• Business Card Not Present 2.25 .10 562.60
  most common
• Purchasing Level II Rate 2.05 .10 512.60
• Purchasing Level III Rate 1.80 .10 450.10
• Large Ticket .95 35.00 272.50

Effective Rate 1.09
60 reduction in cost by processing Level III
versus Level I data
Interchange only -- Not showing all interchange
categories
St. Louis October 9-11, 2011
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• Can I pass the cost of the credit card processing
  along to my customer in the form of a fee?
• No, Visa and MasterCard regulations do not allow
  you to charge a fee or pass back the interchange
  to the cardholder for accepting their card for
  payment.

St. Louis October 9-11, 2011
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• Why can some companies/industries pass along the
  fees to their customers and we cannot?

Convenience Fee Compliance Summary Convenience Fee Compliance Summary Convenience Fee Compliance Summary Convenience Fee Compliance Summary Convenience Fee Compliance Summary Convenience Fee Compliance Summary Convenience Fee Compliance Summary Convenience Fee Compliance Summary Convenience Fee Compliance Summary
Industry/Card Network Fixed Fee Variable Fee Face-To-Face Registration Required Single Transaction Support Two Transaction Support Recurring Transaction Third Party Processor Support
Utilities (MCC 4900)                
Visa 1 Yes No No No Yes No No No
MasterCard Yes Yes Yes Yes 2 Yes 3 Yes No Yes
Discover Yes Yes 6 Yes No Yes 4 Yes No Yes
Amex Yes Yes Yes No No Yes No Yes
                 
Government Tax (MCC 9311)                
Visa Yes Yes/No7 Yes Yes No Yes Yes Yes
MasterCard Yes Yes Yes Yes Yes Yes Yes Yes
Discover Yes Yes 6 Yes No Yes Yes No Yes
Amex Yes Yes Yes No No Yes No Yes
                 
Education Government Non-Tax                
Visa Yes No No No Yes Yes No Yes5
MasterCard Yes Yes Yes Yes Yes Yes Yes Yes
Discover Yes Yes 6 Yes No Yes 4 Yes No Yes
Amex Yes Yes Yes No No Yes No Yes
                 
Other Industries                
Visa Yes No No No Yes No No No
MasterCard Yes Yes Yes No Yes Yes No TBD
Discover Yes Yes 6 Yes No Yes 4 Yes No Yes
Amex No No No No No No No No
St. Louis October 9-11, 2011
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• How are the rules enforced and what are the
  consequences of non-compliance?
• Generally enforced reactively instead of
  proactively but fines may be levied. Severe
  cases can cause your company to be blacklisted.

St. Louis October 9-11, 2011
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• What card data can be stored?
• Customer Name
• Credit Card Number
• Expiration Date
• (security code should NEVER be stored)

St. Louis October 9-11, 2011
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• Is it true that the credit card processing
  activity will be reported to the IRS beginning
  2011?
• Yes, income through credit and debit card
  transactions will be reported to the IRS starting
  in 2011. No real reporting mechanism is known at
  this time.

St. Louis October 9-11, 2011
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The Reality of Card Data Compromise
Card Data Compromise Statistics
1

• In contrast to common belief, Card Present
  merchants are twice as likely to be compromised
  than Card Not Present merchants.

Card Present 73
24
As a consumer, you are more likely to have your
card stolen making a face-to-face transaction,
than when shopping online.
75
Source Trustwave (based upon total number of
breach events)
St. Louis October 9-11, 2011
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The Reality of Card Data Compromise
Card Data Compromise Statistics
Food Service Industry represents the majority of
the compromises (56). Retail Industry is the
next largest industry seeing compromises (22).
2
4
4
4
The challenge for large retailers to meet their
customers needs at the speed with which customers
demand, creates tremendous security issues.
56
22
Source Trustwave (based upon total number of
breach events)
St. Louis October 9-11, 2011
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Challenges by the Numbers
Current State of the Industry
Credit card data remains an extremely valuable
commodity.
The average cost of a data breach is 202 per
record and rising, with the average cost of a
large scale breach reaching 6.6 million dollars.3
A significant data breach at one PCI Level 1
retailer has cost over 250 million dollars so
far..

• 1 Trustwave Global Security Report 2010
• 2 Verizon 2009 Data Breach Investigations Report
• 3 Ponemon Institute, 2008 Annual Study Cost of a
  Data Breach

St. Louis October 9-11, 2011
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PCI DSS Compliance Merchant Levels
Level 1 merchants have rigorous compliance
requirements.
4
3
2
1
Level 4 merchants are impacted, as well!
St. Louis October 9-11, 2011
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PCI DSS Compliance Merchant Validation
Note Due to MasterCard Site Data Protection
(SDP) program rules, all level 1 and 2 merchants
that elect to perform their own validation
assessments must ensure that the primary internal
auditor staff engaged in validating PCI DSS
compliance attend merchant training programs
offered by the PCI Security Standards Council
(PCI SSC) and pass any PCI SSC associated
accreditation program annually in order to
continue validation in this manner. The
training deadline is June 30, 2011.
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How It Works
End to End Encryption and Tokenization
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Key Solution Capabilities
End to End Encryption and Tokenization

• Enable encryption at the point of sale without
  the need of complex key injection
• Provide true end to end encryption from entry
  devices all the way to brand handoff
• Allows for robust host side capabilities
  maximizing reliability and meeting high volume
  requirements
• Allows for encryption in multiple environments
• Swipe
• Key entered
• E-commerce

Key Customer Benefits

• Risk Mitigation
• Potential PCI scope reduction
• The potential ability to take components out of
  scope
• Protection of Brand Reputation
• Implement security solution that will be
  sustainable and flexible as association and
  governing bodies rules develop and change

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PCI ComplianceTypes of Risk

• Systemic Risk
• Primarily Risk associated with large scale data
  breaches
• Increasingly sensitive due to PR impact and
  potential for civil litigation
• Often associated with organized crime and
  sophisticated IT break ins
• PCI ( Payment Card Industry Data Security
  Standards) meant to address major challenges
• Operational Risk
• Normal fraud risk associated with individual
  transactions
• Can often be prevented by operational best
  practices

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12 Potential Signs of CNP Fraud

• Keep your eyes open for the following indicators.
  When more than one is true during a
  card-not-present transaction, fraud might be
  involved. Follow up, just in case.
• First-time shopper Criminals are always looking
  for new victims.
• Larger-than-normal orders Because stolen cards
  or account numbers have a limited life span,
  crooks need to maximize the size of their
  purchase.
• Orders that include several of the same item
  Having multiples of the same item increases a
  criminals profit
• Orders made up a big-ticket items These items
  have maximum resale value and therefore maximum
  profit potential.
• Rush or overnight shipping Crooks want
  these fraudulently obtained items as soon as
  possible for the quickest possible resale, and
  arent concerned about extra delivery charges.
• Shipping to an international address A
  significant number of fraudulent transactions are
  shipped to fraudulent cardholders outside of the
  U.S. Visa AVS cant validate non-U.S., except in
  Canada and the United Kingdom.

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12 Potential Signs of CNP Fraud (contd)

1. Shipping to a single address, but transactions
   placed on multiple cards Could involve an
   account number generated using special software,
   or even a batch of stolen cards.
2. Multiple transactions on one card over a very
   short period of time Could be an attempt to
   run a card until the account is closed.
3. Multiple transactions on one card or a similar
   card with a single billing address, but multiple
   shipping addresses Could represent organized
   activity, rather than one individual at work.
4. In online transactions, multiple cards used from
   a single IP (Internet Protocol) address More
   than one or two cards could definitely indicate a
   fraud scheme.
5. Transactions with similar account numbers
   Particularly useful in the account numbers used
   have been generated using software available on
   the internet (e.g., CreditMaster)
6. Orders from Internet addresses that make use of
   free e-mail services These e-mail services
   involve no billing relationships, and often
   neither an audit trail nor verification that a
   legitimate cardholder has opened the account.

St. Louis October 9-11, 2011