Posts filed under 'News'
I’ve been expecting Paypal to take a shot at acquiring a buy-now-pay-later service provider, and Paypal just announced they are making a move to acquire Bill Me Later. Paypal’s definitely been missing out on a huge market that Bill Me Later owns. Bill Me Later’s only major competitor is a company called eBillMe.
While I personally think that this could be scrutinized as an anti competitive acquisition, especially considering Paypal’s monopoly over non-credit-card online payments, this should make Bill Me Later easier for smaller businesses t use. Until recently, Bill Me Later required ecommerce merchants to be processing in the seven figures per year, far out of reach for many smaller sites that could have greatly benefited from Bill Me Later.
It would probably be six months to a year before any reasonable integration with Paypal happens, but the acquisition is supposed to go through by 2009.
October 6th, 2008
This month marks the 3rd anniversary of the merchant account blog.
I’m currently working on some large time-consuming projects which is the main reason that posting has been so sparse lately. Hopefully this will change in the next few months and I can get back to a reasonable schedule for posting.
Thanks to everyone who stops by. Please feel free to jump in and comment if you’ve been a silent lurker.
Thanks again
July 25th, 2008
Right now, there’s a battle waging for the processing industry. On one side is a massive group of retailers including Walmart, Target, the NRF and many others and on the other is Visa, MasterCard, Amex, card issuing and processing banks. This outcome of this battle will ultimately decide whether the government will regulate credit card interchange, or it remains controlled by Visa and MasterCard.
Retailers argue that Visa and MasterCard are using anti-competitive practices to maintain a monopoly on the processing industry. Visa and MasterCard declare that government regulation of interchange will create a non-competitive situation and ultimately cost businesses more than they are currently paying.
In theory this act (H.R. 5546) sounds to be a simple solution to a complex problem. The government gives retailers the ability to negotiate their interchange fees, done… What this resolution doesn’t take into account is that the system is so much more complex than just some simple interchange negotiation. This resolution would be on-par with telling every gas station in the country to negotiate prices with their customers, good luck… It doesn’t in any way address the cause of the interchange prices, it only addresses the result of where interchange is set at.
Why interchange should not be regulated:
Irresponsible: - The current concept of interchange regulation is in reaction to a slowing economy, and massive inflation in oil and food prices, and not the interchange fees themselves. This is an irresponsible and ineffective way to handle a complicated situation. Putting all personal opinion aside, the US Government Accountability Office, the US Justice Department, the American Banking Association, and the Federal Trade Commission have all warned congress against regulating interchange.
“Policymakers should heed the concerns raised by both the FTC and the Justice Department,” said Yingling. “The many benefits merchants receive from accepting payment cards come at a cost and intervening in this properly functioning market by establishing artificial interchange rates will ultimately hurt consumers.”
Congress passing this bill would be a matter of personal politics and not good government. These organizations exist to control and regulate trade and economy. If they are saying not to do it, it’s a good sign that personal issues are overshadowing what’s important in the overall picture.
Impossible Solution: - The resolution for setting interchange prices is by a panel of three appointed “Electronic Payment System Judges” who set interchange rates. How can setting fixed prices possibly allow for a competitive marketplace. If every store owner had to set their prices the same, how would there be any competition.
It also gives merchants “in theory” the ability to negotiate their interchange rates. Since interchange rates are set by Visa and MasterCard and not a business’s merchant account provider, Visa and MasterCard are going to have a lot of work on their hands. There are roughly 25 million businesses in the US. Giving everyone the ability to directly negotiate with Visa/MC is not going to simplify anything. Since interchange will be set based on cost and return, then I can see the cost going up a lot when 25 million people pick up the phone to call Visa.
The market is “not” non-competitive: - Open up a new business and see how many calls you get from merchant account providers. There is fierce competition in the merchant services industry. Putting scams aside, this competition benefits merchants in the form of the lowest possible rates, and best service. This is the definition of a competitive marketplace and is exactly what keeps the market fair. Interchange is extremely complicated, and only recently has become somewhat transparent. The actual problem being described is not the cost, it’s the complexity.
Conclusion:
The bottom line is that this is an extremely complicated situation that is being dealt with through personal emotions and haste instead of facts and understanding in a time of economic instability. Interchange has become a scapegoat for a falling economy and the fallout from rising oil prices and commodities inflation.
Related relevant posts:
An Ugly Regulatory Bill
STOP THE MADNESS!
Congressional Price Fixing
Electronic Payments Coalition Statement on Price Control Legislation (H.R. 5546)
Interchange bill may be dead for ‘08
No Credit to Congress
July 24th, 2008
The owners of Paymentech, JPMorgan Chase and First Data have decided to dissolve Paymentech into their own operations. JPMorgan will take 51% and the remainder will be merged into First Data.
Both companies have committed to a no-disruption transition so existing Paymentech customers (1Million+) should not see any major change in their processing service.
May 29th, 2008
In a move to become more transparent from increased scrutiny over interchange, Visa has made their operating regulations available. Regulations are available for all regions of the world. The US has two volumes of regulations, for a total of about a thousand pages.
http://corporate.visa.com/pd/rules/main.jsp
May 15th, 2008
Nova recently changed their name to Elavon to create a unified global name. Nova has a better than most reputation in the processing industry, and it seems like changing a company name from Nova to Elavon is a brand suicide.
Anyone processing with Nova should expect to see their statements reflect the new name if it hasn’t been changed already. Other than the name change there should be no difference in service from Elavon.
April 28th, 2008
Discover just signed an agreement with Citi to acquire Diner Club for $165M. Diners club is all but extinct, but this merger may bring some hope into Diners Club’s future. Since Discover is now settled along with Visa and MasterCard it’s possible that we will see the ability to accept Diners Club cards pushed to all businesses that currently process credit cards.
Press Release: Discover Financial Services to Acquire Diners Club International Network
April 9th, 2008
Digital Transactions magazine has an outstanding article regarding current PCI standards. I highly recommend reading it to any business that processes credit cards and businesses that are involved with any step of a credit card transaction.
Download the March 2008 issue and check out the article “Once is not enough”.
March 24th, 2008
Despite uncertainty and a poor market, Visa’s IPO went through yesterday raising about $18B, making it the largest IPO in US history, second largest in world history. The stock market got an additional boost yesterday as the Federal Reserve lowered interest rates again.
Trading starts today and Visa’s stock was projecting several dollars above the $42 IPO price before the market was open. But, it immediately jumped above $60 when the market opened.
March 19th, 2008
Visa’s IPO which was predicted to be going off tomorrow (Tuesday, March 18th), may be pushed back because of the Bear Stearns casualty.
According to The Disciplined Investor “Unless the lead underwriters - JP Morgan and Goldman Sachs - are completely deranged and masochistic, Tuesday is not going to be the best day to attempt to bring history’s largest IPO to market.”
Banks, especially JP Morgan have a lot riding on the success of this IPO, so it would be reasonable to assume that they will indeed push it back to a day that will be much less volatile than tomorrow is predicted to be.
March 17th, 2008
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