On February 28, 2012 Host Merchant Services teased through its Facebook Page that it would have big news regarding HMS and Mobile Payments in March. The Official Merchant Services Blog is here to give you that big news.
Sort of.
The news is that Payfox will be usable for Android phones as well as the iPhones it has been compatible with for the past couple of years. Unfortunately that news is coming piecemeal. The announcement was slated for late March. But the project isn’t quite ready for launch. According to an ISS Bulletin from Transfirst:
“Although PayFox Android is currently not yet available … We are expecting a formal release in the next couple of weeks. “
In anticipation of the pending release, there is a new “PayFox Droid card reader” option opened up in Transfirst’s ELAPP™ software. The option is there, but the functionality isn’t ready yet. So it’s just a teaser of what’s to come. ELAPP™ is an innovative virtual application system that walks users through the merchant boarding process with intelligent rules for data entry.
That’s not the only teaser, however. In the Android Marketplace, Payfox is now listed and available for download. You can see the listing here.
User tests by the staff here at The Official Merchant Services Blog show that the download works. And the app will then show up on your Android phone. But there is no reader equipment available yet and the transactions can’t yet be processed. The App has been on the Android Marketplace since March 21.
So all we’re able to confidently report right now is that the pieces for Android appear to be in place, just not fully ready. We will keep you posted with any updates or breaks in this story. Once it is ready, Host Merchant Services will be rolling out a detailed press release discussing the addition of Android to their already robust iPhone capability and how it relates to their full e-commerce service package that it offers merchants.
The Debate over Discount Fees Hinges on the Costs for Unsecured Credit
Tom Cleveland, March 22, 2012
The debate over the proper level of merchant discount fees rages on with legal arguments and proceedings plodding along, possibly for years to come. One benefit of the latest struggle against bankers keeping their “hand” in the merchant industry’s “cash drawer” is that fees have been bifurcated between credit and debit cards in the United States, applying a lower transaction based fee to items regarded as true replacements for cash and checks. Whether the banking “monopoly” will be broken remains in doubt, but the real issue is how to recover the total costs related to issuing unsecured credit.
Unsecured credit is more a phenomenon in American culture than in most other global domestic markets. One argument often cited is that discount fees in the U.S. are materially higher than those in other countries, but the nature of credit and how it is offered to the general public is the core issue here. The rest of the world is a lot “harsher” in how credit is extended, but credit drives our service economy that depends heavily on consumer retail spending. Disposable income has remained flat for over a decade, and, until this economic fact changes for the better, the retail sector will continue to under perform.
Intuitively, one would expect these merchant fees for card services to be entirely transaction based, without a percentage of the sale ever having to be reimbursed to card issuing banks. Unsecured credit, however, does not come without a significant cost structure. The “rule of thumb” for individuals and companies alike is that a total revenue stream of 35% on volume is necessary to operate at an acceptable level to cover costs and deliver an adequate return on capital. Interest charges cover two-thirds of this requirement, but additional fees are necessary to cover convenience usage where no interest can be charged. Roughly half of retail purchase volume constitutes convenience usage in the card services industry.
The remaining third comes from account fees, merchant discount fees, and a plethora of various fee types foisted on the general public over the years. Consultants advised banks decades ago to broaden their revenue base beyond interest-only charges to remain competitive, and we have all witnessed this “transformation” in “nickel-and-diming” tactics for years.
The costs for unsecured credit are actually higher today, due to present economic conditions, but may moderate over time, although not below the 35% threshold. If merchant discount fees are to drop, then banks will have to raise account fees, almost doubling current levels to cover the difference. There is no “free lunch” in this business. Banks are currently under pressure from toxic mortgage assets, new legislation, and debit card fee reductions. They have no desire to introduce new consumer fee changes, as many major banks have tried and failed with this approach recently.
Banks have fought merchant fee reductions for decades, due to unsecured credit costs. The courts may eventually have to force the issue, necessitating a re-pricing exercise that will unfortunately impact us all in other ways.
The Official Merchant Services Blog finishes its titanic trilogy on the affect Customer Service can have on a business. In our first blog we discussed anecdotal evidence and how it pertains to the perception of service and what can be learned from those anecdotes. In our second blog we took at look at the numbers, examining charts of data to determine a measured impact that customer service has on a business. The combination of strong anecdotal evidence and detailed charts demonstrated how integral quality customer service can be to a business’ financial success. Today we’re going to delve into the tips that get offered regarding inferior customer service — both tips on how customers can deal with customer service they find lacking and tips on how businesses can improve customer service that their customers find lacking.
I got onto this topic recently because of an online discussion that suggested that customers weren’t worth the effort of listening to their complaints. That discussion was sparked from The story of Jennifer Hepler found on The Mary Sue. It brought up the concept of gamer entitlement and video game customers going too far in their negative complaints to video game developers. Added to that was this Forbes article about The Myth of Gamer Entitlement. This really created a framework where customer complaints were presented as too much hassle for game companies to listen to. So the game companies would place customer service extremely low on their priority list.
I really have issues with that concept. It makes no sense to me. Customers and quality customer service are extremely valuable to long-term business. So I set about to prove how valuable customer service can be for a business. After seeing the anecdotal evidence and the numerical data stack up, it’s quite clear that quality customer service has an impact on a business’ bottom line. Good customer service helps retain customers. Happy customers also give a business good word of mouth advertising — the most powerful and effective advertising a business can receive. Good customer service leads to high customer loyalty. High customer loyalty gives your business higher sales and a stronger brand identity.
What to Do if All is Not Well?
So let’s bring this back around to what started me on this line of thinking: Difficult Customers. The strategy that some video game companies are using to “deal” with the difficult customers was to launch a bit of an online campaign through gaming sites and other avenues to paint those difficult customers as unreasonable, and set the company up as a victim of their irrationality. From what I’ve seen and read of that option, the negativity has simply bred more negativity. Making the customers even more difficult and a lot of bad word of mouth has started to seep into the reputation of the company hurting their brand. So instead of creating an antagonistic atmosphere with difficult customers, I did a little research and found some tips and advice on how to deal with difficult customers and turn it into a positive.
The Customer’s Side
To get a handle on difficult customers I think it’s important to understand the perspective of the customer. This article by Mind Your Decisionsis amazing at giving us insight into that perspective — and it gives consumers a series of tips on how to get the service they desire from bad customer service situations. It hinges on the premise that for customers to get what they want from a business’ customer service department, their strategy should be reasonably unreasonable.
It states that being reasonable with bad customer service usually leads to the customer not getting what they want as they let the business continue to ignore their issue. It then states that being unreasonable with bad customer service also misses the mark as making a ruckus may get you what you want, but may leave you feeling like you made a mountain out of a molehill. So it advocates a strategy of being reasonably unreasonable: Holding firm, continually going after what it is you want from the company but not raising a ruckus while you follow that path.
The article is focused on giving customers advice on how to get businesses to respond to your desire for customer service: “When dealing with bad service, one of the easiest ways to be reasonably unreasonable is to explain you are a frequent customer and that you would like a full cash refund. Cash, unlike in-store discounts, can be used at competitors. This small request quickly gets the attention of managers who scramble to keep you happy. You may end up accepting an in-store discount, but it will likely be much larger because you started asking for cash.”
Articles like this are important to be aware of when you’re planning your own customer service protocols. You find again and again that the advice offered to consumers is to not back down. To continue to push for service. To be difficult. Sure, there are always going to be a tiny selection of customers that are the exceptions to the rule — ones that are difficult to be difficult, ones that thrive off of confrontation, and ones that simply want to try and take advantage of your customer service to get something for nothing.
But these are the rare exceptions. Most of the time you are dealing with a customer that feels like they got a defective product or did not get the value of their purchase. They are seeking some sort of compensation, some understanding and some assistance. And because they feel justified in their crusade, they are going to feel entitled to service. They aren’t the unreasonable villains that the “gamer entitlement” tag suggests they are.
The moral of this story is a customer that wants a refund can be difficult about it. But can be turned back into a loyal customer if they receive understanding and compensation. It doesn’t even have to be in the form of a refund. But ignoring them or antagonizing them is only going to do more damage to your business and its reputation than the refund is usually worth. Most difficult customers aren’t that difficult once you initiate customer service that actually addresses their issues and their concerns.
Customer Service Tips
This article from Customer Service Manager offers five tips for dealing positively with difficult customers. Those five tips all hinge on engaging the customer’s emotions. As the article states in its conclusion: “Make no mistake about it; customers, be they internal or external, are primarily driven by their emotions. It’s therefore important to use human responses in any interaction particularly when a customer is upset or angry. If customers like you and feel that you care, then they’re more likely to accept what you say and forgive your mistakes.”
The tips break down to:
Have a thick skin. Be aware the customer is going to be angry and upset and don’t let that get to you.
Listen. Listen to what they have to say.
Don’t use the word sorry. Sorry, the article says is overused and has little impact with difficult customers.
Show empathy. The customer is upset and empathy will help mollify their anger.
Build a rapport. While empathizing with the customer opens the door for you, building a rapport gets you to your destination — customer service.
Most other lists I’ve found on how to deal with difficult customers breaks down to a similar set of tips. The important tips that I repeatedly ran into were all a variation on listening to the customer, showing them understanding and not letting their anger get to you. It all comes back to giving the customer your time, your ear and your energy. Giving them the attention they need to service them and address their issues. You do this and most of the customer service complaints you get are defused. You turn many of these customers into loyal fans of your business who will turn around and spread the news that you give excellent service. You attract more business and build a reputation for your business.
For me, the bottom line of customer service is this: There’s no such thing as gamer entitlement. Those gamers are customers who purchased your product and they are entitled to quality customer service. If you run a video game company you should beat the pants off of your competitors by being one that gives quality customer service. You’ll set yourself apart from the ones that are painting their own customers as the villains and themselves as the victim of a group of people who simply want what they paid for.
The Official Merchant Services Blog continues its epic masterpiece on the impact Customer Service can have on a business. In our previous blog we discussed anecdotal evidence and how it pertains to the perception of service and what can be learned from those anecdotes. The stories usually revolved around nightmarish tales of difficult customers and how those experiences can be applied to improving Customer Serviceand turning those customers into loyal return customers.
But anecdotes really only go so far. Numbers are required to help quantify the importance of customer service. Especially in the context of the things I’ve been reading lately around the internet in terms of video game companies, their development standards and some buzzwords about customer entitlement or gamer entitlement. You’ll remember the article that originally got me involved in a discussion about customer service came from The story of Jennifer Hepler found on The Mary Sue. Add to that this Forbes article about The Myth of Gamer Entitlement. The trend I see happening is video game companies are taking part in a subtle marketing push through their web 2.0 tools to essentially justify letting their customer service lag. By furthering the Gamer Entitlement cause, they paint their own customers as villains, and themselves as victims of irrational customer whims.
Which as I said last time, baffles me. The goal of a business is to be successful and to nurture the development of healthy long-term business relationships. Quality customer service. A business wants happy customers. Loyal customers. Even difficult customers, the kind that complain a lot, the kind that prompt the Gamer Entitlement mythology I’ve been reading about, are valuable in your business. And I’ve found some data — some cold hard numbers — to help us analyze exactly how important customer service is. Hopefully these numbers will help even the victimized game development companies see how it is bad business to ignore customer service.
The Basics
We start off with Customer Loyalty. Customer loyalty isn’t just satisfaction. Loyalty to your business, your brand, your services goes well beyond just satisfaction with a purchase. Customer Loyalty directly impacts business results. The Loyal Customer will continue to buy from your business and will promote it to others. This is the basic foundation for promoting and making sure you maintain quality customer service. This is why Host Merchant Services prioritizes its customer service so high — the motto being “You stay with us because you are happy with us.” It is the catalyst of customer loyalty. And reading what I have about Gamer Entitlement, I feel the most basic core of the concept has been lost. The companies that push this idea of gamer entitlement have forgotten how large an impact customer loyalty has on business. Here’s a graphic defining Customer Loyalty:
Now what to do with the concept of Customer Loyalty? Well Osman Khan delves into a fascinating look at the outcome that different states of customer loyalty can have on your business in this blog. Let’s look at the two charts:
The obvious contrast this chart shows is that the typical business has the smaller percentage of fiercely loyal customers at the top of their pyramid, while sports clubs and entertainers tend to have those zealous “fans.” These are the preferred loyal customers. These fans will stick with your business over the long haul and promote your business to anyone who listens the entire time. This chart may help explain some of my confusion over the gamer entitlement issue. I approach customer service with the typical state of customer loyalty in my mind. But video game companies are a bit more toward the entertainer part of the spectrum. Their pyramid has more rabid fans at the top than the norm. So they may be able to get away with poor customer service.
However, the Gamer Entitlement debate/issue still brings me back to the basic idea of customer loyalty. Video Game companies are not the Boston Red Sox or the New York Yankees. They’re not Bruce Springsteen. So they can’t get away with quite as much in terms of poor customer service. They do run the risk of angering those loyal customers. And losing them. To put it simply … Rockstar Games is not a Rock Star itself. Customer Service should still be a very key element of the business plan.
Marketing, Testimonials, Customers
The power of customer loyalty is typically harnessed in the form of Testimonials — happy customers rave about your business and endorse it. These are extremely effective marketing tools. Here’s a graphic from TechValidate demonstrating how effective Testimonials are compared to other forms of marketing:
This shows what a lot of people already say about testimonials: They work. People listen to other people when they recommend a business. This means that it is potentially a very bad move to alienate customers in the way developers are with the Gamer Entitlement tag. This is what really strikes me as the craziest part of what I’ve been reading about in terms of video game companies. They take a lot of liberties with their loyal customers — their rabid fans. But unlike diehard Yankees fans, video gamers don’t have a high tolerance for that type of action from their beloved video game company. And that’s why the internet is filled with negative word of mouth about the games that these loyal customers should instead be giving testimonials for.
Good Customer Service = More Sales
And the last graphic I offer today is from Brickstream, showing results from a survey they did about customer service. In it, their respondents demonstrate a distinct belief that improving or raising the quality and standards of customer service will directly increase sales and store traffic. The survey results:
That survey backs up what I’ve been thinking. Plain and simple — customer service enhances business. To recap, Customer Loyalty will give your business an edge and naturally increase marketing. Testimonials from loyal customers have a high impact in getting your business new customers and loyal customers stick with your business through the long haul. Loyal Customers are groomed and maintained by quality customer service. And businesses believe that quality customer service directly leads to more sales.
In our next installment on this epic saga of customer service and its impact in business, we’ll be looking at tips that are offered to consumers for dealing with bad customer service, as well as tips offered to businesses on how to improve customer service. Perhaps some of those video game companies will stop thinking their customers are too entitled, and use these tips to improve their sales and their word-of-mouth advertising?
The Official Merchant Services Blog returns to one of its favorite topics today — Customer Service. We can’t stress enough how important customer service is to every aspect of this industry. So we’re going to do a multi-part epic underscoring the value customer service has to your business. This is drawn on the foundation of Host Merchant Services — Superior Customer Service. In addition to the savings on processing fees that the company guarantees, its motto is “You stay with us because you’re happy.”
The HMS Guarantee
Part of this is reflected in the transparency that HMS offers. The company works against the grain in the Payment Processing Industry, shining light on hidden fees and showing customers where they can save money in their statement through the free statement analysis offer. The company backs that up with 24x7x365 customer and technical support. HMS makes sure there is someone available to handle any problems or issues its merchants have. Host Merchant Services states “If you have a problem we will make it right, guaranteed.”
Working in this environment, I’ve come to accept these standards of customer service as the norm. I recently got involved in a discussion online revolving around customer service and it shocked me how willingly some customers not only accept terrible service but defend the practices. I work under the idea that quality customer service is something to be valued. And that delivering a high level of service is something a business places priority on because service has an impact on the success of that business. So it was very surprising to find myself involved in a discussion that spent a lot of time defending bad service.
Internet Drama
The discussion began, as most internet discussions begin, with something tangential: The story of Jennifer Hepler found on The Mary Sue. Hepler, a developer for the video game company Bioware — known for the popular Mass Effect series and Star Wars: The Old Republic game — was interviewed about her job in 2006. Some of the answers she gave in that interview garnered the attention of video game players and Bioware customers in 2012. Those customers became very irate and then launched a scathing internet assault chock full of personal attacks against Hepler and the company. I’m not going to go into the details of the internet attack. It’s really tangential and fits everything you might think would happen in an internet environment where anonymous people have no inhibitions in what they say.
The topic did lead me into a discussion about customer service from video game companies — or more to the point, how video game players are so willing to accept terrible customer service from video game companies. This came up because many people felt that the customers, who were upset with Bioware, were crossing the line and becoming a detriment to the entire video game industry.
To me I saw the attack as pretty standard for the internet and easy to clean up. All it really told me is that Bioware attracted some difficult customers — some very negative and difficult to deal with customers. And that got me thinking about the way the story evolved. How Bioware became the victim and the villainous customers were to blame for their over the top anger. I felt the core issue of customer service got lost in the telling of this story.
The Bigger Picture
Businesses in every industry have difficult customers. And businesses recognized for excellent customer service have standards and protocols for dealing with these difficult customers. These practices help the business move past the difficulty and get to the core issue — assisting a customer who is unhappy with something in an effort to retain that customer in a long-term business relationship.
And this is what I have noticed is getting lost in some instances these days. Businesses seem to be cutting down on customer service as if the customer simply isn’t valuable enough to go the extra mile for.
That makes no sense to me. Customers and quality customer service are extremely valuable to long-term business.
So I did some research, looking for some data and stats on the value of customer service. I also looked for any information I could find on the impact customer service has on the bottom line. And I looked for tips on how to deal effectively with difficult customers. A lot of the information I found was anecdotal. That type of data has its good side and its bad side. The best part about anecdotal evidence is it shares experience with the person reading it. You’re getting a story and you’re getting the benefit of learning from their story without having to go through the same situation yourself. The downside of anecdotal evidence is that it’s a single instance. You can’t chart, analyze or track trends from one story. It only goes so far in trying to define the impact that bad customer service, or conversely difficult customers, can have on your bottom line.
Anecdotal Evidence
One of the more fascinating anecdotes I’ve found in my research was presented by Electrical Wholesaling in their “guide” to dealing with difficult customers from April, 2006. The story they present is: “The customer leaned across the counter. “You mean I spend thousands of dollars in here, and I can’t return a defective tool?” he said.
“Well, the tool isn’t really defective,” replied the counter salesperson.
“So you’re calling me a liar?”
The customer now had everyone’s attention. His loud voice and aggressive manner caused some of the other customers to look at one another and roll their eyes as if to convey the silent message, Oh, one of those difficult people.
It was my first week at the counter, and I was leaning toward the customer’s point of view.
My colleague continued the fight. “No, I’m not calling you a liar. This is simply normal wear of the tool. It’s against the manufacturer’s policy to refund for normal wear and tear.”
I was now completely on the customer’s side.
The customer didn’t reply immediately, and a silence fell across the room. He straightened up, slowly scanned the other customers, and said in a clear voice said, “People only come here as a last resort.”
He turned on the heels of his work boots and marched out of the store. As soon as the door closed, you could feel the air come back into the room. People chuckled rather nervously. Someone said, “Guess it takes all kinds.”
“That guy’s always a pain,” said my co-worker.
And that was the real issue. A different customer would have received a new tool, no questions asked, but because this particular customer wore the “difficult” label, it became his self-fulfilling prophecy to get bad customer service.”
The guide went on to point out the value a business can gain from a difficult customer. It suggested the experience can teach a business how to deliver the quality customer service it promises. A business can learn more from the difficult customer than it could ever learn from your most loyal customers. Difficult customers tell a business where it hurts. Listen closely and these customers will tell you what is missing from your business. They might even suggest what can be done about the problem areas. Their feedback can be the most brutal and the most honest gauge of your success.
The guide then goes on to give tips on interacting with difficult customers — ideas such as listening to the customer, refraining from arguing with the customer, and telling the customer what you can do for them instead of focusing on what you can’t do for them. These are all really basic tips and accentuate how to deal positively with angry customers.
A lot of the tips I found on dealing with difficult customers revolved around that basic advice. Multiple sites suggest the same things over and over again. Don’t argue. Stay calm. Listen. Let the customer vent. And then find a solution for them. If you’re calm, and you don’t antagonize the customer while showing them what you can do for them you increase the chance to resolve the issue where the customer is happy. And those customers are the ones that rave about your customer service. They remember that you helped them even when they were angry. They remember your company was able to work out a solution for their problem.
In our next installment of this series, we are going to look at some of the statistics and data I found — hopefully demonstrating that going the extra mile even with difficult customers helps increase the value of your business.
Spring Fever has gripped Host Merchant Services. The premier provider of payment processing and e-commerce services for small businesses and medium businesses has gotten its own radio advertisement produced. The ad will run WDEL 1150 AM all this month during Philadelphia Phillies spring training game broadcasts. The ad is part of a sponsorship program HMS has entered into with WDEL in support of its Philadelphia Phillies coverage and includes a print ad included on a Phillies schedule poster giveaway. The poster, which the radio station gives away to listeners, includes the baseball team’s 2012 schedule along with a bold Phillies-related image and ad space dedicated to the sponsors.
The 2008 World Series Champion Philadelphia Phillies enter the 2012 season looking to continue its string of 4 consecutive division titles and 5 consecutive playoff appearances. That level of quality and commitment to excellence is something Host Merchant Services provides in its arena of competition: The Credit Card Processing Industry.
So be on the lookout for each of these promotional items as Host Merchant Services gets into the Spring Training groove promoting its services along with the national pastime.
The Entrepreneurial Studies Program and the Entrepreneurship Club at the University of Delaware will continue their successful and informative Free Lunch Friday series — with a little help from Host Merchant Services CEO Lou Honick.
Each Friday at 12:30 p.m., students, faculty, staff, alumni and friends of the University are welcome to attend a 15 to 20-minute presentation on an aspect of entrepreneurship, followed by a 30-minute question and answer session. The next Free Lunch Friday event is Friday, March 2, and will feature a presentation on “The Past and Future of Cloud Computing” by Lou Honick, CEO of Host Merchant Services, which provides credit card and payment processing services for small and medium businesses, web hosting companies and their customers.
Honick has more than 14 years of experience as an entrepreneur, and began his career as the founder of HostMySite.com. He works to revolutionize transactions between customer services and partnerships in the payment processing industry.
Honick has received many awards and was named among Inc. magazine’s top 30 entrepreneurs under 30 in 2005.
Free Lunch Friday workshops are hosted at the UD Venture Development Center, located at 196 South College Ave. Anyone interested in entrepreneurship is encouraged to attend. Seating is on a first-come, first served basis. Food and refreshments are free to attendees.
For more information on entrepreneurship-related events, see the calendar on the entrepreneurial Studies website. Questions should be directed to the e-studies program at e-studies@udel.edu.
2012 is heating up and the payment processing industry is getting things moving. Today The Official Merchant Services Blog reports on a major event that just happened, and brings you all the details on a major event that is coming up in the credit card processing industry.
What You May Have Missed
The GSMA Mobile World Congress just took place in Barcelona, Spain. The event is the combination of the world’s largest exhibition for the mobile industry and a conference featuring prominent Chief Executives representing mobile operators, device manufacturers, technology providers, vendors and content owners from across the world. It ran from February 27 to March 1 and featured a lot of push from Android devices — including the latest and greatest gadgets and apps from the Samsung Galaxy brand. But VeriFone, the credit card transaction terminal making company that Host Merchant Services provides free equipment for its customers from, also dropped a major announcement at the event.
This press release, carrying a byline directly from their event booth at the Mobile World Congress, states VeriFone announced: “The PAYMEDIA Universal Acceptance Platform (UAP), a complete suite of services and software that enables Mobile Network Operators (MNOs) to manage mobile wallet acceptance at merchant systems.”
This is VeriFone’s mobile payment system. The UAP is designed for mobile-network operators to offer merchants to accept digitall walled applications. Customers with Near Field Communications (NFC)smartphones with digital wallets will pay for items by tapping their phone near an NFC-enabled terminal. VeriFone offers the MX800 and MX900 series terminals to their Tier 1 retailers (merchants with annual sales exceeding $1 billion). These terminals were already usable with the NFC App Manager VeriFone created for the Google Wallet Trial. So UAP is one step forward for VeriFone giving them the ability to run mobile payments through their own branded applications and their own customers.
This is an interesting devleopment in light of the NFC problems Google and Google Wallet were facing recently. This shows that the allure of Mobile Payments is still very strong for companies. The predictions still center around billions and billions of dollars worth of growth in the next few years. So companies are still making major moves to tap into mobile payment solutions such as NFC.
The testing of NFC, however, still continues to be limited. As VeriFone demonstrates, it’s still not ready for the majority of merchants. Tier 1 merchants give a good testbed based on the volume of transactions, but the technology still isn’t being tested heavily in the rest of the marketplace. So the standard knock against NFC still exists: The majority of consumers are still hesitant to accept the payment method due to security concerns. Analysts continue to predict Mobile Payments will explode and the sector will boom, but consumer acceptance still remains an obstacle.
VeriFone states in their press release that they have a plan to address consumer acceptance. “The missing element in MNO’s mobile wallet plans has been the lack of focus on how to provision, integrate and manage wallet and value-added acceptance apps at merchants’ systems,” said Paul Rasori, VeriFone senior vice president of marketing. “VeriFone’s PAYMEDIA UAP bridges that gap in the NFC ecosystem by managing the complexities of mobile commerce acceptance and ensuring a seamless buying experience no matter what wallet, app or program consumers bring to stores.”
For more information about VeriFone’s UAP, click here.
For more information about the rest of the Mobile World Congress, this blog gives a decent recap.
What Is Coming Up
While you may have missed the Mobile World Congress in Barcelona, fear not — The ETA Annual Meeting and Expo is coming up. From April 17 to 19 the most diverse and comprehensive conference in the payments industry will rock Mandalay Bay Las Vegas. This year’s show brings together more than 3,500 payments professionals and suppliers to the industry for three days annually to provide peer-led education, networking, and one-of-a-kind partnership opportunities. Whether you want to learn more about the payments industry, showcase a new product, or are in the market for a new partner or channel opportunity, you will find everyone and everything at the 2012 ETA Annual Meeting & Expo, from merchant acquirers, financial institutions, payments processors, and alternative payment providers to value-added resellers, prepaid companies, and merchant sales teams. Some of the highlights for this year’s extravaganza include:
Opening General Session Keynote Speaker: Guy Kawasaki: Tech industry legend and the original Mac evangelist, Kawasaki will share his irreverent approaches to innovation. Learn how to create your own successful innovations, and. . . generate revenue.
2012 Political Analysis: Charles E. Cook, Jr.: Cook, widely regarded as one of the nation’s leading authorities on US elections and political trends, will provide insight into the upcoming US elections. As an authority on policy-making and politics in Washington, Cook’s perspective on the 2012 political and legislative environment promises to be especially insightful as it relates to the unique challenges and concerns of our industry.
Educational SUPER Sessions: If you want to move from ordinary to extraordinary you need the latest and most complete information. Take a deep dive into these four fundamental industry topics at this year’s meeting: Sales, Technology / Products, Regulatory Issues and Social Commerce.
The Official Merchant Services Blog has just learned that Visa and MasterCard are planning to add new processing fees in the coming months — fees specifically targeted toward Debit Card Swipe transactions. These new fees, which we are consolidating and dubbing as “Card Association Fees” are going to complicate the pricing process for Merchant Services Providers in 2012.
Tricky Fees
Visa, MasterCard and Discover are the main players in the “card associations” and they are the driving force behind interchange and interchange rates. These associations periodically review and modify their interchange rate structures and billing strategies. What this means is that normally each year the big credit card companies get together and increase interchange rates. But after the Durbin Amendment went into effect in 2011, the credit card associations are taking pause and tweaking their own strategy. So effective April 2012 there are new Card Association Fees being implemented and these fees are not interchange fees. These are brand new processing fees created by the associations.
Visa’s New Fees
Visa has announced that beginning April 1, 2012, it will be introducing a trio of new fees:
A Transaction Integrity Fee
Revisions to its Network Acquirer Processing Fee
A Fixed Acquirer Network Fee (FANF)
Transaction Integrity Fee: Visa’s Transaction Integrity Fee is a new $0.10 fee that will apply to U.S. domestic regulated and non-regulated purchase transactions made with a Visa Debit card or Visa Prepaid card that fail or do not request Custom Payment Service (CPS) qualification. The CPS rates are Visa’s best rates and apply to both regulated and non-regulated transactions. This new fee can be viewed as a definite response from Visa to the Durbin Amendment’s interchange rate cap and finance reform/regulatory changes. This is part of the ninja-style set of moves The Official Merchant Services Bloghas cited would be the reaction to the Durbin Amendment.
Network Acquirer Processing Fee: The Network Acquirer Processing Fee on Visa-branded signature debit will be reduced — going from $0.0195 per authorization to $0.0155 per authorization. The fee for credit card authorization will remain $0.0195 per authorization.
Fixed Acquirer Network Fee: FANF will apply to the acceptance of all Visa-branded products and is based on both the size and the number of merchant locations. The FANF fee will be based on volume reported in July 2012. Visa will require U.S. acquirers to provide new merchant location reporting for the tracking of this fee. The new reporting requirements will include a monthly breakdown of acquired merchants, number of merchant locations, and merchant sales volume by merchant Taxpayer ID. For Card Present merchants, with the exception of Fast Food Restaurants, a merchant Taxpayer ID with physical locations will be assessed FANF on a per-location rate basis. For example, Card Present Merchants with one to three locations will see a pass through per location per month fee of $2. Price per location per month will increase according to the number of locations – upwards of $65 month for merchants exceeding 4000 locations. Card Present High Volume MCC Merchants with one to three locations will see a pass through per location per month fee of $2.90. Price per location per month will increase according to location — upwards of $85 month for merchants exceeding 4000 locations. Customer Not Present, merchant aggregators and merchants primarily operating as Fast Food Restaurants (MCC 5814) will be assessed based on gross merchant sales volume originating from any Visa-branded card. Merchants that fall into this category with monthly gross sales volume ranging from less than $50 a month on the low end will see a $2 a month fee- to merchants with gross sales exceeding $400 million at a $40,000 a month fee. There are some 18 tiers, with a merchant falling into a volume tier of $8,000 to $39,999 a month seeing a new $15 per month FANF fee.
Visa will also effectively waive the FANF for eligible Charitable and Social Service Organizations (MCC 8398). The FANF waiver for Charitable and Social Service Organizations will be provided through a quarterly rebate process that Visa has indicated will be defined at a later date.
You’ve been thinking about starting your own business for years. The opportunity to step out on your own and launch the business has finally come — but wait. The macro-economic conditions are so severe that your business seems doomed to failure even before it starts. Should you make the leap and launch your business during tough economic times?
Starting New Venture
While business decisions like this are always difficult, and every sector is unique in its competitors and profit margins, the true stories and insights of entrepreneurs who have started businesses in tough economic times may give you some guidance.
One important fact to consider is this: the economy is not standing still and goes through cycles of boom and bust with relative regularity. As evidenced by the excellent Wikipedia article on Recessions in the United States — one can view the dates of recessions since the ‘Panic of 1797‘ through to today’s ‘Great Recession’. These business cycles are highly unpredictable, making the chance that your business will face a tough macro-economic situation during its life very likely.
Rather than try to “time” your business launch, experts agree that having sufficient capital to survive regardless of the economy around you and a sound business strategy are the real prerequisites for getting a successful new business off the ground.
Consider the actions of serial entrepreneur, Neil Heuer, who has founded a new business right in the teeth of the most severe economic downturn since the Great Depression and chose to compete in the decimated Florida real estate and remodeling sector. Mr. Heuer started Grand Woodworking in Naples, Florida in June of 2011. Specializing in Naples custom cabinetry and unique high end custom designed woodworking for South Florida’s affluent homeowners, Grand Woodworking competes by producing hand crafted wood designs of exacting specifications and uncompromising quality.
Mr. Heuer explained his reasoning for starting his business during the Great Recession, ”We think now is an excellent time because people are looking to remodel their homes instead of just buying new. People are trying to make their current home new to them. Also technology is moving quickly and people are looking to re-house their glass big heavy CRT televisions with nice flat panel televisions for watching movies. Now is also a good time because people are cost conscious when making decisions investing in their home and we are convinced we can build an excellent quality product for the best price and be able to put the Grand Woodworking name on it.”
When further asked for what advice he would give now to a potential business owner about starting a business during an economic downturn, Mr. Heuer commented, ”First believe in your product. You must believe you are the best by doing what you plan on doing. Mediocrity isn’t acceptable to customers want more. They expect more but most importantly they deserve more. Consider it more like being partners with your customers. Work with the the customer and understand their needs and what they want the end result to be. Get the customer to depend on you.”
Another successful entrepreneur who founded a company during a volatile economic period is Daniel Foster. In the year 2000 Mr. Foster and co-founder Stuart Melling began an Internet business selling web hosting services to developers and small business in and around Manchester, United Kingdom. They named the company after their apartment address and 34SP.com was off and running. Today the company specializes in a variety of hosting products including UK website hosting and business web hosting.
Host Merchant Services asked Mr, Foster about his startup experience and what advice he would give today’s potential business owners, ”We started 34SP.com on graduating from university in summer 2000, just after the peak of the dot com boom. It seemed that anyone with any idea could start a company and one thing they all needed was somewhere to host their website. We started without any borrowing, so it was important to be cash flow positive from day one. I’d recommend this approach to anyone starting a small business, even if it means starting with relatively modest targets.
You can always beat your own targets but if you have to reach goals set by lenders, the consequences soon become obvious. Also, I’m not sure there is a best time to start a business. If you have a good idea, give it a go! Starting 34SP.com and being my own boss was one of the best decisions I ever took, and I can’t imagine working any other way. 34SP.com was started at the start of a recession, so with the economy hopefully now on the mend, now is surely the best time possible to run with that idea you’ve been thinking about for years!”
So there is some great advice from two people just like yourself who started businesses when economic conditions were less than perfect and have persevered despite the odds. Keep your eye on that dream of owning your own business, and don’t be afraid to take actions to make your dreams a reality.
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The testing of NFC, however, still continues to be limited. As VeriFone demonstrates, it’s still not ready for the majority of merchants. Tier 1 merchants give a good testbed based on the volume of transactions, but the technology still isn’t being tested heavily in the rest of the marketplace. So the standard knock against NFC still exists: The majority of consumers are still hesitant to accept the payment method due to security concerns. Analysts 
Transaction Integrity Fee: Visa’s Transaction Integrity Fee is a new $0.10 fee that will apply to U.S. domestic regulated and non-regulated purchase transactions made with a Visa Debit card or Visa Prepaid card that fail or do not request Custom Payment Service (CPS) qualification. The CPS rates are Visa’s best rates and apply to both regulated and non-regulated transactions. This new fee can be viewed as a definite response from Visa to the Durbin Amendment’s interchange rate cap and finance reform/regulatory changes. This is part of the ninja-style set of moves The Official Merchant Services Blog 
