Bankcard 101
Agenda
 Company Overview
 Credit Card History
 Evolution of Processing
 Process Flow
 Merchant Services 101
 Merchant Processing Expense
 Marketing/Prospecting
 Statement Review
 Back Office Procedures
Welcome!
Netcom PaySystem
Thank you for your interest in becoming a Netcom
PaySystem Regional Sales Agent.
Our company has been in the electronic payments
industry since 1987 and our portfolio consists of
over 4,000 merchants. We are a newly formed
public company out of a new IPO with United
eSystems. We have a wide variety of products to
offer our merchants to make a progressive package
at competitive pricing.
Where are we!
980 Canton Street
Suite D
Roswell, Georgia 30075
Phone: 800-875-6680
Fax: 770-649-1370
www.netcompaysystem.com
Your Team and Operations
 Mike Plummer- President
 Amy Plummer – Finance
Coordinator
Amy will help out with statement analysis as needed.
 Sam Spiezio
- Vice President of Sales Development
Contact Sam for sales development and marketing
questions.
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 Scott Wegert and Robert O’Brien Accounts Managers
Contact Scott and Robert for all day-to-day operations and application
management.
Products and Services
At Netcom PaySystem we constantly monitor changes in the Point of Sale industry
with an emphasis on improved service to our Clients.
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Credit/Debit Processing
ACH Retail or Internet
Recurring Billing
Check Services including;
Check21
ECC
Check by Phone
Check by Web
Free Check Recovery
InStor BillPay Services Including:
SameDay BillPay
Load all Debit
Load all Wireless
International Wire Transfer
Gift and Loyalty Programs
Merchant Advance
Age and ID Verify or MSB’s
ROAMpay Wireless
What Makes us Different?
 Customer Service
 9-6 M-F
 Help Desk 24/7/365
 Talk to a live representative
 2%-4% Attrition Rate
 NO Contracts
 NO Exit Penalties
 NO PCI Fees
Bankcard 101
Credit Card History Overview
 First card introduced in 1920’s
 First universal card 1950’s by Diners Club
 American Express hit the market in 1958
 Bank Americard first state wide issuance in 1959
 System licensed in other states in 1970
Evolution of Processing
There are two types of banks that you need to be
aware of in this industry:
 Issuing Banks are those banks that issue credit cards
to the public.
 Acquiring Banks are those banks that set up the
merchant to accept credit cards from their patrons
Since the 1950s there have been essentially only four
steps to processing a customer’s credit card.
Types of Transactions
 Manual - The merchant was presented a plastic card that had
embossed on the front the name, account number, and expiration date.
The merchant made a manual imprint of the card, filled out the sales
draft, had the customer sign and then checked a weekly mailer to see if
the card was on the unacceptable list. After accepting the days’
transactions, the merchant “batch” them together and take them to the
bank. Often the bank would wait up to two weeks for the funds to be
made available to the merchant.
 Voice Authorization – Everything was very much the same as
“Manual” except the authorization process. Voice authorization did
away with the mailer by having the merchant call into a central hub to
obtain approval from a live voice operator. The merchant was then
given an approval code that was written on the sales draft. Following
the same deposit methods as with manual system; each night the
merchant would take the receipts to the bank as usual.
Types of Transactions (Cont.)
 Point of Sale Authorization – This was the first time the magnetic
strip on the back of the cards came into play. The magnetic stripes are
with the cardholders account and bank routing number information.
By swiping the card thru the terminal the merchant sends the
information via the telephone lines to a central system that authorizes
payment. The merchant then batches as usual and takes the drafts to
the bank for deposit.
 EDC (Electronic Data Capture) - This is the process that we use
today. By swiping the card the merchant gets the P.O.S. authorization;
however the merchant does not have to make a physical bank deposit.
At the end of the day, the merchant electronically batches the
information held within the terminal and the deposits are made
automatically to the merchant’s checking account within 2 business
days.
Types of Transactions (Cont.)
Note: With the EDC system there are two kinds of processing:
 Host Capture – the transaction is authorized automatically by
the processor. This is used for all types of business where the
transaction is completed and nothing is left open.
 Terminal Capture – is a type of EDC that allows a transaction to
stay open, such as needed in the hotel and restaurant industries.
An amount of money is entered into the terminal in order to
capture this money from the cardholder’s line of credit. The
hotel then closes out the transaction at check out and the exact
amount is entered into the terminal. The transaction then gets
batched and the company receives their funds within two
business days.
Process Flow
Authorization Process
 Cardholder presents credit card to pay for purchase
 Merchant swipes card, enters the dollar amount, and
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transmits an authorization request to the merchant bank.
Merchant bank automatically sends authorization request
to the Processor (or other platform)
Platform routes the request to cardholder issuer
Issuer approves or declines the transaction.
The Processor forwards the Issuer’s response to the
Merchant.
Merchant Bank forwards the response to the Merchant.
Merchant receives the authorization response and
completes the transaction accordingly.
Typical On-Line Authorization
Process, Internet Payment Device
Authorization through an Internet
Application
 Card information (e.g., card type, account number, expiration date) is entered
into the Internet application by the cardholder in a secure environment using
Secure Socket Layer (SSL) technology
 The agency's Internet application, which automatically links to an Internet
payment gateway, transmits the encrypted information to the selected
gateway.
 The gateway accepts the encrypted data via the Internet, decrypts the
information, reformats the information to Processor's specifications and
transmits it to Processor’s over a leased-line.
 The Processor's system recognizes the authorization request as being for a Visa,
MasterCard, American Express or Discover card. In the case of Visa or
MasterCard, the request is transmitted to the appropriate association, which,
in turn, routes the request to the member bank which issued the card. If the
authorization request is for an American Express or Discover card, the
Processor transmits the request to American Express or Discover respectively.
Authorization through an Internet
Application (Cont.)
 The card issuer (a Visa or MasterCard issuing bank or American Express or
Discover) verifies that the cardholder's account is valid, and that the amount of
the transaction is less than their remaining credit limit (if such a credit limit
exists). The approval (with authorization number) or declination is
transmitted directly back to the Processor for American Express and Discover
transactions and indirectly back to the Processor through an association for
Visa and MasterCard transactions.
 The Processor sends the authorization response over the leased-line to the
gateway.
 The gateway encrypts the authorization response and forwards the response
over the Internet to the agency's Internet application.
 The cardholder is made aware of the response, and, if approved, is typically
provided a confirmation number. If declined, customers are typically afforded
the opportunity to use another card.
Valid Credit Card Transactions
There are 3 components to every credit card transaction that must be present
in order for a transaction to be valid. If any of these three components is
missing, then the cardholder has the opportunity to contest the
transaction.
1.
Proof the card was presented at the time of the
transaction. There are only two forms of proof that the card is
present.
 A manual imprint of the card or
 Card swiped in Point-of-Sale terminal
2.
Signature on the Sales Draft. Every draft must be signed by
the cardholder in order to be valid.
3.
Promised goods and services must have been delivered at
the time of the sale. In other words the cardholder must
have received the services or goods that they were promised.
How do the Issuers/Processor’s make
their money?
Pricing:
There are many different aspects of pricing in our industry. This section will focus on the
basic pricing structures. This is the ongoing cost associated with processing cards for the
merchant.
 Discount Rate: For the vast majority of merchant, this is the single
most important element to their pricing structure. The discount rate is
a percentage of money the processor keeps out of every transaction.
These monies are distributed to all of the entities involved in
processing the transaction. Naturally, all merchant should be
concerned that they have competitive discount rate.
Example: If a merchant is being charged a 2% discount rate based on a
$100.00 ticket; the cost on this particular sales would be $2.00.
Merchant would keep $98.00 for that sale. In addition to any other fees
that may be associated with the transaction.
How do the Issuers/Processor’s make
their money? (Cont.)
Generally speaking the processor will give the merchant one of two
choices as to when they want the charges to be debited to their account.
 Month End Discount : Monies are deposited into merchant’s account
within 24-48 hours from the time they batch out. Then at the end of
the month, all fees are collected and debited from merchants account.
Primary benefit to the merchant is having access to more of their
money longer.
 Daily Discount : Monies are deposited into merchants account within
24-48 hours as with month-end-discounts; however, instead of the fees
being taken out at the end of the month. The fees are debited before
being deposited.
To eliminate bookkeeping nightmares on the part of the processors, it is
suggested that the emphasis be on “Month End Discounting”
How do the Issuers/Processor’s make their
money? (Cont.)
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Swiped Transaction: This type of transaction is for the merchant who business is
primarily face-to-face; having the ability to swipe the card present through his
processing terminal. This method is the most secured way of accepting the transactions,
greatly reducing the risk for fraud; therefore, the merchant receives the lowest possible
discount rate available for his type business.
 Keyed Transaction:
This rate is for transactions that do not have the card present at
the time of sale. Or perhaps the merchant’s processing terminal is unable to read the
magnetic strip on the back of the card (which holds all of your information). Therefore,
there is a need to “key in” the credit card number, expiration date, and with the new
Address Verification System (AVS), you will also be prompt to enter in billing address
and zip code.
Due to the card and customer not being present at the time of sale, the rates are higher to
cover the increased risk of fraud. In order for them to qualify as a swiped account, they
must accept at least 80% of their sales face-to-face, with only 20% keyed. The reverse is
true for keyed accounts.
How do the Issuers/Processor’s make their
money? (Cont.)
 Mid-Qualified Transaction: This is when a merchant who is set up as a
swiped account, accepts a keyed transaction. Or a card not present transaction,
which includes the billing address being passed for an authorization or sale
transaction. The discount rate for this transaction is higher than the discount
rate for a Qualified transaction. For the increased risk of a keyed transaction,
typical industry price can average anywhere from .65% to 1.5% of the keyed
transaction, higher than is charged for a swiped transaction.
 Non-Qualified Transaction: This is a charge that applies to transactions that
carry the most risk. Typical reasons are: International Cards, Failure to close out
a batch in a timely manor (24 hours), commercial cards, and lack of
information about a transaction. Most of the time it is lacking the billing
address information from a keyed transaction.
However, with today’s technology and proper processing, the merchant can avoid some of
these charges. With newer updated equipment that prompts your merchant for this
information; the cost of upgrading can many times pay for itself, in addition to reducing
the risk of fraud.
How do the Issuers/Processor’s make their
money? (Cont.)
Transaction Fee: In addition to the discount fee, there is a cost per transaction for processing
credit cards. Depending on the processor this fee can be called many different things and be
located in several different locations within the body of their monthly billing statement.
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Authorization Fees
Watts Fees
Per Item Fees
Transaction Fees
The set range for this fee is anywhere from $0.00 (due to much higher discount rates), to as much
as $!.00 per transaction. The industry average is $.20 to $.40 per transaction. As with discount
rates, typically speaking, the per transaction fee for keyed transactions accounts is higher
than swiped. Again, this is due to higher risk.
Example: If each transaction cost the merchant $.20 and they performed 400 transactions per
month, their transaction fee cost would be $80.00, in addition to the discount rate and any
other fees that may apply.
How do the Issuers/Processor’s make their
money? (Cont.)
Statement / Service fee: Similar to most financial services, this is a monthly fee
for receiving the statement summary of the account, as well as the service the
24 hrs / 365 days a year, service that the merchant receives. This is an area where
in some cases you’ll find hidden fees being charged to the merchant.
 Industry average is from $5 to $20, although $10.00 is what’s typically seen on
most merchant statements.
Monthly Minimum: This is the monthly total processing cost. The merchant
will be billed whichever is greater, the sum total of discount rate and
transaction fees, or the minimum, whichever, is greater.
How do the Issuers/Processor’s make
their money? (Cont.)
Batch –
 A collection of credit card transactions saved for submitting at
one time. Usually each day. Batch fees are charged to encourage
a merchant to submit his or her transactions at one time, rather
than throughout the day.
Batch Settlement –
 An electronic bookkeeping procedure that causes all funds from
captured transactions to be routed to the merchants acquiring
bank for deposit.
Card Validation Code (CVC) or Card Validation Value (CVV or CVV2) –
 Tool used by MasterCard or Visa to prevent fraud. It requires that
a number usually located on the back of the card above the magstripe be entered in to verify the card is the present and
authentic. When the card is not present at time of sale.
How do the Issuers/Processor’s make
their money? (Cont.)
Chargebacks
If goods and services are unsatisfactory delivered or preformed and the
cardholder notifies the bank within a specific period of time after the
transaction, the merchant might receive a chargeback, which means
the money is taken from their account and returned to the cardholder.
The steps for the chargeback are as follows:
 Customer notifies their issuing bank to refund a transaction.
 Issuing bank notifies the acquiring bank to provide proof the card was
present.
 Acquiring bank notifies merchant to provide proof.
 (a) if merchant can’t provide proof, the checking account is debited.
 (b) if merchant provides the proof, the case then may go to arbitration.
Dealing with Interchange Fees
What's the reason for the interchange fee? Interchange compensates card
issuing institutions for their risk and the expenses they incur to process
transactions.
 The conditions under which you accept credit cards and process
transactions all affect how high the fee will be.
 The interchange fee is determined by the nature of your business and the
processing procedures you follow.
 Hence the interchange fee for a face-to-face transaction will be less
 While MOTO or ecommerce transaction will be higher
For example, a customer makes a $200 purchase, using a Visa card, at a retail
store. The interchange category for this Visa transaction is CPS Retail. The
discount rate is 1.95 percent. If all procedures are followed -- if the card is
swiped, electronic authorization procured and transaction settled within
two days -- there are no additional charges, and the fee is $3.90 to the
merchant. However, if the card is hand-keyed instead of swiped, there's a
1.00% percent penalty, making your bill $5.90 instead.
What is a Basis Point?
 Investopedia explains Basis Point - BPS
The relationship between percentage changes and
basis points can be summarized as follows: 1% change
= 100 basis points, and 0.01% = 1 basis point.
So, a bond whose yield increases from 5% to 5.5% is
said to increase by 50 basis points; or interest rates
that have risen 1% are said to have increased by 100
basis points.
On-line vs. Off-line debit
 Online (Pin-based):
 When the customer enters pin number at time of sale, the
transactions are subject to only a set transaction fee regardless of
the size of the ticket. The merchant has no liability for a fraud
based charge back.
 Normally .55-.85 per transaction
 Off-Line (Signature based):
 Transactions are processed as credit cards and subject to discount
rates, transactions fees. The transactions are subject to the same
rules and regulations of credit cards.
Debit vs. Credit - The Bottom Line
Example: Compare the fees on a $100.00 sale for a merchant with a 1.85%
rate and a .25 transaction fee for credit card transactions
Online
(Requires a Pin Pad)
Offline
Signature based, (No Pin)
Transaction Fee $.85
Network fee. Included $0.00
Total Cost Savings of 42%
Transaction Fee
$.25
Discount Rate @ 1.85% = $1.85
Total Cost
$0.85
$2.10
Making the Choice
Both forms of debit acceptance let merchants offer payment
flexibility to their customers, which in turn can capture
impulse buying, generate higher-ticket purchases and
improve customer loyalty. But PIN-based debit transactions
offer added advantages, such as:
 The option to provide cash back to customers, which
increases store traffic.
 A fast way to move shoppers through the checkout line.
 Virtual elimination of chargebacks and fraud.
 Higher transaction approval rates.
 Potential for additional revenues from surcharges.
Prospecting
 Cold Calls
 Phone Solicitation
 Networking Socials
 Associations
 Lead/Referral Sources
 Observational
Cold Calls/Tele-Sales
 Know who you are calling on and why!
 Get past “The Gatekeeper”!
 Establish Trust!
 Be prepared!
 Stop thinking like a salesperson!
 Start thinking like a customer service rep!
 Remove any expectations.
 HAVE FUN!
Example – Cold Calling
(ask for the owner by name if possible)
Hi my name is __________. I work as a Merchant Advisor and am tasked
with the responsibility to talk to each of the Merchant’s in this area with
regards to PCI regulation, the erroneous fees being charged by processor,
and how it effects your business.
I do not have time now, as I have an appointment with Jim down the
street. However, I was running early and out of consideration for your time. I
wanted to schedule a few minutes for me to review your current situation and
show you how you can eliminate the fees, become compliant and stay
compliant at NO CHARGE TO YOU.
Does that make sense?
Set the appointment!
Note: If they hesitate, assure them you are not there to sell them any, but
rather make suggestion based on your findings. Be very a matter of fact,
and non threatening.
Example - Tele-Sales
(ask for owner by name if possible)
Hi my name is __________. I do not mean to bother you, but
I’m making a customer service call. Is now a good time to
talk? I work as a Merchant Advisor and am tasked with the
responsibility to talk to each of the Merchant’s in this area
with regards to PCI regulation, the erroneous fees, being
charged by processor, and how it effects your business.
I wanted to schedule a time, when it’s convenient for you, so
that I may review your current situation and show you how
you can eliminate the fees, become compliant and stay
compliant at NO CHARGE TO YOU.
There is NO Charge for our service, and shouldn’t take up too
much of your time whatsoever.
SET APPOINTMENT!
Networking Socials
BNI – Business Network International
1. Professional Marketing Organization that helps
members build business via word of mouth referrals.
2. Only one person from each professional
specialty is permitted to join.
3. Because giving referrals is the cornerstone of
membership, everyone becomes a virtual sales team
for the members.
4. Increased exposure to many people and
business, because the relationships are built on trust.
You not only meet other members, you gain access to
their contacts as well.
Networking Socials
Local Chamber of Commerce
1. Integrity – Positive perception by local members, as
well as a positive impact on the community.
2. Networking Functions
a. Luncheons for Women
b. Business after 5 meetings
c. Industry Luncheons
d. Golf Tournaments
e. Home Shows
3. Marketing Opportunities
a. Monthly News Letters
b. Radio Advertizing
c. Hot links to our website via business directories
Associations
Trade Association
1. Integrity – Positive perception by local members, as
well as a positive impact on the community.
2. Referral Opportunities
a. Work with other like operators/
business owners with similar interest
b. Develop a reputation
c. Have them calling you
3. Marketing Opportunities
a. Monthly or quarterly trade publications
b. Local events
Key Target Associations
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Dental/Medical Associations
Home Owners Association or HOA
Small Business Associations
American Business Women’s Association
National Association for the Self Employed
National Association Convenient Stores or NACS
American Rental Association
National Association for College Stores
American Accounting Association
American Association of Attorneys – CPA’s
American Institute of Professional Bookkeepers
Credit Union National Association or CUNA
Independent Community Bankers of America
Apartment Associations of America
Internet Merchants Association
Lead/Referral Sources
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Pre-Paid Legal
ADT
Local Bulletin Boards
Merchant Circle
YouTube
Linkedin
FaceBook
Blogs
Hoover, SalesGenie and Proposal Portal, etc
Other Business Professionals/Business Owners
Commercial Property Managers
IT and Web Designers
Observational
Sales opportunities are everywhere, if you look for them. Even
when you are at lunch, at a traffic light or just driving down the
street. Keep a digital recorder with you at all times.
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Coming Soon
New construction – strip malls and office parks
New location
Local auto repair shops
Local eateries
a. Electricians
b. Plummer’s
c. Any other mobile service vehicles