May 27, 2014

Discussion Concerning Cap on Credit Card Interchange Continues

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According to a poll by Digital Transactions News, few would be surprised if legislation appeared that placed a cap on credit card interchange within five years. According to Digital Transactions, “In the poll, 58% of respondents said such legislation is very likely, along with 8% who said it was somewhat likely. Only 13% gave it an even chance. Of respondents, 13% said it was somewhat unlikely and 8% said it was not at all likely.”

While those who took the poll have revealed that they view this legislation as very likely, others feel differently. The payment industry observers, for example, do not consider such legislation likely at all. For one, the Durbin Amendment must first be resolved. Director of government and industry relations for the Washington, D,C,-based Electronic Transactions Association, Mary Bennett, gave this statement, “No legislation on interchange regulation, whether for debit or credit, will move forward until the court case surrounding the so-called Durbin Amendment currently in the courts is resolved.”

The Durbin Amendment, the section of 2010’s Dodd-Frank Act, regulates debit cards. It would seem that the Federal Reserve plans to appeal a July 31 decision in August, which will then overturn the board’s rule implementation of this amendment. The belief is that the payment industry participants should focus more on how merchants and banks can work together directly, instead of trying to regulate credit card interchange. This would allow the merchants and banks to build their businesses by working side by side.

In a Digital Transactions News article, principal of Stamford, Steve Mott, states, “There’s more money to be made by both banks and merchants in driving incremental purchases and business than ever existed in payment fees, which obviously was one-sided.”

Due to the political environment, it will take time for these changes to take place. Experts in the industry have given the time frame of five years for the credit card interchange regulation to become moot. In an email sent to Digital Transactions by Mott, he states that, “Fundamentally, the cost of processing a credit card transaction to a merchant—the merchant discount fee, which is mostly interchange—is an artifact of a bygone era.”

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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