Taking Municipal Payments into the 21 st Century Debit/Credit/EFT September 24, 2010 John Barker IT Director, City of Nashua
What we will cover today Why change? Making Choices Key things to know How to get started Nashua s Journey What we selected How it works Lessons Learned
Don t sweat the details Don t worry about writing down any details except this. All the slides will be available as of Monday Sept. 27 th for download at Nashua s FTP Site 1. To get them just use any FTP software, or a browser such as Windows Explorer and type the following URL into the address line. ftp://ftp.gonashua.com/ p 2. A Password dialog box of some type will open. In the Connect as or Username field type NHTAX for the User Name and NHTAX for the Password. 3. Use your FTP software, or your browser window to download or drag the presentation to your desktop or selected folder.
Cash is so 20 th Century! Few citizens under the age of 25 can find their checkbook! More consumers now have debit cards (80%) than credit cards (78%), and consumers use debit cards more often than cash, credit cards, or checks individually. (Source: Federal Reserve Bank of Boston, January 2010) Purchase transactions generated by credit and debit cards in the U.S. totaled more than 27 billion from Jan. 1 through June 30. Debit-card purchases accounted for 65 percent of all sales, up from 62.3 percent. (Source: Nilson Report, payment industry newsletter). Transactions per ATM has been in steady decline since 1999 (Source: American Banker Association, March 2010)
Don t ask the wrong question The question is not should your municipality take electronic payments, but rather how should you take electronic payments
Decisions
2W Ways to take payments Merchant Funded Government pays the processing fees Absorb it as a cost of business, or raise taxes/fees to citizens Tons of services to help set this up (banks, etc.) It s the standard, so most systems support it Citizens as consumers will expect this Convenience Fee Funded Pass along the fees to the Citizen Fees added to transaction to recoup processing Gov can t afford to lose 2% - 3% of revenue Requires use of a 3 rd party processor to add the convenience Not all Citizens will like or accept this
Convenience is not always convenient There must be a convenience tied to the payment, such as online processing Customer must be able to opt out of the fees Rules differ for Government tax payments handled different than non-tax Government options slow to arrive - Public Sector / Emerging Market or Utility Interchange programs Card Associations have complex and differing rules governing how and when convenience fees can be charged Integration of convenience fee payments with your existing or new financial systems can be challenging
More decisions?
2 Ways to accept convenience fee payments Online Post any or all of your bills on a payment web site Easier to implement (upload bills, handle payments like lockbox) Use most any 3 rd party processor portal Can accept Visa, MC, Discover, Amex online Can handle echecks Take advantage of IVR, bill notifications, scheduled payments At City/Town Hall Process online payments at the counter Harder to implement (must handle undirected payments, needs reconciliation codes, trap for Visa cards) Not all 3 rd party processors accept ad-hoc payments Can accept MC, Discover, Amex for any payments, but Visa only for Tax Think of it like handling a check at the counter
What s to know? You d be Amazed
3 rd Party Payment Processor Builds, hosts, & maintains a secure compliant network Absorbs & blends the transaction costs of card payments (so each transaction becomes a known cost) Contracts t & manages processing arrangements Can offer Web, IVR, Over-the-Phone, Over-the- Counter, Kiosks s Maintains higher-level PCI compliance
Point of Sale (POS) & Payment Gateways POS Software - Turns a desktop PC into a payment processing station Eliminates the need for additional phone lines / terminal devices Some POS systems can process transactions ti through h existing accounting software vendors, assuming they have a card payment module and payment gateway (i.e. Verisign, Authorize.Net, PC Charge, etc.) that is compatible with merchant processor s processing network. This may allow you to integrate a payment solution with your accounting system(s). Direct payment gateways (rather than utilizing a third party gateway) can minimize the number of parties involved for a simpler and more cost effective solution.
Who are the Players? Acquiring Processor 3 rd Party Processor Interchange Network Card Issuing Bank Proprietary Card Cos. Merchant (YOU) Your Depository Bank Citizen (Taxpayer / Cardholder) Authorization and Transmission Day 1 Funds Settlement Day 2 or later
Issuer Banks Fee Structures Processing Fees Debit Network Credit Cards Debit Cards Visa & MC Interchange Fees Assessment Fees Interchange Fees Network Switch Fees 3 rd Party Processor Merchant Service Fees Merchant Service Fees Interchange Fees Assessment & Switch Merchant Service Fees Paid to card assns. Credit Assmt. Fees Passed on to issuer paid to card assns. Paid to merchant banks Debit Switch Fees card processor For operations, fraud paid to network Per contract with losses, and profit OSC Depends on capture method & nature of business Interchange and Assessment rates set by Visa & MC each April.
PCI Data Security Standard (PCI DSS) PCI = Payment Card Industry Administered i d by PCI Security Council Merchants not in compliance subject to fines (this means you!) Two primary requirements Annual Self-Assessment Questionnaire (SAQ) includes you Quarterly Security Scans For 3 rd party processors & others Third-party gateways must be compliant as a service provider
PCI Compliance You and 3 rd Party Processor must be PCI Compliant
Play by the Rules! You can accept credit/debit payments for any type of bill at the counter (face to face) with MC, Discover, and AMEX You can accept Visa at the counter for tax payments only (Relabel a fee or a charge as a tax at your peril) You can accept Visa, MC, Discover, AMEX payments made by customers online for any type of bill Using a 3 rd party processor doesn t change Card Associations rules! No matter what they tell you. You will be a Merchant, so you will still need to comply with PCI (as Level 4 merchant you must complete SAQ C annually) At the Counter - don t scan, hold, or ask to see a person s card, use a PINPAD for customer input
How do you get started? Write an Ordinance.. NH State RSA 80:52-c requires a town/city in NH to authorize the use of credit/debit instruments of payment (Nashua NRO-5-132 Authorizing Payment by Credit or Debit Card) Select a 3 rd Party Payment Processor..many vendors and many flavors Compare Terms and Conditions.. contract commitments, setup costs, recurring monthly costs, chargeback or other fees, vendor s PCI compliance, etc. Decide how deep to dip your toes.. Will you take payments at the counter (pinpads/swipers) p p or just online? Define Processing Requirements.. how will data be exchanged between you and 3 rd party, what data formats required, what information must be collected, how will transactions be reconciled
Take it Slow and Steady
Nashua s s Journey Nashua researching credit/debit over 6 years cutting through the confusion 2007 implemented credit at Solid Waste (not convenience fee based) 2008-2009 reviewed 9 vendors (8 in-depth) Short-listed 3 and awarded to Systems East in Nov. Dec 09 Aug 10 Hammer out contract T & Cs Fix PCI issues Design upload/download formats Design reconciliation reports Design POS interface Sept 10 implementing credit/debit (at-the-counter & overthe-web) starting in Treasurers Office (wastewater payments as pilot)
Nashua s 3 rd Party Processor Search Key Criteria (from list of 62 questions) Nominal setup cost Nominal recurring monthly fee No recurring annual fee or contract Level 1 PCI compliance Supports blocking VISA at-the-counter for non-tax payments Supports ad-hoc/non-directed payments Supports shopping cart functionality Can calculate interest, apply penalties, accept all bill types
Nashua s Final Selection Nashua selected Systems East as our 3 rd Party Processor All the features we needed (web-based based, no local maintenance) None of the features we didn t Advanced features coming g( (direct integration, Amex, auto payments) Best price for Citizens, best flexibility for City Systems East Point & Pay Interware/Official Payments MuniTrax RbsLynk Active Network Govolution First Data MCC ebill
Now roll up your sleeves Once you have selected a 3 rd Party Processor you have some work to do Create one or more bank accounts to receive funds Negotiate any changes in Ts & Cs (req. by law) Set jurisdiction and venue to State of New Hampshire Remove language for personal guaranty or guarantor Strike any language that calls for a security interest in municipal funds in other accounts Remove language on termination ti fees Strike any invalid non-disclosure requirements Create bill extraction and upload batch Create bill download and process batch Create reconciliation procedures and reports Create any POS functions including receipting Create signage, instructions, training
At 10,000000 feet
In the weeds
You may need a POS Some form of POS procedures will be needed if you take payments at the counter Receipts from the 3 rd party gateway may not provide sufficient detail for counter transactions it will definitely not provide detail needed for undirected payments 3 rd party gateway will not create a daily cash-up summary for your counter Clerks Nashua s custom POS application Create a unique Cart ID for undirected (ad-hoc) payments to be entered by Clerk (format TTXX999999 TT is Dept code; XX is Clerk inits; 999999 is transaction #) Print a Customer receipt that shows payment details and lists all fees including convenience fees Create summary reports with daily cash-up totals for checks, cash, and credit/debit
Reconciliation Download data from Systems East contains Trans ID field created at time of transaction or Cart ID, and type of trans, bill date, Interest Calculation date, payment date, etc. Nashua processes downloaded payments like a lockbox Archive Payments report used to reconcile by reporting transactions filtered by date, cost center, etc. Based on clearing date (2 days for Credit/Debit, approx. 4 for ACH), Nashua checks total transactions against totals cleared. If clearing totals t don t reconcile, the ACH and EVO (credit/debit) portals are used to provide exact transaction data and status (such as failed or reversed transactions)
Let s Pay a Bill at Nashua Online Nashua specific info
Let s Pay a Bill over the Phone
Nashua s s Lessons Learned Don t debate the why, or the should I Realistically assess where you would use e- payments, and then how it would integrate with your existing systems Select the vendor who offers the easiest integration, with the cheapest cost to your Citizens Plan your implementation don t forget to factor in data transfers, payment processing, reconciliation procedures, and at-the-counter integrations
Results reported by other Gov users Use of echecks for tax payments is up to 50% at some municipalities i Online credit transactions are approx. 3 5% (some claim 10%) At the counter credit transactions are 10% - 30% and growing Success is universal - no one has cancelled their programs (no one reports any major citizen complaints) No one claimed that implementation increased their staff workload or decreased productivity
Thank You! Questions? Gary Debaise (Xpress-pay) and I will be at Riverwatch Lounge on 2 nd Floor after this presentation if you want to learn more.