Wednesday, February 24, 2010

Retailers Take a Swipe at 'Swipe Fees' While Internet Retailers Only Wish They Could Pay Them

Internet Retailers Can Only Wish Visa would Charge Them "Swipe Fees"

CNN Politics published an article about 15 minutes ago which reports that more and more merchants are "up in arms" about Swipe Fees.

Swipe Fees are a cost of doing business. If you don't like them, you can refuse to take Visa/MC cards.

Personally, I think they should focus more on why Visa has been pushing (with rewards) signature debit cards over the 12.5 times more secure PIN Debit cards. That fact alone robs merchants of millions of dollars annually.

PIN Debit rates are SIGNIFICANTLY LOWER, because they are SIGNIFICANTLY MORE SECURE. If you own a retail brick and mortar establishment, steer your customers towards the PIN Debit option. Not only will it save you more on Interchange, it will virtually eliminate charge-backs.

Of course, if you are an Internet Retailer, then you are SOL. Wouldn't it be "GREAT" just to be able to pay "Swipe Fee's?

Internet Retailers "would probably maim" simply to have have the "right" to pay "Swipe Fees." They would "kill" for the right to pay PIN Debit fees.

But alas, Visa won't allow "Swipe Fees" for online transactions because they make way too much money on Non-Swiped "Card Not Present" Fees.

Remember...

The MORE SECURE the transaction, the LOWER the FEE.

The "LESS SECURE" the transaction, the HIGHER the FEE.

Visa, MasterCard, American Express, Discover and JCB evaluated HomeATM's eCommerce based PIN Entry device. The stringent evaluation resulted in the first-ever (and still to this day, world's only) PCI 2.0 Certified PIN Entry Device.

Yet, here we are, almost a year later, and there is no PIN Debit Interchange Rate for Internet-based transactions. Worse yet, there isn't even a "card present" rate.

Internet Retailers could ask the logical question: Why can't we process a more secure transaction when these insecure one's are costing us millions while making you millions? It ain't right...

Put another way: "How can Visa, MasterCard, Discover, American Express and JCB evaluate and then PCI 2.0 Certify a PIN Entry Device designed for eCommerce use, and then not offer "card present" and "PIN Debit" rates on transactions conducted via that same device?

HomeATM made history. We not only created the first eCommerce PCI Certified PED, it's apparently the first ever certified PED in history that cannot *conduct "card present" OR "PIN Debit" transactions. (*denotes sarcasm) Wonder what it WAS certified to be able to do?*

When you consider that PIN Debit is preferred by both merchants and consumers alike, then add the fact that (at least in the UK) "card not present" fraud consists of 87% of the total fraud committed, you have to wonder why Visa is keeping "card present" and "PIN Debit" transactions off the web. UK "Card Not Present" Fraud Responsible for 86.6% of Total

ESPECIALLY in light of the fact that their solution to securing an online transaction is to keep the card not present and just typing more numbers into boxes in browsers. No wonder Verified by Visa, was recently exposed as a "Textbook Example of How Not to Authenticate a card user." Verified by Visa: "Textbook Example of How NOT to Design an Authentication Protocol"

Visa can charge significantly higher fees when the card is not swiped thus the Internet is a cash cow for them. Allowing for Swipe Fees would be taking money out of their pocket.

Unlike the brick and mortar world, where some merchants feel they should have the right to "negotiate" Swipe Fees, Internet Retailers cannot even "negotiate" the right to pay "Swipe Fees"

One could argue that eMerchants are prevented by Visa...or at least "excluded" ...from being able to conduct a "more secure/card present transaction."

You would think that would fall under one of those "inalienable right" thingamajobbers. Now if there "wasn't" a PCI 2.0 Certified PIN Entry Device in the marketplace, it would be a different story. But there is. So why then, are Internet Retailers forced to conduct "card NOT present" transactions. They can conduct transactions in the same manner conducted by brick and mortar retailers. Have the customer swipe their card and have the customer enter their PIN at the Point of Sale. The only difference is that the Point of Sale is the consumers home instead of the retailers rental location.

Meanwhile, fraud skyrockets and Visa's own security product is exposed as a sham. "Card Not Present" fraud costs billions of dollars per year, yet Visa want's it to remain the SNAFU status quo. (in order to rake in millions of dollars at the expense of merchants and consumers.) Sounds like Internet Retailers would have a better chance of winning a war against the Dynamic Duopoly fighting for CP vs. CNP than the brick and mortar merchants have with their "right to negotiate" stance.

From CNN:

STORY HIGHLIGHTS

Merchants pay "swipe fee" when customers use MasterCard, Visa

Swipe fees brought in somewhere between $38 billion to $46 billion in 2008

Credit card industry says the fees are appropriate because of services they provide

Unclear whether restricting fees would mean lower prices for consumers

Two Videos, one defending and one taking a swipe at fees.

Read the Article in Full at CNN Politics by clicking the headline below:

Merchants want Congress to take a swipe at 'swipe fees'

By Kevin Bohn, CNN senior producer

February 24, 2010 10:59 a.m. EST

"The merchants are getting ripped off, it's that simple. There's monopoly power with Visa, MasterCard. They have over 70 percent of the transactions," said Rep. Peter Welch, D-Vermont, who is pushing for congressional action on the issue.