MSG PAYMENT SYSTEMS

EMV Chip Cards

2012-01-19T09:51:00.001-06:00

Credit card with embedded chip technology.

As a trusted and experiencedcompany in the electronic payments industry, we’re relied upon to provideservice and educate our merchants with the latest payment technology andinformation. If you follow the news or perhaps read our blog about the DurbinAmendment, you’ll know that this last-minute addition to the Dodd-Frank WallStreet Reform and Consumer Protection Act of 2010, has sparked fiercedebate. It just went into effect thispast October, and already we’re seeing its ramifications. Amidst all the hype,is a little-noticed component about the potential impact the ruling may have onencouraging the migration of debit cards away from magnetic stripe toEMV-enabled or Chip & PIN (Personal Identification Number), technology. TheDurbin Amendment is just one of the many reasons why the days of the creditcard’s magnetic stripe appear numbered, with chip cards poised to immigrateonto America’s payments landscape.

The EMV specification,originally named for developers Europay, MasterCard and Visa,is a global standard for interoperable credit and debit payment cards,point-of-sale (POS) payment terminals and transaction processing networks basedon chip card technology.

Chip cards, also known as smart cards, use an embedded microchipto encrypt your information, making it difficult for unauthorized users to copyor access your data. Data can only be accessed when your card is inserted intoa chip-enabled terminal and you enter your unique PIN. The microchip allows formore accurate verification of a card’s authenticity and a cardholder’sidentity. You have a PIN that identifies you as the rightful owner of your cardand replaces your signature as the means of authorizing a card transaction.

The EMV specification iswidely used in Europe and Asia and is steadily being adopted as the standardtype of credit card worldwide. Everywhere, that is, except the U.S.

The status quo is slowlychanging. Visa has announced several initiatives to encourage retailers toaccept EMV-based chip cards. MasterCard followed suit with its effort topersuade U.S. ATM owners to upgrade their machines to take cards by April 2013.And several credit card companies rolled out chip cards to American travelersto make overseas purchases easier.

Proponents of EMV-based chipcards brag about the security they offer versus the traditional magnetic stripecards. Because transaction information is encoded uniquely every time, it’sharder for criminals to pick up payment data and use it again for anotherpurchase. Compare that with magnetic stripes that contain payment informationthat never changes. All criminals have to do is lift that information andcreate a fake card.

Chip cards nearly eliminatecard skimming, the illegal copying of information from the magnetic strip of acredit or ATM card. As a result, chip cards provide enhanced protection againstfraud from lost, stolen or counterfeit cards. These fraud prevention aids arewhy some organizations in the U.S. are advocating chip cards to reduce merchantfraud losses and consumer complaints. Despite positive reinforcement from bigplayers in the industry, this technology is still in the early stages being aviable form of payment in the U.S. Readthis article to learn more about EMV technology.

What are your thoughts?Please share them in a comment below – or send me an email and we canfind time for a private conversation.

Update: IRS Withholding Postponed to 2013

2011-12-07T10:21:00.001-06:00

In accordance with Internal Revenue Service (IRS) Internal Revenue Code (IRC) Section 6050W, merchant acquiring entities are required to file an information return (form 1099-K) for each merchant reflecting all of their settled payment card transactions.

If a merchant's Federal TIN and legal business name on record with their acquirer does not match IRS records, the merchant could be subject to IRS withholding (the current rate for such withholding is 28% of processing funds). This is why merchants may have received a notice from their acquirer requesting confirmation of their information.

Initially, withholding was going to go into effect on January 1, 2012. However, in November 2011, the IRS announced that the effective date of backup withholding would be postponed until January 1, 2013.

Although withholding has been delayed, it remains imperative that merchants' information match the IRS records.
For more information regarding 6050W, view our original post.

Online Debit & Offline Debit: What's the difference?

2011-06-28T15:00:00.001-05:00

Almost every merchant we speak with asks the same question: what is the difference between online debit and offline debit?

The difference between these two debit choices is whether a PIN (personal identification number) is used at the point of sale. When a PIN is used, the transaction becomes “online” and funds are immediately withdrawn from the cardholder’s available funds. When an offline debit transaction occurs, the cardholder signs a receipt, much like a credit card transaction. Funds are not withdrawn immediately.

Update: P2P Payments

2011-06-07T10:23:00.000-05:00

For a quick lesson on P2P Payments, view our post from February 2010: Person-To-Person (P2P) Payment Services...What Is It?

The following article, BofA, Chase And Wells Fargo Unveil New P2P Payments Network,by Matt Gunn, was originally posted on 5/25/2011 on BankTech.com. Click here to be re-directed the original article.

Three of the nation's big four banks have developed a person-to-person payment service that'll allow customers to send money via mobile number or email address.
The project, dubbed clearXchange, is a joint venture between Charlotte, N.C.-based Bank of America, San Francisco-based Wells Fargo and New York-Based JPMorgan Chase. It enables the three banks' customers to make payments from their checking account to anyone with an account at one of those three banks. Chase, Wells Fargo and BofA said clearXchange will roll out nationally, and that the plan is to ultimately bring other financial institutions into the network.
It is the first bank-owned solution of its kind.
"This is an innovative game-changer in electronic payments," said Mike Kennedy, EVP and Head of Payments Strategy at Wells Fargo. "We want our customers to be able to easily send money to anyone without having to establish a new account outside their primary bank. All our customers need to know is the email address or mobile number of a friend or family member and we will take care of the rest utilizing clearXchange."
Bank of America's John Feldman will serve as general manager of clearXchange, which is headquartered in Charlotte.
"Our goal is to provide convenient and safe financial services options for our customers," said David Owen, eCommerce, Claims and Fraud Executive at Bank of America. "By creating a utility like clearXchange, we are able to meet the needs of our customers and differentiate our capabilities from other offerings in the marketplace."
Email addresses or mobile numbers will be used instead of routing and checking account numbers. The banks didn't indicate how payments will be initiated, whether through online banking or through mobile banking services as well.
"clearXchange will allow us to make our popular person to person payments service even better," said Jack Stephenson, Director of Mobile, eCommerce and Payments at JPMorgan Chase. "Chase customers will be able to send and receive money even more quickly and easily — with full confidence their funds are in a bank account without worrying about cash, checks or higher-cost services."

TheHill.com: Durbin, bankers battle over interchange fees

2011-05-02T11:11:00.001-05:00

This article, by Vicki Needham, was originally posted on 4/28/2011 on TheHill.com. Click here to be re-directed to the original article.

The battle between the banking industry and Sen. Dick Durbin (D-Ill.) continued on Thursday as the Senate leader defended his proposal to lower swipe fees charged by banks.

Durbin responded on Thursday to a letter from the American Bankers Association (ABA) reiterating their opposition to any to changes to the interchange system, saying that lower fees will reduce retailer and customer costs.

The Federal Reserve has proposed capping the fees at 12 cents a transaction, replacing a formula that averages 1.14 percent of the purchase price, or about 44 cents, that accounts for $16.2 billion in revenue.

The law has pitted retailers against the banking industry.

Durbin argued that while the ABA is asking Congress to require a study of the issue, it's clear the group doesn't want any changes to the fee system.

"Given that your association has unambiguously stated its opposition to any government regulation, it is difficult for me to believe that your efforts to have Congress stop and study this rule are anything other than an effort to prevent regulation from ever occurring,” he said.

“While I do not expect your association to ever change its position of outright opposition to interchange reform, I will conclude by sharing with you the same words that I recently wrote to the CEO of one of your largest member institutions: interchange reform is necessary and it is long overdue," he said.

Durbin pointed out a position statement on the ABA's website that makes clear "that your association opposes any effort by state or federal governments to regulate interchange rates" and “that Congress should stop and study the Fed’s proposed rule before the rule goes forward.”

In an April 21 letter to Durbin, Frank Keating, president and chief executive of the group, wrote that "confusion about this issue remains, and I feel compelled to reach out to you once more, on behalf of all our members, to again express our concerns and add some clarification."

The ABA argues that the cap on the fees would cause "harm to consumers, banks and the communities they serve."

"This is evidenced by the fact that roughly 86 percent of the comment letters received by the Federal Reserve express opposition to the proposal," Keating wrote. "Congress has the power to step in and stop and study this rule before it goes forward."

Durbin, on the other hand, said "reasonable regulation of the interchange fee system is supported by a broad and diverse array of consumer, business, university, labor and community groups."

"These voices should not be drowned out by the lobbying might of the financial industry.”

Keating noted in his letter that while Home Depot's chief financial officer said the company will save $35 million a year, "she said nothing about passing that benefit on to customers."

Led by Sen. Jon Tester (D-Mont.), the lawmakers are pushing a bill that would delay the provision included in the Dodd-Frank financial reform law that would drastically limit the amount banks can charge retailers for swiping debit cards.

The bill would require the Fed to stop writing rules implementing the measure, and call for a two-year study examining the impact of the provision on consumers, businesses and banks.

Overview of Data Storage Requirements

2011-05-02T11:02:00.001-05:00

Magnetic Stripe Data: Do not store magnetic stripe data after receiving authorization. After a transaction is authorized, the full contents of the track data, which is read from the magnetic stripe, must not be retained on any system. The account number, expiration date and name are the only elements of the track data that may be retained if held in a PCI compliant manner.
No CVC and CVV2 Storage: The three-digit code on the back of the card is known as the CVC or CVV2 number. When asking a cardholder for CVC or CVV2 data, you must not retain this information on any kind of paper order form or store it in any database. Do not store these numbers anywhere!
Know Your Liability: You (the merchant) are liable for losses resulting from compromised card data.
Know Your Employees and Monitor Their Activities: Ensure your employees are adequately trained in all facets of data security. You are liable for the activity of your employees.

Wall Street Journal: Bill Would Delay Fed's Debit-Card Fee Rule

2011-03-21T16:55:00.008-05:00

The following article was written by Maya Jackson Randall and published on The Wall Street Journal website on March 16, 2011. Access the original article here.

WASHINGTON—Sen. Jon Tester and a bipartisan group of U.S. senators Tuesday formally launched their legislative attack on the Federal Reserve's plan to regulate debit-card transaction fees, a move cheered by banks and credit unions but slammed by retailers.
The bill, dubbed the Debit Interchange Fee Study Act, comes amid concerns over the Fed's proposed fee caps and calls for a two-year timeout on the regulation.

The American Bankers Association, the Independent Community Bankers of America, the Consumer Bankers Association and the National Association of Federal Credit Unions all applauded the move by Sen. Tester (D., Mont.).
Rep. Shelley Moore Capito, the West Virginia Republican who leads a House financial services subcommittee, plans to introduce a bill that would also seek to delay the Fed's regulation of the debit-card processing fees banks charge retailers. Her bill would require a one-year delay and greater study of the issue.
A spokeswoman for Rep. Capito said the legislation would ensure the fee cap is fair. Some consumer-advocacy groups say a deep cut in the fees could force financial firms to raise the cost of checking accounts and other services, which could push low-income consumers out of the banking system. No one wins when consumers are underbanked, Rep. Capito's spokeswoman added.
"We are very encouraged by the actions taken by Congress today," Consumer Bankers Association President Richard Hunt said. "Only through a delay and study will we fully understand the impact this will have on American consumers."
The Fed's plan, mandated by the Dodd-Frank financial-overhaul law that Congress passed last summer, would cap what are known as interchange fees at 12 cents per debit-card transaction, a significant cut from the average of 44 cents that has prompted consumer groups and banking regulators to voice concerns about the proposal's impact on small banks and low-income consumers.
Retailers have fought hard for limits on the interchange fees they pay to banks every time a consumer swipes a debit card at a cash register, and they won a victory last summer when No. 2 Senate Democrat Dick Durbin of Illinois included the interchange-regulation requirement in the Dodd-Frank bill. Sen. Durbin has since vowed to "strongly oppose" legislative efforts to delay the Fed's "swipe fee" rules.
"Every month we delay limiting the amount banks and credit-card companies charge merchants means another $1.3 billion bailout for Visa, MasterCard and their big bank allies," Sen. Durbin said in a statement Tuesday. "The $13 trillion banking industry doesn't need another handout--especially one paid for by small business and American consumers."
Consumer advocates are at odds. While groups such as the National Community Reinvestment Coalition are urging the Fed to withdraw its proposal, other consumer groups such as Public Citizen and U.S. PIRG say the rule would be beneficial to consumers and are fighting efforts to delay the rule.
Meanwhile, much is at stake for the financial industry. The Fed's fee restrictions would weigh heavily on the profits of card-issuing banks, and many financial firms have argued that they would have to start raising fees and costs in order to recoup lost interchange revenue.
Although it would be hard for Sen. Tester to get the 60 votes he'll likely need to delay implementation of the Fed's interchange-fee law, bipartisan concerns over the Fed's proposal are growing. "The stakes are simply too high to move forward with this rule without a closer look at the impact on consumers, credit unions, community banks, and the small businesses and jobs they sustain," said Sen. Tester, a member of the Senate banking committee.
The Fed is required to issue a final debit fee rule by April 21. On a conference call with reporters, Sen. Tester said he wants the bill passed before that. He noted "it's going to be difficult" but he remains optimistic that some senators who previously supported interchange regulation will change their vote.
"Hopefully, we get this thing done before the April 21 deadline," he said. "We need to move with some speed on this."
Sens. Bob Corker (R., Tenn.), Jon Kyl (R., Ariz.), Ben Nelson (D., Neb.), Tom Carper (D., Del.), Pat Roberts (R., Kan.), Chris Coons (D., Del.), Mike Lee (R., Utah), and Pat Toomey (R., Pa.) are all co-sponsors of the legislation.
Still, retailers are urging lawmakers to support the Fed's efforts to rein in the interchange fees and are criticizing the Tester bill.
"Merchants are ready to pass lower swipe fees along to consumers in the form of discounts and other benefits as soon as reform goes into effect in July but we can't do that if Congress lets bankers stand in the way," said National Retail Federation General Counsel Mallory Duncan. "The banks and card companies claim they want to study swipe fee reform but the truth is they want to kill it."
Similarly, a spokeswoman for the Retail Industry Leaders Association argued that the Tester bill would give banks a bailout at the expense of retailers and consumers.

Consumer Credit Card Spending Exceeds Debit

2011-03-21T13:06:00.000-05:00

The following article was published on March 18, 2011 on The Green Sheet.

Consumer card spending jumped 8.5 percent in February 2011 over the same month in 2010, according to First Data Corp.'s SpendTrend analysis. The dollar volume growth exceeded January's year-over-year increase of 7.4 percent. Consumers demonstrated renewed faith in the economic recovery as the unemployment rate dropped to 8.9 percent in February, according to First Data.

For the first time in over two years, credit dollar volume growth of 9.9 percent was higher than debit growth. Signature debit volume grew 8.7 percent year over year, while PIN debit grew at just 6.1 percent. Average ticket growth of 0.1 percent for the month was due exclusively to rising gas prices. In the travel industry, dollar volume growth was 13.6 percent, again partially due to rising fuel prices.

View original article here.

PCI DSS Quick Reference Guide

2011-02-07T14:02:00.005-06:00

The PCI Security Standards Council has created a straightforward guide to inform and educate merchants that process, store or transmit cardholder data. Click here to view the PCI DSS Quick Reference Guide.

PCI Update

2011-01-06T16:22:00.002-06:00

On October 28, 2011, the PCI Security Standards Council issued a press release regarding version 2.0 of the PCI Data Security Standards and Payment Application Data Security Standard, which became effective on January 1, 2011. Below is a summary; view the complete article here.

For merchants, version 2.0 does not introduce any new major requirements. The majority of changes are modifications to the language, which clarify the meaning of the requirements and make understanding and adoption easier for merchants.

In addition to the standards documents, the Council has also launched a new website with updated materials and navigational tools aimed at providing its diverse stakeholders with the targeted information they need to understand the standards and how to apply them in their organizations.

As part of a broader initiative to help small merchants develop their PCI security programs, it also includes a dedicated site for this key group with resources to address their unique environments.

For more information on the PCI Security Standards Council, visit https://www.pcisecuritystandards.org/index.php

Minimum Transaction Amount Imposition

2010-12-29T19:33:00.001-06:00

The Financial Reform Act, signed by President Obama in July, allows merchants to impose minimum amounts when cardholders attempt to make credit card purchases (note that the minimum amount imposition is not applicable to debit cards). Minimum purchase amounts may vary by merchant, but cannot exceed $10.00. Maximum purchase amounts can be applied but only by federal agencies or higher education institutions.

IRS 6050W Regulation: How will it affect merchants?

2010-12-29T19:32:00.001-06:00

Effective January 1, 2011, the IRS will require all merchant acquirers to report transaction information on behalf of their merchants. They will be required to calculate and store the gross amount of reportable payment card transactions, coupled with the correct legal name, address and Taxpayer Identification Number. Additionally, merchant acquirers will be required to produce and file a Federal IRS 1099-K form on the behalf of the merchant, and this form will report the gross amount of reportable payment transactions for their activity in 2011. Merchants should receive a copy of this form in 2012 and every year thereafter.

In order to be compliant with the regulation and avoid penalties, merchants should verify that the information (including legal name, EIN/TIN and social security number) they submitted on the credit card processing application matches what is on file with the IRS.

For more information about this regulation, please visit http://www.irs6050-facts.com/merchants/ or contact the IRS.

Congress Approves Interchange Regulation Amendment

2010-08-03T19:19:00.002-05:00

As part of the Restoring American Financial Stability Act of 2010, both houses of Congress agreed on a provision to regulate debit card interchange. This reconciled amendment allows the Federal Reserve to cap debit card interchange at a level that's "reasonable and proportional" to the cost of processing debit transactions.

The amendment also allows merchants to decline credit and debit cards for purchases below $10. It gives small businesses and their customers a real chance in the fight against the outrageously high 'swipe' fees charged by Visa and MasterCard. It will prevent the giant credit card companies from using anti-competitive practices...and restore common sense and fairness to this broken [financial] system.

One major exclusion to this amendment prohibits merchants from offering discounts to consumers who pay with cash (something merchants are already allowed to do under card brand rules as long as disparate retail prices for the same item are not posted based on payment method).

As a small business owner, it will be interesting to see what happens as a result of this "chipping away at bank revenues". As the saying goes "He giveth, and he taketh away". This may cause more pressure on the banks to come up with new fees that they will charge the consumer or the merchant. Only time will tell.

2010-06-17T19:38:00.001-05:00

In November 2009, Aberdeen Group published their research paper titled, “The 2009 PCI DSS and Protecting Cardholder Data Report.”

Some of the key findings include:

While there have been years with minimal number of cards breached, the number of incidents continues to rise virtually every year and the trend in the number of cards compromised also continues to increase.

In a survey of 1/3 large retailers(revenue >$1B) , 1/3 mid-size retailers(revenue between $50M and $1B) and 1/3 small retailers (revenue less than $50M), the best-in-class retailers spent $135,000 in annual PCI compliance costs while all others spent $300,000. The reason the best-in-class retailers had less annual PCI Compliance costs was their adoption of technologies.

Similarly, with protecting cardholder data, the most effective way to protect it is not to block the attacker, but to take away the attacker’s target. While all companies should do a better job of leveraging … (technologies)… to protect cardholder data in the here and now, they should also pay close attention to collaborations between payment processors and technology solution providers to promote alternatives such as end-to-end encryption and tokenization for the elimination of stored cardholder data altogether.

Person-To-Person (P2P) Payment Services...What Is It?

2010-02-25T20:11:00.001-06:00

In today's world, it can be difficult to stay ahead of the curve when it comes to technology and the advancements that occur on what seems to be a daily basis. Think about the last time you heard about the typewriter? Does anyone even use a CD player anymore? Or how about those rare instances when you're standing in line at the grocery store checkout waiting patiently while the customer in front of you pays by check. A check? The amount of time it takes for someone to write out a check didn't seem to bother anyone in the past. Now, with the world travelling at the speed of light, writing a check in the grocery check out line couldn't take longer!

The electronic payments industry plays a significant role in the fast pace of technology, working to meet the relentless consumer demands for online payment services. After nearly a decade of positive experiences with online banking, ecommerce, bill pay and transfer services, consumers are looking for new online payment solutions, particularly the ability to send money easily and securely to friends, family and others.

Instead of just using a mobile phone or computer to reach out and call a friend, consumers may soon be using computing devices to reach out and pay them. That is, at least, what financial institutions are expecting as they begin to roll out person-to-person (P2P) payment services, which would allow consumers to send money to friends, relatives, or even independent service providers by e-mail or mobile phone.

Unlike a wire transfer or other previously available payment options, P2P would only require the payor to have their payee's e-mail address or mobile phone number. No bank routing number and account number required.

Mobile phones, such as the iPhone, are a leading driver behind this technology. The term "application" (or "app" as most iPhone users call it) are like nothing you've ever seen on a mobile phone. Mobile phone users are becoming more sophisticated with the use of these applications because the shear convenience of having information at our immediate access is what today's consumer wants. And having payment capabilities such as the P2P payment services available right on your mobile device is the next natural leap for this technology.

Police Investigate ATM Scam

2010-02-25T19:34:00.001-06:00

In the ongoing battle against identity and credit card theft, the best defense for consumers and business owners alike is awareness - staying in the know about how scam artists get away with the latest tricks. One such way credit thieves can steal from us is through a process called card skimming.

According to the City of Rocklin, California Police department, sophisticated card skimming devices were used at a Rocklin gas station in December 2009 to swipe money from at least two dozen people.

Police said thieves installed credit card skimming devices on two pumps at the AM/PM on Sunset Boulevard in Rocklin, CA. The devices allowed the thieves to copy and use handfuls of people's credit cards. "It was a computer ribbon type device with a transmitter that was no bigger than a cigarette box," said Lt. Lon Milka.

In the past, if customers looked closely, they could see something was wrong with the card reader on the pump because the device was installed on the pump's exterior. This time, the thieves installed the skimmer inside the machine making it impossible for customers to detect.
"It's scary," said Michelle Skinner, who bought gas at the AM/PM. "And I just used by debit card to purchase my gas," said Gerry Rhodes while filling up his car.

Police said the device actually transmitted credit card information to the thieves so they didn't have to re-visit the pump once it was installed. Police said, in the past, the thieves had to get the information directly from the skimming device. "Totally, totally state of the art. Never seen anything like that before," Lt. Milka said.

Police said the best way to protect yourself at the pump is to pay with cash. "If that's not possible, I would suggest going into the market, or into the store, into the cashier and using the device in there," Lt. Milka said. If you do stick to a card, police said to opt for a credit card over a debit card because it is more secure. They also said to check your account online regularly.

Police do not have any suspects. They hope surveillance cameras will shed some light on how the devices were installed undetected. They are also waiting to see if any more victims come forward. The culprits could face several felony charges.

http://www.kcra.com/news/22051216/detail.html

Top 10 Ways to Avoid Chargebacks

2009-10-27T10:07:00.005-05:00

What are Chargebacks and How Can You Avoid Them?

Chargebacks are transactions disputed by the cardholder or issuing bank in which the merchant must refund the money for goods or services sold. The most common chargebacks occur due to returned merchandise, terminated services, disputes, employee error or fraud.

You can minimize chargebacks by practicing the following 10 habits:

1. Control the risk for mail, phone and Internet transactions.
Keep a list of problem customers and limit the number of transactions from one cardholder. Verify the address and CVV2 number prior to completing the sale. Also, make sure your customer service phone number is easily accessible.

2. Get a manual imprint and signature when not swiping a card.
You must get the card number, signature, transaction date, authorization code and purchase amount.

3. Respond promptly to requests for transaction receipts.

4. Process refunds promptly to your customers.
Display your refund policy prominently, either on receipts or your website if you sell online.

5. Avoid duplicate transactions.
Check batch totals and balance deposits each day. If you accidentally charge a customer twice, void the incorrect amount and credit the account before closing your batch. Create separate invoices when a customer makes more than one purchase a day.

6. Take immediate action when a customer asks to cancel a recurring transaction.

7. Only charge the customer for goods and services once they are delivered.
Obtain a signed proof of delivery for all merchandise not delivered at point of sale.

8. Follow authorization procedures.
Do not attempt further authorization or reduce the charge amount if a "decline" code appears.

9. Maintain high quality of merchandise or services.
It is difficult to overcome a dispute when a customer challenges quality.

10. Make sure the embossed number matches the displayed account number when swiping a card.

Learn more about Chargeback and Fraud Protection by visiting http://www.membergroup.com/articles-chargebackProtection.html.

First American Payment Systems. (2009). Top 10 Ways To Avoid Chargebacks [Flyer]. Fort Worth, TX.

Innovation in Electronic Payments

2009-10-20T09:48:00.003-05:00

Half a decade ago, government passed a law that improved the lives of Americans, and particularly business owners, everywhere. Check Clearing for the 21st Century Act, better known as Check 21, took effect on October 28, 2004, a year after President George W. Bush signed it. Check 21 set the stage for electronic payments such as image exchange, Remote Deposit Capture (RDC) and the ability for customers to deposit paper checks without envelopes into their banking ATM system. Add to Check 21's credits unsexy but cost-saving new processes such as branch capture, where bank tellers capture check images, sparing the bank from transporting paper checks to processing centers.

The September 11, 2001 terrorist attacked proved to be the impetus that ultimately resulted in Check 21. Financial institutions and processors were in the process of developing electronic-based clearing solutions before 9-11, but the attacks showed how dependent the country still was on moving paper checks around. On September 11, the government grounded virtually all check payments in the U.S., putting a screeching halt on the check clearing process for days.

Decisively, government passed the Check 21 law, which defines a "substitute check" as a paper reproduction of the original check. This is also known as an image-replacement document (IRD). When properly prepared, an IRD is the legal equivalent of a paper check. The law doesn't require banks or credit unions to create IRDs, but they must accept them. The clearing process with an IRD is like a fax - paper at the start and paper at the finish, but all electronic in between. Take, for example, shopping at your favorite retail store. Perhaps you've seen this before. You're at the checkout. You hand the cashier a written check for the total sale amount of items being purchased. She scans the paper check and hands it right back to you. Huh? What just happened? An electronic image has been captured of your paper check and the corresponding transaction data is now moving electronically for clearing through the banking system.

Electronic check imaging is a direct derivative of having Check 21 in place. Indeed, this "remote" - outside the bank - capture of check images or RDC is one of Check 21's legacies, and only now is it gaining the interest of business owners. With RDC, retailers and other check-accepting businesses scan the paper checks and upload the images to the depository bank. RDC enables merchants to send deposits to just about any bank in the country, not merely those within a reasonable driving distance of the bank where the owner or an employee physically takes checks and cash for deposit.

RDC gives merchants the freedom to make deposits when it is convenient for them. It also enables merchants to separate and classify deposits to match their existing accounting system. Whether you accept 5 or 500 paper checks weekly, services such as RDC and image exchange derived from Check 21, are helping to revolutionize the way merchants process check payments and electronic transactions in general. Innovative technology in the payments industry further expands merchants ability to make smart business decisions that can help streamline operations, save money, and increase cash flow.

For further information on RDC and other image-exchange products, contact MSG Payment Systems at (888) 697-8831 or visit us online at http://www.msgpaymentsystems.com.

Daly, Jim. "Check 21 Five Years Later"
Digital Transactions October 2009: 29-36.

PIN-Less Debit Next Up on the Internet

2009-10-04T20:26:00.002-05:00

Merchant efforts to steer shoppers to use personal identification numbers instead of signatures when paying with debit cards may be poised to move to a new front: the Internet. Imagine an online PIN-debit system that works like this:

At the point of purchase, a debit card can be recognized after the customer keys in the card number. A pop-up window would ask the customer to enter his/her PIN using mouse clicks on a floating keypad. As the customer clicks each number, the keypad scrambles itself, changing the location of each number. This rearrangement fools malicious software, or malware, that might try to track the mouse movements to capture the PIN. After the customer enters the PIN, the computer sends the coordinates of the clicks to the Web-based PIN debit software provider, which reassembles the PIN. The information is then sent through the secure Electronic Funds Transfer (EFT) network for authorization. Two companies in the electronics payments industry plan to test software-based debit-processing systems this year.

Two companies plan to test rival software-based debit-processing systems this year in order to provide what they consider a secure convenience for debit cardholders.

The difficulty with Web-based PIN debit, in which consumers enter PINs and their debit card numbers to complete transactions online, is keeping PINs safe from fraudsters and complying with operational guidelines.

New payment processing technology like this makes just about every player in the payments industry skeptical. What is the risk of fraud? How seamless is this software? What is the cost involved? These are just a few of the legitimate questions that need to be asked before a new payment capability is rolled out and launched for the whole world to see.

However, with the inevitable gain of debit card usage over credit cards, we may come to a point in the future where e-commerce PIN-debit transactions are in high demand by consumers and merchants alike.

Giusti, Michael. "PIN-Less Debit Next Up On The Internet"
ISO&Agent Jan/Feb 2009: 16-19.

Exhibiting at the 2009 IFPA Conference

2009-09-15T14:35:00.001-05:00

For the first time ever, 7 associations in the Free Paper Industry will be participating in the 2009 IFPA Conference in Chicago, IL. MSG Payment Systems, preferred payment systems provider to the Free Paper industry, will be available Friday, September 25 through Saturday, September 26 to answer all of your questions about processing merchant cards and using the latest technology in your business.

Don't miss this conference. To register for the IFPA Conference in Chicago, visit IFPA online at www.ifpa.com. Or for more information about MSG Payment Systems, visit us online at www.msgpaymentsystems.com.