ELECTRONIC PAYMENT PROCESSING
NEW TOOLS AND TECHNOLOGY
Matt Fluegge Dean Middleton
Dan Sollis
TODAY, YOU WILL LEARN ABOUT:
ACH GATEWAY
CREDIT CARD
GATEWAY
REMOTE DEPOSIT
CAPTURE
EBPP
REPORTING
TOOLS
VIRTUAL
LOCKBOX
THE 3 MOST IMPORTANT THINGS FOR A CREDIT MANAGER
REGARDING AN EXISTING OPEN ACCOUNT PORTFOLIO…
1
DSO
2
DSO
BENEFITS
Increase the ability to get “paid” when performing collection calls
Improve your A/R aging
Reduce your DSO
Reduction of traditional lockbox and other bank fees
Enable batched deposits
Integrated reporting enabling auto cash application & auto
posting
Accelerated returns notification; NSF’s discovered earlier
Schedule future or recurring transactions
Electronic transactions take precedence over paper checks
Eliminate lengthy wait time associated with mail services, fax
checks, and traditional lockboxes
TURNKEY SOLUTION
ACH Gateway enables you to receive funds from your customers almost
instantaneously in a secure internet environment.
Convenient
-
An ACH transaction can be processed over the phone or internet.
Secure
-
As ACH transactions are designed to occur automatically and electronically, they
dramatically lessen the amount of people who can access the personal information. Furthermore, the
electronic nature of ACH transactions means that the records cannot be stolen, lost or misplaced in the
mailing system.
Reduces Costs
-
ACH payments are substantially cheaper than accepting a credit card payment over
the phone.
The
Office of the Comptroller of the Currency estimated that a traditional paper check
transaction costs five times as much to process as the same transaction processed through the ACH.
Access to Funds - Accelerated funds availability, usually within 24-48 hours.
No need for time-consuming
and expensive integrations
.
12378965 120002024 87884884 125,000.00 002456 002457 002458 002459 002460 50,000.00 25,000.00 25,000.00 15,000.00 10,000.00
CREDIT CARD GATEWAY
Obstacles
Pricing
Compliance
Configuration of acceptance
Opportunities
Convenience
Networks:
•
Provide
systems/operations
•
Develop products
•
Provide risk
management
•
Offer advertising
and promotions
•
Set standards and rules
Issuers:
•
Issue cards
•
Assume buyer’s
credit risk
•
Generate reports
•
Provide customer
service
Acquirers:
•
Sign up merchants
•
Underwrite merchant
risk
•
Provide processing
•
Handle authorization
•
Manage
Capture/Settlement
•
Generate reports
•
Provider customer
service
Payment System
Roles & Responsibilities
11
Fee Breakdown
Interchange
Network Assessments &
Other Fees
Processing Fee
NOTE: Does not include other network pass-through fees such as those for Dues & Assessments, Network Access & Brand Usage, Acquirer Processing, Network Settlement / Base II, Risk, etc.
Interchange Management
13
Passed through Visa, MasterCard, and Discover to the card Issuer.
Collected by Acquirer from the merchant for every
Visa
®, MasterCard
®, and Discover
®transaction.
What is the Interchange Fee?
$10.60
$0.0017
$1.25
$0.04
$0.0195
$0.5500
$0.001
$500 Visa B2B Transaction
Interchange (2.10% + $0.10) Visa Base II FeeTran Fee
Comm/Gateway Fee Visa Acq. Proc. Fee Visa Assessment Visa Risk Fee
Fee Breakdown
Interchange represents 85% of the cost of this transaction.
*Based on Average Ticket currently qualifying for the Visa Commercial B2B Business Card rate effective April 2015
•
B2B
•
Travel &
Entertainment
•
Fuel
•
Grocery
•
Other Retail
•
Recurring Payments
•
eCommerce
•
Restaurants
•
Emerging Market
•
Card Terminal
•
POS Software
Systems
•
Virtual Terminal
•
Automated Fuel
Dispenser (AFD )
•
Key Entry
•
Emerging
Technology
•
Consumer Cards
•
Credit
•
Debit
•
Rewards
•
World
•
Signature
•
Commercial Cards
•
Purchasing
•
Business
•
Corporate
•
Fleet
Interchange Management
1
5
Market
Segment
Processing
Technology
Card Products
Visa Business Card Not
Present Transaction
16
With AVS (Address Verification)
2.10% + $0.10
Without AVS and Level II data
2.95% + $0.10
Savings Opportunity
:
Interchange Management
17
Incentive Interchange Programs
•
Commercial Cards – Level II / III
•
Commercial Cards – Large Ticket
•
Decreased expense
Commercial Card – Data Levels
Level 1:
Card number, expiration date, location information, Tax ID, AVS
Level 2:
Customer Code
Sales Tax Indicator
Sales Tax Amount
Tax exempt transactions cannot qualify for Level 2, but they can
qualify for Level 3
Level 3:
Line Item Detail – invoice data such as quantity, description,
dollar amount.
This is not a comprehensive list of level 3 data requirements.18
The greater amount of data provided, the lower
the interchange rate.
PROCESSING LEVEL QUALIFICATION CHART
Level 1
transactions are your
standard transactions with just
minimal data. The card holder is
using a personal or commercial
credit card.
Level 2
transactions are taxable
card transactions, with a
customer code on purchasing
card transactions.
Level 3
transactions are
available on MasterCard
commercial cards and Visa
purchasing and corporate credit
cards.
Level 1 & 2
transactions can be
processed through a standard
credit card terminal or PC
processing. Level 3
transactions require special
software to transmit the extra
information required to qualify
the transaction.
Good Better
Best!
Interchange Rate Examples
Visa Purchasing Card
:
Purchasing Standard
2.95% + $0.10
Purchasing Card Not Present (tax exempt)
2.65% + $0.10
Purchasing Card Present (tax exempt)
2.50% + $0.10
Purchasing Level II Rate (taxable)
2.05% + $0.10
Purchasing Level III Rate
1.85% + $0.10
Purchasing Large Ticket Rate:
1.45% + $35.00
MasterCard Business Card
:
Business Standard
2.95% + $0.10
Business Data Rate I (tax exempt w/ no L3)
2.65% + $0.10
Business Data Rate II (taxable)
2.00% + $0.10
Business Data Rate III
1.75% + $0.10
Business Large Ticket Rate:
1.20% + $40.00
Sample Transaction Costs: Interchange Expense
Visa Purchasing Card: $500 transaction
Purchasing Standard (minimal data):
$14.85
Purchasing CNP (tax exempt, w/out Level 3):
$13.35
Purchasing Level II Rate (taxable):
$10.35
Purchasing Level III Rate:
$ 9.35
37%
reduction in cost by processing Level III data versus minimal data.
MasterCard Business Card: $500 transaction
Business Data Rate I (Level I):
$13.35
Business Data Rate II (Level II, taxable):
$10.10
Business Data Rate III (Level III):
$ 8.85
34%
reduction in cost by processing Level III data versus Level I
Large Ticket Interchange Expense
Visa Purchasing Card: $50,000 transaction
Purchasing Standard (minimal data):
$1,475.10
Purchasing CNP (tax exempt, w/out Level 3):
$1,325.10
Purchasing Level II Rate:
$1,025.10
Purchasing Large Ticket Rate:
$ 760.00
48%
reduction in cost by processing Level III data versus minimal data.
MasterCard Business Card: $50,000 transaction
Business Data Rate I (Level I):
$1,325.10
Business Data Rate II (Level II):
$1,000.10
Business Large Ticket:
$ 640.00
52%
reduction in cost by processing Level III versus Level I data
Large Ticket Example
MasterCard Business L4 Card: $39,829.18 transaction
Data Rate I (tax-exempt)
2.96% + $0.10
$1,179.04
Data Rate II (taxable)
2.31% + $0.10
$ 920.15
Large Ticket (level III)
1.51% + $40.00
$ 641.42
45.6%
reduction in cost by processing Level III versus Level I data
$537.62 Savings
24
B2B COMPANY: PROCESSING FEE SUMMARY
Current NACM Program Savings
Account 1 - Sept. $87,508.20 $61,768.62 $25,739.58 Account 1 - Oct. $63,681.35 $45,615.82 $18,065.53 Account 2 - Sept. $3,642.60 $2,856.15 $786.44 Account 2 - Oct. $2,866.23 $2,266.81 $599.41 Account 3 - Sept. $3,389.50 $1,367.25 $2,022.24 Account 3 - Oct. $6,761.06 $2,305.80 $4,455.27 TOTALS $167,848.94 $116,180.46 $51,668.48 * EFFECTIVE RATE 3.14% 2.17% $5,347,307.72 Effective rate = fees divided by
Visa/MC/Discover Sales
Visa/MC/Disc Sales
AVG. MONTHLY SAVINGS $25,834.24 30.78%
TOTAL ANNUAL SAVINGS $310,010.91 SAVE
Level 3 Impact
Without Level 3 Data on tax exempt
payments, merchants are paying on
average
0.25% to 0.90%
more than
they could be on every Level 3 capable
commercial card transaction.
26
Changes to Commercial Card Interchange
Interchange Fee Program
Every card type/category is
increasing by 0.00% to 0.45%,
Except Level III qualified cards
Through 10/17/14
Effective
October 18, 2014
Visa
Corporate
Visa
Purchasing
Visa Corporate and
Visa Purchasing
Commercial Electronic
2.75% + $0.10
2.75% + $0.10
2.95% + $0.10
Commercial Non-Travel Level III
1.95% + $0.10
1.95% + $0.10
1.85% + $0.10
Commercial Business-to Business
Eliminated in April 2015
2.10% + $0.10
2.40% + $0.10
2.55% + $0.10
Eliminated 4/15
Commercial Retail / Card Present
2.10% + $0.10
2.40% + $0.10
2.50% + $0.10
987123 654987456
2,050.00
375987654321001
REMOTE DEPOSIT CAPTURE
ACH VS. RDC
Subject ACH RDC
What are the
differences between ACH and RDC?
Paper check payment is converted to an ACH electronic payment.
This works as follows:
•Paper check is tendered for payment. •Payee adds payment amount and name of payee, then transmits data through the ACH Network to debit customer’s account.
•In ARC, the check is destroyed after conversion; in POP, the check is returned to the checkwriter at the time of payment. These transactions flow through the ACH Network.
Paper check payment is imaged; the image is later converted into a substitute check. The substitute check is used in the paper check collection system.
This works as follows:
•Paper check is captured and converted into a digital image. •An FI—the reconverting bank— uses the digital image to create a substitute check, which is a paper reproduction of the original check (front and back). The substitute check must bear this legend: “This is a legal copy of your check. You can use it the same way you would use the original check.” These transactions do not flow through the ACH Network.
Enabling legislation or rules
NACHA Operating Rules Check Clearing for the 21st Century Act
When service began POP: 1999 / ARC: 2002 October 28, 2004
Authorization required from check writer to
convert or truncate
Biller or retailer obtains authorization from check writer to convert checks
MOBILE APPLICATION: RDC & CREDIT CARD
Ability to process payments outside of your traditional POS
environment
Take images of checks with the camera on your own iOS or
Android device
Accept personal or business checks from virtually any customer
Accept credit card payments from your mobile phone/tablet
ELECTRONIC BILL
ELECTRONIC BILL PRESENTMENT & PAYMENT
Outsource your billing functions and realize:
Savings of 25% to 50%, or more
Improve DSO by 4 -10 days, or more
Reduce labor and material costs
Improve customer satisfaction
Improve overall efficiencies
Data Transfer Basic file from your
accounting system
Data Conversion for SQL Processing and
parsing to your custom documents
Delivery of Bills Print & mail, fax,
e-mail and web portal Website Access Customer self-service Presentment & Payment
Payment &
Remittance
Processing
ACH & Credit Card
with level III
Posting of Remittance and Payment Transfer for automated Cash Application Security & Compliance Marketing Options
Customer visits online archive to review bill and
submit payment.
Data conversion for online archive presentment on a custom built website
or print-to-mail process. Transaction processed via payment gateway.
Merchant gathers billing data file to transmit to
payment processor.
Paper/Email/Fax Funds are transferred and
reported to Merchant’s bank account.
