America Outdoors Association s Marketing & Management Conference December 2011 Strategies to Find New Customers and Grow Demand

Transcription

1 America Outdoors Association s Marketing & Management Conference December 2011 Strategies to Find New Customers and Grow Demand

2 The Players Merchant s Bank Cardholder > 2 billion Merchant > 30 million Card Issuing Bank Who coordinates all these players? Third Party Providers POS / Gateways / PCI / more... Card AssociaKons VI / MC / DI / AE / JCB Processor Acquiring Bank ISO / MSP / MLS Manages relakonships The Players Cardholder Merchant s Bank Merchant Card Issuing Bank Key Connec)ons Third Party Providers Card AssociaKons Processor / Acquiring Bank ISO / MSP / MLS 2

3 Cost Factors if you priced right! Issuing Bank 80% - 85% Processor/ISO/MSP 8% - 12% Collected by Processor Card AssociaKons 5% - 6% Third Party Providers 1% - 5% May be collected by Processor, MSP or MLS % of fees paid per transackon Cost Factors Issuing Bank 80% - 85% of transackon costs Interchange Fees Set by Card AssociaKons (VI / MC / DI) Rates vary by type of merchant, cost of the sale, card category, processing mode (CP / CNP). There are 126 interchange categories for Visa, 216 MasterCard and 109 Discover. American Express rates are set by business type, with 30 bp CNP surcharge Associa)on Low High Visa.05% + $ % + $0.10 MasterCard.05% + $ % + $0.10 Discover.05% + $ % + $0.10 American Express 2.50% + $ % + $ Interchange rate range does not include special categories for uklikes, supermarkets and pre- paid cards. See Card AssociaKon websites for all interchange categories. 2 Fees charged by regulated banks under the new Durban Amendment regulakon. Includes $0.01 risk fee per transackon 3

4 Cost Factors Processor/ISO/MSP 8% - 12% of transackon costs Category Discount Fee 1 AuthorizaKon Fee Statement Fee 2 Seklement Fee 2 Early TerminaKon Fee 2 Annual Membership OpKonal Fees 2 How Assessed % of each transackon to cover underwrikng, risk, ongoing service and support costs $ of each transackon to cover network conneckvity costs Set monthly dollar amount to cover account online fee $ amount assessed per batch seklement Typically applicable during first three years of account ackvakon. Set annual fee that is not a hard cost from the processor. This is generally a tag on fee from the ISO/MSP. OpKonal costs that are only applied if selected ( i.e. equipment replacement, supplies, data breach insurance, virtual terminal, mailed statement, etc.) 1 If processor sekles American Express transackons using One Point, discount fees may be collected on AE transackons. 2 These categories are hard costs from the processor. Some ISOs/MSPs may choose to cover them in the Discount and AuthorizaKon fee categories and use their absence as a markekng strategy. Card AssociaKons 5% - 6% of transackon costs Collected by processor and paid to card associakons Fee Visa MasterCard Discover Assessment 0.11% 0.11% 0.10% Per Trans Fees $ Cost Factors $ (CP) $ (CNP) $ Access $ $ $0.025 Seklement $ $ $ Risk $0.001 N/A N/A Misuse of Auth $0.045 N/A N/A AVS N/A $0.005 (CP) $ (CNP) N/A 4

5 Cost Factors Third Party Providers 1% - 5% of transackon costs POS SoluKons Gateway ApplicaKons CommunicaKons Security AddiKonal Services ReservaKon Systems Retail and Restaurant POS s Online Shopping Carts Authorize.net Skipjack USAePay Phone and Internet Service Providers PCI Compliance Vendor RemediaKon Costs Terminals and Paper Supplies Wireless Service Providers Gio and Loyalty Card Services Check Guarantee Services Fees for some of these services may be collected by your processor or ISO/MSP Pricing Models Interchange Pass- through Tiered Enhanced Billback Cost Plus Pricing Most Transparent Single Account CP/CNP Unbundled Pricing Interchange Categories 3 or 6 Tiered (up to 20) Not Transparent Overcharges low Kered cards Bundled Pricing Qualified Mid- Qualified Non- Qualified Processor determines categories cards fall into Flat Rate Pricing Not Transparent MulKple Accts for CNP Surcharges Mid- Qualified Non- Qualified Processor determines surcharge amounts For a transackon to be deemed qualified, it must meet the following requirements: Swiped transackon with all magnekc stripe data transmiked in authorizakon request Seklement within 1 day of transackon Applicable electronic authorizakon data included with seklement record 5

6 HypotheKcal fee analysis on $94, bankcard volume on 2033 transackons Cost element IPT Tiered Billback Discount applied to transackons Pricing Models Interchange Plus a.18% 1.69% Qual 2.59% Mid 3.29% Non 1.69% AuthorizaKon Fee (per trans) $0.08 $0.28 $0.19 Monthly Account online fee $5.00 $11.00 $9.95 Batch Seklement Fee (per batch) $0.05 $0.37 $0.20 Card AssociaKon Fees Disclosed Undisclosed Undisclosed Total monthly processor fees $2, $2, $3, Net rate (fees/volume) 2.29% 2.81% 3.26% Note that simply having IPT doesn t guarantee the lowest rate, but at least you can see all the costs! The Durbin Effect D- Day for debit cards - October 1, 2011 Dodd- Frank Wall Street Reform Bill (Durbin Amendment) Mandated reduckons in debit card interchange fees Impacts Signature Debit, Pin- Debit and Pre- Paid Cards Applies to large banks, those with $10B + assets Benefits only accrue to merchants on interchange pass- through Early Findings Month of October Ouuiker Accounts see net rates fell by 35 bp on average Ouuiker Accounts see 70% regulated vs 30% non- regulated banks 6

7 The Durbin Effect impact on fees Interchange Category Visa Retail Debit ($200 average Kcket) Visa Retail CNP ($200 average Kcket) Visa EIRF Debit ($200 average Kcket) Visa Standard Debit ($200 average Kcket) Visa Restaurant Debit ($40 average Kcket) Visa Small Ticket Debit 3 ($20 average Kcket) Pre Durbin $ % + $0.20 $ % + $0.15 $ % + $0.20 $ % + $0.25 $ % + $0.10 $ % + $0.04 Regulated % Decrease $ % + $ % $ % + $ % $ % + $ % $ % + $ % $ % + $ % $ % + $ % 1 Includes $0.01 risk fee per transackon 2 Prepaid card fees for non- regulated banks increase to 1.15% + $0.15, an average 5% increase on retail, 29% on fuel 3 Small Ticket transackons will see an increase in fees of 9% on average from non- regulated banks (1.60% + $0.05) High Kcket merchants see the greatest impact. $1,000 Visa Retail CNP Pre- Durbin = $16.15; Post Durbin $0.72; 95.5% PCI DSS Payment Card Industry Data Security Standard, launched 9/7/06 Requirements designed to ensure ALL companies that process, store or transmit credit card informakon maintain security Enforced by the payment brands (Visa and MasterCard) Compliance levels determined by aggregated number of transackons across all DBAs. Level 4 < 20,000 trans annually Annual SAQ (Self Assessment QuesKonnaire) required by all Quarterly vulnerability scans required for all merchants whose processing systems have any internet conneckvity or electronically store cardholder data. Complete the relevant AkestaKon of Compliance in SAQ Submit the SAQ, evidence of passing scan, and the AkestaKon of Compliance to Processor/Acquiring Bank Cardholder Data is any personally idenkfiable data associated with the cardholder. Account number, expirakon date, name, address, social security number, etc. hkps:// 7

8 Data Loss Trends DataLossDB.org Incidents Over Time Source: Open Security FoundaKon and DataLoasDB thru October 2011 Data Loss Trends Incidents by Breach Type (All Time) Misc SnailMail Stolen Doc Unknown Web Doc Disposal Fraud Web Hack Stolen Computer 6% 3% 4% 4% 5% 8% 8% 10% 11% 16% 25% 0% 5% 10% 15% 20% 25% 30% Source: Open Security FoundaKon and DataLoasDB 8

9 Data Loss Trends Incidents by Vector (All Time) Unknown; 7% Inside Malicious; 9% Inside; 6% Inside Accidental; 24% Outside; 54% Inside 39% Source: Open Security FoundaKon and DataLoasDB Incident Costs Your business reputa)on may be permanently damaged Fines to Acquiring Banks range from $5,000 to $100,000 or more per month Costs for forensic inves)ga)on Reimbursement for fraudulent purchases Costs of reissuing credit cards range from $50 to $100 per card Bank will probably terminate your merchant account 9

10 PCI Compliance Don t assume that your data is safe and secure your business s reputakon could be damaged and fines incurred CerKficaKon is required - banks will start imposing financial penalkes for non- compliance, not just breaches Data breach insurance does not relieve you of the need to be compliant, it only helps cover the costs of a breach Make sure that all current patches to your POS have been installed Make sure that your POS system has a firewall if you have internet conneckvity PCI Compliance Change passwords to POS systems on a regular basis. Don t use vendor supplied passwords Use and regularly update ank- virus sooware on your systems Restrict access to cardholder data by business need to know Assign a unique ID to each person with computer access Turn off remote access when it isn t needed Educate your employees on data security issues If you don t need it, don t store it! 10

11 Industry Trends Mobile transackons expected to reach 13.7 billion by 2013 up 69% Ecommerce transackons expected to reach 30.3 billion by 2013 up 233% Fraudulent transackons conknue to grow Chip and Pin technology is increasing to reduce fraudulent transackons TokenizaKon replacing credit card numbers with a random value Contactless processing - Google Wallet and Smart Cards Social Media connected Gio and Loyalty card programs CerKfied Payment Professional (CPP) designakon launched by ETA Cost Saving / Profit Increasing Tips Accept only Interchange Pass- Through Pricing Work with a professional MLS for independent advice Never lease terminals owning is the best opkon Don t buy hardware that only works with one processor Review your statements regularly with your MLS Sekle all transackons within 24 hours to avoid downgrades Answer disputes promptly and maintain proper documentakon Complete all PCI compliance tasks to avoid fines or penalkes 11

12 Cost Saving / Profit Increasing Tips Train employees on proper transackon execukon Consider wireless/mobile solukons for remote transackon processing Consider gio card programs to increase markekng and lower fees Understand how customer returns/refunds are handled Make sure your processor using monthly fee colleckon Encourage cardholder use of debit cards for lowest rates Set minimum purchase amounts for credit cards Offer cash discounts More queskons? Come by booth #214 during the confluence Fund Your Dream Is a preferred provider of Merchant Services to AOA members or