Updated: Friday, April 24, 2015
SEAA hosts Transaction Cardi Gras in New Orleans
T he Southeast Acquirers Association held its 14th annual conference April 20 to 21, 2015, in New Orleans with a balanced blend of exhibits, entertainment and presentations. The two-day event included networking, presentations, seminars and entertainment in a city known for hospitality, music and world-class cuisine.
Leading industry processors, manufacturers, vendors, leasing companies and technology startups convened in the exhibit hall. Monday evening's opening reception was followed by a Bourbon Street pub crawl led by a live jazz band. Show highlights included an ETA Certified Payments Professional seminar, an array of contests and an eclectic mix of guest speakers.
"In our experience, it was a well-organized, high quality event with a great balance between social gatherings and informative discussions around payments, acquiring and merchant relationships," said conference exhibitor Stephen Ramminger, Senior Business Operations Manager at Atlanta-based ControlScan.
SEAA, ETA strategic partnership
Presenter Jason Oxman, Chief Executive Officer of the Electronic Transactions Association, drew applause when commenting on the ETA's active collaboration with regional industry associations.
"I'm honored to have the opportunity to represent the industry," he said, reflecting on the ETA's 25-year history and continuing focus on education, advocacy and exchange of information. He shared findings from a newly released Goldman Sachs study in which 64 percent of respondents stated they expect merchant volumes to increase in 2015; approximately 45 percent of merchants said they were on track to achieve EMV (Europay, MasterCard and Visa) compliance by the end of 2015.
Oxman noted that the ETA now has four full-time lobbyists in Washington, D.C., currently monitoring six pending bills in Congress. He expressed confidence in the newly formed bipartisan Congressional Payments Caucus and the payments industry's role in powering payments throughout the United States.
Eclectic presentation mix
Casey Porter, Director of Product Delivery at Visa Inc., co-presented with Oxman on the role of ISOs and merchant level salespeople in the ever-changing payments market. Porter said Visa is working with processors and acquirers "to drive our value and sell our issuing products into the merchant base," through timely offers and discounts at the POS.
Keynote speaker and author Mac Fulfer shared his Amazing Face Reading sales techniques, which included a live demonstration involving four brave audience volunteers. Fulfer noted that sales professionals can take their cues from a prospect's facial characteristics to adapt sales presentations. "There is no law against using face reading," he said.
Other presentations by industry experts included advice on selling merchant portfolios, using technology to acquire new merchants, and effective ways to build a personal brand through networking and relationships.
Whodat2015 innovation awards
Winners of the SEAA's Whodat2015 Innovation Program were honored at the conference. Ten finalists competed in four categories: originality, revenue opportunity, presentation quality and market impact.
Finalists had eight minutes to present innovations to a judging panel during the opening session on April 20. Contest rules stipulated that solutions must be production-ready at the time of competition. Entrants were limited to one product per submission form and two product submissions per company with an April 1 deadline.
First prize winner Ping 2 Credit Mobile received $1,000, a complimentary exhibit space in the Payments Next Zone at Transact 16, and a complimentary booth at the 2016 SEAA. Second place winner Jory LLC received $500. Third place winner Click a Waiter Inc. received $300, and fourth place winner Quisk Inc. received a $200 prize.
Pay it forward with lagniappe
Lagniappe, a word that means a little something extra, is thought to have originated in New Orleans from the Spanish la ñapa. It also can be used to describe the spirit of camaraderie and partnership at Transaction Cardi Gras.
Gary DeBaise, Account Representative at New York-based Xpress-Pay, said that exhibiting at SEAA increased the company's visibility and credibility. He described the show's overall atmosphere as "friendly professionalism" and offered an example, stating, "I met someone at lunch and he opened a conversation right away about my business, his business and how we can potentially work together."
Michael Doron, Managing Director of Pay.On America Inc., was also pleased by booth traffic and level of interest at the conference. "There's a growing need for secure, PCI-compliant, cross-border e-commerce in the card-not-present space," he said, noting that attendees and fellow exhibitors were equally interested in learning about his company's products and services.
Conflicting decisions on surcharging emerge in state courts
Thursday, April 23, 2015
R ecent federal court rulings have placed a cloud over state laws regulating credit card surcharging. In March 2015, a federal district court in California ruled that a California law prohibiting retailers from surcharging credit card payments was an unconstitutional restriction of merchant freedom of speech. That followed a February decision handed down by a federal district court in Texas rejecting similar arguments presented by a group of merchants in The Lone Star State, and two other states have weighed in as well.
Italian Colors Restaurant v. Harris pitted five California retailers against that state's attorney general. The merchants argued that a California law restricted their First Amendment right to free speech by regulating how retailers describe price differences between cash and credit card payments. Plaintiffs also argued that the law exempts government speakers from restrictions that apply to retailers.
The law in question permits merchants to offer customers discounts for not paying with credit cards, but prohibits merchants from surcharging payments made by credit card. The state had argued that the law did not dictate how merchants communicate pricing, but rather regulated economic activity (adding surcharges at the checkout).
Morrison C. England, Chief Judge, U.S. District Court, Eastern District of California, rejected the state's argument. "Here, what is regulated is how those prices are conveyed to customers, not the prices themselves," England wrote. He went on to declare the law unconstitutional and permanently enjoined its enforcement.
Texas, Florida, New York weigh in
A month earlier, in Powell v. Pettijohn, Judge Lee Yeakel of the U.S. District Court for the Western District of Texas took a different stance on the matter. He rejected claims similar to those at issue in the California case that were made by a group of Texas merchants opposing that state's no-surcharging law.
"This court finds and concludes that the Texas Anti-Surcharging law regulates only prices charged, and economic activity that is within the state's police power, and does not implicate First Amendment speech rights," Yeakel wrote.
Also in February, Florida's attorney general defended that state's law preventing merchants from imposing credit card surcharges, claiming the statute is intended to protect consumers from unfair pricing and does not restrict constitutional free speech rights. In 2014, merchants in New York successfully challenged that state's no-surcharge law as unconstitutional and are now awaiting an appeals court decision.
"All of these things are going to be appealed and depending upon how the various appeals courts decide in each of these four cases, if they remain split, then it might end up going to the higher court, the Supreme Court," said Gerritt Kerkstra, Senior Management Consultant at The Strawhecker Group. "Merchants want the ability to characterize their ability to surcharge on their own terms and not have them dictated to them by the state."
Roots run deep
The debate over surcharges receded in 1976 when Congress enacted a temporary federal ban on surcharges, which it twice extended before allowing the ban to lapse. At that point, the card brands advocated for similar legislation at the state level. The settlement of a class action against Visa Inc. and MasterCard Worldwide later removed contractual provisions prohibiting retailers from imposing surcharges starting Jan. 27, 2013.
In the interim, California, Florida, New York and Texas were among a group of states to adopt anti-surcharging laws. Colorado, Connecticut, Kansas, Maine, Massachusetts, Minnesota and Oklahoma enacted similar statutes.
But the current ruling in California may shift the tide. "I think it's a turning point in the country," said Ed Levene, President of CardCharge, whose company developed a patent-pending technology that calculates surcharge transactions in real-time. He noted that processors are beginning to update their rails to handle surcharges.
Kerkstra said he has heard California "is a little hotter" than other markets. "There's an interest in it, but what merchants need to consider if they're going to be imposing surcharges is what are their competitors going to do," he said, adding that consumers will vote with their feet, and retailers with a dominant market position might stand a better chance.
Whether to surcharge remains a strategic decision. "I think there is some reluctance by some of the big-box retailers that they're going to alienate their customers, but I think what's going to happen is merchants are going to start doing it," said H. Laddie Montague Jr., President and shareholder of Berger & Montague P.C. "I just hope they do it responsibly. By that I mean abiding by the rules so that any cost will be born by those being surcharged and not by others."
Montague, whose firm was one of three selected to serve as lead counsel in the Visa and MasterCard settlement, believes court rulings like the one in California may exert pressure on the card brands to reduce fees and could potentially stimulate regulators to act, as has been the case in other countries.
In Australia, for example, surcharging has been available to retailers for over a decade. "I've been advised that about half of the merchants in Australia post their cash price and charge the cost of the credit card," Levene said. "It's a democratic, free society and that's a very reasonable, really similar situation to what's probable in the United States."
White House gets tough on cyber crime
Wednesday, April 22, 2015
T he United States raised the price of cyber crime on April 1, 2015, the effective date for a new set of penalties for cyber criminals. President Barack Obama declared a “national emergency” when he issued an executive order granting additional powers to U.S. government agencies to “respond appropriately, proportionally, and effectively to malicious cyber-enabled activities.”
Described as “our latest tool to combat cyber attacks,” the order takes aim at individuals and businesses engaged in cyber warfare that “results in significant threats to the national security, foreign policy, economic health or financial stability of the United States.”
The new measure is a continuation of Foreign Policy Executive Order 13636, titled Improving Critical Infrastructure Cybersecurity, and signed in February, 2013. It introduces harsher penalties for cyber criminals. The Secretaries of the Treasury and State now have the authority to seize property, extradite, or imprison individuals or businesses involved in malicious activities.
Security analysts hail government oversight
Mark Wayne, Executive Vice President of Governance, Risk and Compliance at Michigan-based ANX eBusiness Corp., welcomed additional government oversight of cyber threats in the business community.
“Before, the government did not generally get involved in an isolated credit card data breach until after it had already happened,” he said, noting that his team has seen on a weekly basis how new forms of malicious software infiltrate POS systems within retail businesses to steal customer credit card information.
“With multiple, enterprise-level data breaches occurring in the last few years, including the Target and Home Depot breaches, the demand for cyber security has rapidly escalated from an IT team discussion to the executive boardroom concern; and now it has reached the White House,” Wayne added.
Zero tolerance for cyber fraud
The following fraudulent activities against U.S. critical infrastructure, companies or citizens could be subject to the government sanctions:
- Harming or significantly compromising the provision of services by entities in a critical infrastructure sector
- Significantly disrupting the availability of a computer or network of computers (for example, through a distributed denial-of-service attack)
- Causing a significant misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive advantage or private financial gain (for example, by stealing large quantities of credit card information, trade secrets, or sensitive information)
- Knowingly receiving or using trade secrets that were stolen by cyber-enabled means for commercial or competitive advantage or private financial gain, where the underlying theft of the trade secrets is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States (for example, where a corporation knowingly profits from stolen trade secrets)
- Attempting, assisting in, or providing material support for any of the above harms
Protecting infrastructure, security resources
White House author and blogger Michael Daniel described the guidelines and penalties as appropriate for the information age where broadband communications are ubiquitous in both the public and private sectors.
“Our focus will be on the most significant cyber threats we face – namely, on actors whose malicious activities could pose a significant threat to the national security, foreign policy, economic health or financial stability of the United States,” Daniel wrote.
Daniel stressed that the sanctions will target only the malicious actors whose actions undermine U.S. national security, not the victims of cyber attacks, and certainly not security professionals. He reassured security analysts that Qualified Security Assessors and researchers would not become inadvertent targets of investigations during their performance of routine assessments and scans.
Broader, long-range effort to fight cyber crime
“This executive order supports the administration’s broader strategy by adding a new authority to combat the most serious malicious cyber-threats that we face,” said President Obama.
Daniel said the executive order was part of “a broad range of tools – including diplomatic engagement, trade policy and law enforcement mechanisms – to address cybersecurity threats.”
Following are other strategic government initiatives designed to improve threat detection and protect critical infrastructure:
- The Cyber Threat Intelligence Integration Center monitors foreign cyber threats within the federal government. It also provides business intelligence to the various government centers responsible for cyber security and network defense.
- The Department of Commerce's National Institute of Standards and Technology has been working on the Cyber security Framework, a key deliverable of the original government mandate for improved security standards. NIST members from government and private sectors have been collaborating to enhance network security while protecting privacy and civil liberties.
Prepaid cards trump checks for payroll
Monday, April 20, 2015
A new report from Aite Group LLC indicates payroll cards are gaining broad acceptance as demand for reloadable prepaid debit card grows. But another recent report, from Mercator Advisory Group, warns that a regulatory proposal pending at the Consumer Financial Protection Bureau could turn the tables on this trend.
The CFPB proposal aims to increase consumer protections on all types of open-loop prepaid card programs, including payroll cards. But experts warn it may achieve the opposite.
Reloadable prepaid debit cards represent a huge and growing market. Mercator estimates that 56 percent of adult Americans purchased reloadable prepaid debit cards in 2014, up from 53 percent in 2013 and 47 percent in 2012. In 2013 5 million payroll cards were in consumers' wallets; employers loaded $30.6 billion onto the cards, according to Mercator.
In a report on payroll cards published in October 2013, Aite Senior Analyst Madeline Aufseeser, said that since 2010, dollars loaded onto the cards by employers had been posting a 19.9 percent combined annual growth rate. Her projections put the yearly total value of payroll card loads at $68.9 billion by 2017.
A new research note from Aite, Checkmate: U.S. Payroll Card Programs Trump Paper Checks, paints an equally optimistic view of the market for reloadable payroll cards. "Possibly the most complex product niche in the prepaid card category, payroll card are swiftly usurping paper checks as employers' preferred back-up alternative to direct deposit on checking accounts, and they represent one of the largest growth opportunities," the report noted.
Concerns about CFPB oversight
The CFPB's pending proposal – spelled out in an 800-plus page document released in November 2014 – could change all that because it would extend to prepaid debit cardholders the protections currently covering debit cards linked to checking accounts and those covering credit cards. This includes extensive disclosure requirements which, experts warn, could diminish the appeal of payroll and other types of prepaid debit cards.
"While the rule contains some good ideas that could benefit providers and card shoppers, there are several provisions that would actually reduce consumer protections," said Ben Jackson, Director of Mercator's Prepaid Advisory Service. Jackson authored a recent Mercator report titled Murphy's Law and the CFPB: The Proposed Prepaid Rule Won't Protect Anyone.
The American Payroll Association said it has concerns about the CFPB's planned rulemaking. One big concern is a plan to require employers to provide disclosure forms the APA argues will discourage adoption. The proposed wording for the form: "You do not have to accept this payroll card. Ask your employer about other ways to get your wages."
The National Consumer Law Center, meanwhile, wants an even more stringent rule. In a comment letter to the CFPB, the NCLC, which represents the interests of low-income Americans, wrote that "the CFPB needs to do more to stop employers and colleges form forcing consumers to use cards they do not want."
The public comment period on the CFPB' package of proposals closed in March. Final rules are not expected immediately. The CFPB has said any final rules would take effect two years after issuance.
Crunching the numbers
This isn't the first time payroll cards have come under scrutiny in Washington. Before the Dodd-Frank Act created the CFPB as the nation's top consumer watchdog, the Federal Reserve Board addressed payroll cards in several rule-making activities related to Regulation E, (which details federal consumer protections for electronic payments). The CFPB now has exclusive rule-making authority for Reg E.
The Network Branded Prepaid Card Association compiled a fact sheet defending the use of payroll cards. These are some key points the group made:
- The annual average cost incurred by employees paid via payroll cards is $83.
- The annual average cost incurred by those who receive paychecks is $256, which is the average combined cost of check cashing and money order services.
- A typical worker earning $26,000 a year who can/will not use direct deposit or a prepaid debit (payroll) card spends $750 a year in fees to cash checks, purchase money orders and pay bills.
Gravity Payments resets minimum wage
Friday, April 17, 2015
A s demonstrators staged “tax day protests” across the United States demanding higher pay, Gravity Payments dramatically increased its staff’s salaries, making headlines around the world. The ISO's Chief Executive Officer, Dan Price, revealed April 14, 2015, in a televised meeting that the company would pay a minimum salary of $70,000 to all employees. The plan, effective immediately, allots incremental raises over a three year period.
“Starting today, everybody in the company that makes under $50,000 a year is automatically going to make the greater of $50,000 a year or $5,000 more than you’re making today," Price said.
In examples provided, a $48,000 salary would be raised to $53,000; $43,000 and below would be increased to $50,000. Price noted that minimum salaries would be raised to $60,000 in December 2016, and $70,000 in December 2017, a number that Price stated he is “really happy about.”
A leap forward for Seattle
Gravity Payments, established in 2004, has a merchant portfolio of approximately 12,000 merchants with $6.5 billion in 2014 transaction volume. The company is headquartered in Seattle, where a minimum wage of $15 an hour became law on April 1. The trend toward a mandatory minimum hourly wage, fueled by nationwide protests and lobbying efforts, is expected to continue in major U.S. markets.
Seattle Mayor Edward B. Murray established the Income Inequality Advisory Committee (IIAC) when he assumed office in January 2013. With Co-Chairs David Rolf, President of SEIU 775MW and Howard Wright, founder and CEO of the Seattle Hospitality Group, the committee aims to address issues related to employee compensation in the Seattle business community.
Murray shared the IIAC’s vision and objectives in its inaugural meeting. “We can boost the earnings of low-wage workers in a meaningful way and increase the economic activity of the region that comes with greater spending power,” he said, adding that these accomplishments are possible without harming employees or eliminating jobs.
A broad economic agenda
The IIAC reached its goal of raising Seattle’s minimum wage; its three year program of scalable increases formed the basis for Gravity Payment’s wage increase plan.
Other key initiatives in the IIAC’s broad economic agenda include:
- Ensuring universal health insurance regardless of employment
- Making affordable housing more available and closer to where people work
- Preserving and strengthening public transit systems to connect people to jobs
- Creating a fertile environment for the creation and growth of new jobs and industries
- Offering education and training options structured to help working adults succeed and linked to better paying jobs in demand by industry
Balancing risk with profit, happiness
Price acknowledged that the plan involves risk but reaffirmed his commitment to bridge the pay scale gap between C-suite executives and rank-and-file workers. He voluntarily cut his $1 million salary to $70,000, which combined with approximately 75 percent of the company’s projected profits, will help fund the company-wide pay raise. He plans to keep his new minimum wage “until our profit goes back up to where it [was] before we made this policy change.”
In addition to measuring profit margins, Price and his human resources team will monitor the less tangible but, in their view, equally important employee happiness meter. Price’s inspiration for creating a $70,000 baseline salary was based on an article he had recently read concerning emotional well-being.
The article, "High income improves evaluation of life but not emotional well-being," by psychologists Angus Deaton and Daniel Kahneman, shared results of a Gallup survey of 4,500 U.S. residents in 2008 and 2009 and later published in a National Academy of Sciences newsletter. The authors found that pay raises considerably impact emotional health and well-being.
“[W]e confirm the contribution of higher income to improving individuals’ life evaluation, even among those who are already well off," the author wrote. However, they also found the effects of income on the emotional dimension of well-being "satiate fully" at an annual income of $75,000. In addition, the authors noted that the principle was proven only in workers earning annual salaries of up to $75,000.
The principle's implementation had a discernible effect on April 14 at Gravity Payments, where the average salary is $48,000. After a few moments of stunned silence, employees erupted into cheers and gave Price a standing ovation.
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