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a short guide to an important process

Definition s
Credit Card Terminal Merchant Merchant Account

Definitions Processes Resellers

In this section you will learn the terminology you will need to sell merchant services properly.

Processor
ISO Card Issuing Bank

Pay close attention to the terms because often, the merchants will only understand the process to a very limited extent.
If you can arm them with knowledge they will trust you, and trust is the beginning of every sale.

Definitions
Credit Card Terminal Merchant Merchant Account

Definitions Processes Resellers

Any card issued by a banking or lending institution, which can be swiped or otherwise interfaced with a terminal and carries the cardholders bank or lending account information for the purpose of transferring funds.
This includes any bank card with a magnetic strip, smart card (which contains a microchip that houses the cardholders information), or Speed Pass out on the market today. The rates that the merchant is charged for accepting these cards are set by Visa and Master Card, based on the number of disputed charges or charge-backs.
There are several different types of cards, all classified by the networks: 1. Debit/Check Cards Cards issued by banking institutions which are tied directly to a cardholders bank account. These are considered the most secure type of cards because they are tied directly to verified stored funds, and have a very low chance of being disputed (or charged back) Standard Credit Cards Cards issued by banks or lending institutions, which normally represent funds which are loaned or deposited specifically to build credit. This is considered to be the second most secure and least costly type of card. Corporate Cards Cards issued by lending institutions or banks to corporations for the purposes of tracking spending, issuing rewards, or allowing multiple signers on accounts. These cards normally have a little bit higher rates because they are normally linked with business spending accounts or tied to rewards programs. Rewards Cards Cards issued by banks or lending institutions which generate a value per transaction called points which can be redeemed by the card holder for some value or rewards for the usage of the card. These are the most expensive type of card to be processed (higher rates set by Visa/Master Card) because the rates must be paid for. FACT: It is not commonly known that the rewards that some cards offer their cardholders are normally paid for by the merchant who took the card in the form of higher rates paid for that card.

Processor
ISO Card Issuing Bank

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Definitions
Credit Card Terminal Merchant Merchant Account

Definitions Processes Resellers

A Credit Card Machine, other device or software which reads the magnetic strip on a credit card or otherwise interfaces with a card, then communicates that information to the processor using such types of communications as wireless, internet, land-line, or website.
Terminal has become a general term to represent one of the many mediums through which transactions can be run: 1. Landline Credit Card Machine a basic credit card machine which uses a regular phone line to run transactions. These machines are best for small, low volume merchants on a budget. (avg. cost $100$200) Internet Credit Card Machine these machines are setup to run transactions through an internet connection, sometimes with a landline back-up. The transactions are very fast (typically 2-3 seconds) and are best for high volume merchants where long lines are typically formed. (avg. cost $200-$400) Wireless Credit Card Machine these machines utilize cell phone networks (either CDMA or GPRS) to run transactions wirelessly. Best for mobile merchants or merchants who operate at events or festivals where communications are non-existent. Just like a cell phone, they normally require a data plan and are very expensive. (avg. cost $600-$900) eCommerce There are several different types of eCommerce but the most popular types are Website processing and Virtual Terminals (a software which mimics a credit card machine. POS System/Software This is what you typically will see in large restaurants, bars, and hotels. POS Systems are normally a single or network of computers with touch screen monitors that run software that helps the merchant track sales, employee hours, inventory, and allows them to customize menus and specials.

Processor
ISO Card Issuing Bank

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Definitions
Credit Card Terminal Merchant Merchant Account
There are many different types of merchants today:
1. 2. 3.

Definitions Processes Resellers

A business which accepts payment in return for goods or services; this includes Retail, Restaurant, MOTO (mail order/telephone order), eCommerce and B2B (business to business).

Processor
ISO Card Issuing Bank

4.

Retail The most typical storefront merchant who sells items directly off of their shelves to consumers. Restaurant/Service Most bars and restaurants fall into this category if they accept tips. Other examples are cab/taxi services, hair and nail salons, or delivery services. MOTO This term stands for Mail Order/Telephone Order but this old term has expanded to include eCommerce and B2B (business to business). The reason for this category is because the security of the transactions associated with these merchant accounts is a lot lower be cause the card is not present. This means that the merchant is not swiping the card and therefore the identity of the cardholder cannot be verified. These are normally higher risk. Examples of MOTO accounts would be online merchants, manufacturers, insurance agencies, and merchants who sell via catalog or newspaper. Fuel/Petroleum These merchant accounts are classified as such because they will typically pre-authorize a card for $1 or some minimal amount to make sure the card is valid, and then settle the full amount charged later at the end of the day.

Depending on how the merchant accepts payment, they should fall into one of these categories, but it is important to note that new business types are created every day and that it may not always be clear as to which type of merchant account should be set up for them.

Definitions
Credit Card Terminal Merchant Merchant Account

Definitions Processes Resellers

The merchants credit card processing account, managed by a merchant services company or ISO. All merchants are required to go through an application process and, upon approval, are issued a Merchant ID (MID). This account holds all the information about the merchants fees, rates, and deposit bank account information.
It is important to understand that a merchant accounts primary functions are:
1. Provide Processing The merchant account is what links the terminal to the processor so that the processor knows which merchant the transaction is being run under, and also which bank account to deposit the credit card charges into every day. Asses Rates and Fees The merchant account is setup with all the monthly, yearly, per item and contract fees agreed to by the merchant at the time the account is set up. Normally, all fees are auto-debited out of the merchants bank account once a month. Merchants will not receive a bill for any fees other than a cancellation or early termination fee sometimes. They will however receive a monthly statement detailing all of the credit cards transactions run and a detail of the fees and rates as well. Typical fees are listed below: Statement Fee a monthly fee that helps to provide everything that goes into generating the merchants statement. Monthly Minimum a monthly fee that is charged in place of the per transactions rates if those rates dont result in an amount greater than the minimum. Security Fee a yearly fee the merchant must pay as part of their PCI Compliance program. *see PROCESSES section under security. Service Fee normally a monthly fee the merchant must pay if they required an excessive amount of service or equipment repair. Charge-back Fee to discourage disputed charges on a card, merchants are normally penalized per incident if a customer starts the charge-back process and wins.

Processor
2.

ISO Card Issuing Bank

Definition s
Credit Card Terminal Merchant Merchant Account

Definitions Processes Resellers

The company which physically handles all transactions between the merchant and the card issuing banks. The Processor also handles the technical aspects of the merchant account and prepares configuration data for terminals to be programmed for a merchant to accept credit cards.
Processors normally handle a large load of the merchant services work:
1. 2. Customer Service processors will handle many customer service issues such as answering questions for merchants about transactions or account questions. Technical Support there are many issues that a credit card terminal can experience such as communication failures, invalid batch sequences, wrong receipt headers, or programming problems. The processor is normally there to field a lot of these calls. They can fix a lot of problems over the phone and help to reduce the work load of the merchant services companies. Terminal Programming once a MID (merchant ID) has been issued to a new merchant, they can then have their terminal programmed to accept cards under their account. A lot of times the processor can do this for some different types of terminals. Account Support - on top of supporting the merchants, the processor also supports its ISOs and SubISOs, helping them set up new accounts, make changes to accounts, and close accounts. Some examples of Processors are as follows: 1. Global Pay 2. First Data 3. Chase Paymentech 4. Merchant One

Processor
ISO

3.

Card Issuing Bank

4.

Definition s
Credit Card Terminal Merchant Merchant Account

Definitions Processes Resellers

A merchant services company which has direct authorization from the Processor and Visa/Master Card to facilitate the merchants credit card processing program.

ISO/Merchant Services companies are charged with selling merchant accounts and are the intermediaries between the merchant and the processor. They handle such account issues as
1. 2. 3. Banking Changes This is a change to the deposit bank account where the credit card transaction funds are deposited everyday. Address Changes Terminal Preparation Once the account is approved and the configuration file has been created by the processor, many time the ISO/merchant services company will physically download that information into the terminal for processing, Support - the merchants will need support, and many times it is up to the ISO to keep their customers happy by providing excellent support or help with anything else they may need.

Processor
ISO Card Issuing Bank

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Vi-Tel is a Sub-ISO meaning we are below another ISO and could not setup merchants without a Certified ISO above us. North American Bancard is our certified ISO by Visa/MC and can therefore setup new merchants for processing.

Definitions
Credit Card Terminal Merchant Merchant Account

Definitions Processes Resellers

Any banking or lending institution that has authorization from Visa/Master Card to issue credit cards with their logo/brand on it. A credit card must be on a network (i.e. Visa/Master Card/Discover/Amex/others) which the processor recognizes before the transaction can take place.

Processor
ISO Card Issuing Bank

There are literally thousands of lending institutions and banks out there that issue credit cards and debit cards but these only pertain mostly to Visa and Mastercard. American Express and Discover do not normally allow very many institutions to issue their cards for them. It gives them better control over their brand. A lot of times what youll see is a merchant being able to accept Visa, Mastercard, and Discover at the rates the Merchant Services Company has defined, but American Express has a different rate schedule and a completely different set of monthly fees. This is important to explain to a merchant. American Express has a LOT of control over their merchant accounts. They go through their OWN approval process for merchants and sometimes will turn down a merchant even if the merchant has been accepted on VISA/MC/DISC.

Processe s
Account Setup Security Authorization Settlement

Definitions Processes Resellers

This section is designed to teach you the basics of merchant services and its processes. Its important to remember that understanding the process by which something works is the key to taking full advantage of it.

Chargeback
Account Maintenance Account Closure

Processes
Account Setup Security Authorization Settlement
1.

Definitions Processes Resellers

Once the merchant agrees to rates, fees and selects a terminal, the merchant and reseller must fill out an application. (either online or on paper)
A quick app will be provided to you that you can print out and hand to the merchants to fill out for you to enter later, or you can take them to the VI-TEL Online Quick App and have them enter in the info there. Once the App has been entered into the Vi-Tel website, the app will be received by Vi-Tel and then submitted for approval by North American Bancard.

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Chargeback
Account Maintenance Account Closure

The Merchant must also provide a copy of a voided check of the deposit bank account he/she wishes his processing funds to be deposited into. The processor reviews the application and either approves, declines, or places it in a pending status if they need more information or further review.
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Approved Accounts will be issued a Merchant ID number (MID) Declined Accounts will normally be provided a reason why the Decline occurred (due to credit or fraud history or problems with the application). Pended Accounts, need further review. They may sometimes come back and ask for clarification on the application or for some further paperwork from the merchant such as their articles of incorporation.

Processes
Account Setup Security Authorization Settlement

Definitions Processes Resellers

You may have heard from time to time on the news where cardholder data (particularly credit card numbers and expiration dates) have been stolen in very large numbers. It is now common place to hear that thousands of card numbers have been stolen electronically.

Chargeback
Account Maintenance Account Closure

This presents a very large liability particularly on Visa and Master Cards part, so recently new standards have been instituted by Visa and Master Card to protect card holder data called PCI Compliance. The following guidelines must be met before merchants may process:
1. 2. 3. 4. Merchants may not store (or have access to) any full credit card numbers. Terminals must not store full card numbers, and can not display card numbers on their displays or print out on receipts or reports. Merchant Services Companies must run Audit Programs to Certify that the merchant is compliant to PCI Standards. New Encryption Standards are now required to be met to protect cardholder pin numbers. (This has made many credit card machines obsolete) Passwords must be present on any function of the terminal which would allow even the most limited access to cardholder data through reports. Any computer network with internet access which facilitates the transaction must be behind a firewall.

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Processe s
Account Setup Security Authorization Settlement
Terminal
Authorization Request Error Messages Approval or Decline

Definitions Processes Resellers

Processor

Card Issuing Bank

Chargeback
Account Maintenance Account Closure

This is the first step in every credit card transaction. The Authorization process simply verifies the funds are available, and tells the cardholders bank that it may need to set aside or hold the funds for a transfer later. Steps: 1. The card is run and the terminal contacts the processor with an Authorization Request. 2. The Processor verifies everything is setup correctly with the terminal and merchant account and then either routes the transaction to the Card Issuing Bank, or sends an error message back to the terminal describing the problem. 3. The Bank checks the availability of the funds and issues an Approval or Decline. 4. The terminal then adds the authorization to the list or batch of authorizations it has received since the last settlement was run.

Processe s
Account Setup Security Authorization Settlement
Terminal
Settlement Request Error Messages Settlement Confirmation

Definitions Processes Resellers

Processor

Chargeback
Account Maintenance Account Closure

Card Issuing Banks This is the second and final step in every credit card transaction. The Settlement process tells the cardholders bank to transfer funds from one bank to another. Steps: 1. 2. The Batch is run and the terminal sends a list of all authorizations to be settled to the processor. The Processor verifies everything is setup correctly with the terminal, merchant account and batch and then requests all card issuing banks to transfer funds, or sends an error message back to the terminal describing the problem. The Processor issues a settlement confirmation and a batch report of all closed transactions.

3.

Processes
Account Setup Security Authorization Settlement

Definitions Processes Resellers

A Chargeback is the process by which a cardholder disputes a charge on their credit card account. The following is what takes place during a chargeback:

Chargeback
Account Maintenance Account Closure

1. 2. 3. 4.

The card-holder calls their bank to dispute a charge and the bank begins the chargeback process. The processor then requests a retrieval of the signed sales receipt from the merchant and any other proof the merchant can provide for validation. The merchant faxes or sends in the signed slip and the processor either awards the dispute to the customer or declines to refund the sale. If the dispute is won by the customer, the merchant has the funds removed from his bank account and is typically charged a fee for the chargeback.

Remember: Excessive chargebacks are a very negative thing on a merchant account. It typically means that the merchant is either misrepresenting who they are, misrepresenting their products, or misrepresenting their pricing. Although mistakes do happen, a chargeback is not something to take lightly. Merchant accounts can be FORCED CLOSED by the processor for too much charge back activity. The merchant can even be put on a TMF or MATCH list and will never be able to accept cards again.

Processes
Account Setup Security Authorization Settlement

Definitions Processes Resellers

There are several routine maintenance items every merchant account will go through from time to time:

Chargeback
Account Maintenance Account Closure

1. 2. 3. 4. 5.

Banking Changes A change of the account that the merchants processing is deposited into. Address Changes A change to the location or corporate addresses. Fee Changes Occasionally circumstances require a fee to be added or dropped from a merchants account. Name Changes Changes to the DBA or corporate name associated with the account. Many more.

Processes
Account Setup Security Authorization Settlement
1.

Definitions Processes Resellers

It is very common for merchant accounts to close due to various reasons. These could be that the merchant is going out of business, the merchant is switching processors, or that the processor has decided to close the merchant due to excessive risk or possibly fraud. When a merchant account needs to be closed there are a few things the merchant needs to keep in mind:

Chargeback
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Account Maintenance
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Account Closure
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Am I under a contract? It is considered industry standard practice for merchants to be under a contract for their processing account. A standard contract is 3 years. If so what is my cancellation fee? If the merchant IS on a contract, no doubt there is a cancellation fee. This will normally be equal to the monthly minimum fee on their account multiplied by the remaining months on their contract. Why am I cancelling? If the merchant is not going out of business, its possible they are going to another merchant services provider because of better rates or equipment or service related issues (merchants should ask themselves can my merchant services company possibly match rates I am being offered elsewhere?) Do I own my equipment? Something the merchant needs to understand is many times they are given free equipment, but in reality the equipment is only theirs if they stay with their merchant services provider for the full term of their contract. If not, they could be facing hefty fees if they do not return the equipment after they cancel.

Resellers
Opportunity Regulations Compensation Potential

Definitions Processes Resellers

This section is designed to explain to you the ins and outs of being a reseller of merchant services products. The Merchant Services Division of Vi-Tel Wireless, through North American Bancard is unique among all of our other product lines.

Resellers
Opportunity Regulations Compensation Potential To be completed

Definitions Processes Resellers

Resellers
Opportunity Regulations Compensation Potential To be completed

Definitions Processes Resellers

Resellers
Opportunity Regulations Compensation Potential To be completed

Definitions Processes Resellers

Resellers
Opportunity Regulations Compensation Potential To be completed

Definitions Processes Resellers