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What The Heck Happened to the Merchant Processing Resource?
August 26, 2011WHAT THE HECK HAPPENED TO THE MERCHANT PROCESSING RESOURCE?
We’ve had a lot of design changes implemented to our site in the last year. We hope this is the last one. Thank you for your patience!
Bottom line: Our previous web host sucked (Webs.com). Their dns servers were always down late at night and on weekends for “maintenance.” Their site building tools would crash 90% of the time and their technology is so old that it was impossible to do pretty much anything other than post a blog.
So we found new hosting and prepared ourselves to move the site in its original format but Webs.com disabled our access to FTP, making it impossible to retrieve our files. It appears they did this to discourage us from leaving them. That was the last straw.
So without FTP access, we were stuck with figuring out how to move thousands and thousands of pages. Not to mention, we figured out that Webs was hosting many files remotely, so we wouldn’t have been able to access most of our content anyway.
We got creative and reverted back to primitive programming on the OS X unix terminal, using curl –O commands against our sitemap to download our site through http into individual files.
So now we have the raw data, but the CSS stylesheets are gone. That means the pages are up but they’re styled like it’s 1994. Ugly, ugly, ugly.
In the next week (that’s what we say but it will probably take longer), we intend to repost that content into our wordpress theme. The old files will probably be given a 301 redirect to prevent ’404 File not found’ errors for indexed urls.
deBanked has big plans for the rest of 2011 and 2012, especially with the amount of traffic we were getting while using the old, useless format.
In the meantime, you can forward all questions to webmaster@merchantprocessingresource.com
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Update 8/24 All old articles have been republished to the site in a readable format. Their dates/timestamps are still wrong but the original urls are intact.
Electronic Payments Industry changing Forever – All Points Bulletin!
August 23, 2011Electronic Payments Industry Changing Forever – ALL POINTS BULLETIN
Posted on December 17, 2010 at 8:36 PM
Attention business owners and to all those employed in the merchant processing and Merchant Cash Advance industry. The world is changing and not at the ‘global warming will one day kill us all’ pace. It’s happening right now. Remember that little thing called the Wall Street Reform and Consumer Protection Act that passed in July? There was a little itty bitty part in there that we so happened to broadcast and critique in detail on our site, known as the Durbin Ammendment. Take a look the law’s summary, particularly #3. On the evening of December 16th, the Federal Reserve Board delivered an early Christmas present to all the debit card networks and big banks. The gift contained the government’s proposed debit card fee changes, or as some bank executives might tell you, “they mailed us 10 sticks of dynamite.” If you’re serious about this business, read through the 176 page document that every news agency is trying to sum up in 3 paragraphs.
Visa’s stock plunged on the news
Debit cards accounted for 35% of all non-cash transactions in 2009. The proposed changes seek to cap the fee charged for accepting a debit card to a maximum of 12 cents. According to the report issued by the Board, here’s what businesses are paying now:
“Networks reported that debit and prepaid interchange fees totaled $16.2 billion in 2009. The average interchange fee for all debit transactions was 44 cents per transaction, or 1.14 percent of the transaction amount. The average interchange fee for a signature debit transaction was 56 cents, or 1.53 percent of the transaction amount. The average interchange fee for a PIN debit transaction was significantly lower than that of a signature debit transaction, at 23 cents per transaction, or 0.56 percent of the transaction amount. Prepaid card interchange fees were similar to those of signature debit, averaging 50 cents per transaction, or 1.53 percent of the transaction amount.”
Debit interchange fees have always been assessed as a percentage of the sales amount. The larger the transaction size, the higher the fee. Debit cards are most frequently used for smaller purchases but a flat cap on transaction fees regardless of transaction size is a game changer. Now twist this with the fact that interchange fees are almost disappearing altogether and one needn’t think too hard about the unintended consequences.
MasterCard issued a statement immediately. “Experience demonstrates that consumers, not banks or payments networks are the biggest losers as a result of this regulation,” said Noah Hanft, MasterCard’s general counsel. “This type of price control is misguided and anti-competitive, and in the end is harmful to consumers.” Visa hasn’t provided any useful feedback at this time but has openly condemned the report.
The Board acknowledges that some card issuers can’t even cover their own costs with the 12 cent transaction fee in effect. This Board’s direct response to this dilemma is that they simply don’t care. “An issuer with costs above the cap would not receive interchange fees to cover those higher costs. As a result, a high-cost issuer would have an incentive to reduce its costs in order to avoid a penalty.”
Thank you Federal Reserve for the feeble minded, anti-capitalistic solution. “Just lower your costs or we’ll fine you.” The outrage is warranted because the proposal isn’t really a proposal at all. This is the new order granted to the government after the passage of the Wall Street Act back in July. The payment networks and banks may comment on this proposal but effective July 21, 2011, this simply becomes law.
This is the equivalent to forcing all the businesses in America to lower their retail prices under penalty of law as the solution to dealing with consumers whining about the recession.
Additionally, the Board constantly refers to the life cycle of a debit sale to being a 4 party transaction. There is:
* The bank that issued the card to the customer
* The customer
* The business that the customer shops at and uses the debit card
* The acquiring bank that the business uses to accept debit cards
The payment networks are what allow the acquiring banks to communciate with the banks that issued the debit cards. The networks have costs associated with their service, infrastructure, and overhead. The 12 cents per transaction is the combined total that can be charged between both the acquiring bank, payment network, and issuing bank. There’s not a whole lot to go around.
While the Federal Reserve and congress are patting themselves on the back and high fiving eachother for saving the economy (by sticking it to the big banks), the end result will be the loss of millions of jobs, the elimination of debit cards, an increase in other bank fees, the end of all debit rewards programs, the end of electronic payments quality, the end of electronic payments assurance, and the collapse of the free market economy. Give me a high five. Not!
Here’s what will happen and why:
* The Board ignores or does not understand the electronic payments industry business model. The debit card business is not a 4 party transaction. The acquiring bank party encompasses multiple layers and parties in itself. Acquiring bank —> Payment Processor —> Indepedent Sales Office —> Sales Agents. Debit transaction costs are marked up at each level to create a competitive marketplace. The electronic payments industry employs millions of people. With a 12 cent cap and no markup abiliity, those millions of workers will lose their jobs overnight.The majority of this business is commission based, with processors and sales agents directly taking home solely what’s generated on the markup of debit/credit fees of their clients.This is probaby the most blatent and incredibly obvious oversight. There can be no competitive market because costs are fixed and there can be no sales because there is no money for anyone to earn on markups. National unemployment will rise several percent over the course of a few months.
* Rewards debit cards can no longer exist. Card issuing banks currently pay their customers rewards by charging businesses more for accepting a rewards card transaction. Since a bank no longer has that ability, rewards cards can no longer exist.
* Debit cards become a moot point for banks. With no profit incentive to put them in the hands of customers and no ability to compete on price, there is no incentive for debit networks or cards to continue.
* Quality, fraud protection, and assurance will suffer. Banks whose own costs are higher than the imposed cap face fines by the Federal Reserve unless they cut costs. Therefore the government is not only incentivizing poor quality, but in fact making it mandatory.
* Ever hear of too big to fail? This industry is too big to be messing with. These are the actual national and international money networks through which trillions of dollars move through every day. Mandating poor quality, eliminating all competition, and removing profit incentives will de-evolutionize the flow of money altogether.
The Board will review and allow comments through March 31st, at which point this industry will meet its maker. Yes, it’s that’s serious.
-deBanked
https://debanked.com
Did Somebody Say the End of the Credit Card Industry?
August 23, 2011
We check our site’s inbox once a day and usually receive some compliments, feedback, or industry secrets. But over the last two days, more than 15 people e-mailed us this link: The End of Credit Cards is Coming. This was followed by a barrage of comments such as “Does this mean the end of the Merchant Cash Advance industry as well?” or “It looks like your site topics are going to be obsolete.”
If any industry is poised to take a hit as a result of this “payment evolution”, it’s likely to be the manufacturers of plastic and magnetic strips. (The companies that make the cool shiny holograms on the back may also suffer.) If you actually READ through the article, it discusses an industry progression towards contactless payments. A contactless payment is still an electronic payment and it involves the same networks and banks. Saying the declined use of physical rectangular plastic cards will result in the end of the electronic payments industry as whole is like saying that the less frequent use of flutes and banjos will result in the end of music.
All sarcasm aside, this progression towards contactless payments indicates the merchant processing industry is on the verge of an explosive rebirth. Here’s why:
Equipment Sales and Leases
New technology to accept contactless payments will be required. If plastic cards are slowly phased out, retailers will have absolutely no choice but to purchase or lease equipment to accept contactless payments. (Sales and Leasing boom)
Increased Interchange profits for banks
The growth of contactless payments will likely cause Visa and MasterCard to increase certain interchange categories. They will rationalize this by providing proof that contactless security costs more.
New Payment Networks
Every merchant needs to accept both Visa and MasterCard branded cards in order to survive. In some regions of the country, it’s also important to accept American Express. Though American Express charges merchants more, they can’t afford not to have it. That being said, the above referenced article mentions the formation of a new super power payment network called ISIS to rival the current players. ISIS was formed by AT&T, T-Mobile, Verizon, Discover and Barclays Bank. Since ISIS is indepedent from the other payment networks, they will be able to create their own “interchange” and cost structure. I am inclined to believe that costs will not be lower than what’s commonplace in the current marketplace.
Increased Electronic Payments Usage
For the past 4 years, we’ve been lectured repeatedly by the government, teachers, and financial experts that credit cards are bad. During that same time period, we’ve also celebrated the importance and efficiency that phones/smart phones have brought into our lives. Blackberries, iPhones, Droids, texting, apps, skype, and wireless internet are the bread and butter of our daily lives. So what is the public inclined to infer with phones capable of making electronic payments?
- Credit Cards Payments Bad
- Smart Phone Payments Good
As long as Smart Phone is Good, consumers don’t need to feel guilty over their usage of credit. I’m sure we’ve all seen the debt counseling talk shows where they take an out of control spending housewife and force her to cut up her credit cards. She cries a little, acknowledges her problem, and then in a symbolic gesture of triumph, cuts up her cards. The entire charade portrays the plastic card as the perpetrator of the woman’s debt problems. One thing I don’t expect to see any time soon is a woman being lectured by a debt counselor to smash her iPhone with a hammer to stop her out of control spending. “In order to conquer your debt, I want you to go home and burn all 5 of the Droids on your family plan.”
BECOME DEBT FREE
Join the thousands of people who are breaking their scissors on their phones, buying new scissors, and then smashing their phones with a hammer. Say “Forget it to Credit” because there’s no app for your spending problems!
Those rectangular plastic cards may be on their way out but contactless payments are going to bring billions to the merchant processing industry. Happy processing!
-deBanked
No New SBA Loans Being Accepted. Don’t Understand? We’ll Draw You a Picture
August 23, 2011
On September 27, 2010, the Small Business Administration(SBA) temporarily sweetened the deal on the popular 7(a) loans. As part of the Small Business Jobs Act, government backed default guaranties rose to 90% and many of the major fees were waived.
By late December, the funds for this program had been fully allocated and exhausted. But the announcement was poorly communicated, resulting in thousands of unsuspecting bankers and applicants left stranded and confused. To deal with the drama, the SBA set up queues, where applicants were either placed on standby to take the place of a cancelled Jobs Act loan or to be transitioned into the regular 7(a) loan without the deal sweeteners.
But leave it to the SBA to underestimate the intelligence of their clients. Worried that bankers and business owners might not understand the concept of closing one program and offering them another, they drew a picture.
Actual image being used on SBA.gov to explain the status of Jobs Act loans
In case the phrase “No New Loans Being Accepted” is obscure and cryptic, we can decipher the message using the Daily Transition Phase Alert meter. It’s a state of the art, super genius meter, that was handcrafted by NASA scientists, and topped off with the modern pizazz of a traffic light. Green is GOOD. Red is BAD. Big dollar sign GOOD. Small dollar sign BAD. If the meter is yellow, speed up and try to beat the light but make sure there are no cops behind you first.
Bankers should start using this system en masse. Instead of an outright decline, they can simply inform applicants that their lending ability is in Phase Red. Persistent businesess can take their chances in the underwriting process and battle it out using the Daily Transition Phase Alert meter 2.0. Left foot on $. Right hand on. But watch out for blue because blue is very bad! Blue automatically allows the bank to raise your business checking account fees and increase your credit card processing rates.
The Amazing Daily Transition Phase Alert Meter 2.0!
While your bank is busy playing games with you (they’re not just mind games anymore!), alternative financial firms such as Merchant Cash Advance providers are busy funding applicants in less than 7 days on average. The process is easy, only minimal paperwork is required, it’s credit score flexible, and every business is doing it these days. Want to find out the status of your Merchant Cash Advance application? We’ll hand draw you a picture:
Choose your funding source wisely…
– The Merchant Cash Advance Resource
