Electronic Transactions: A Year in Review

Ross Federgreen Comments
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This year will go down as one of major transition for the electronic-payment industry. Several related issues have had an effect on the self-storage business and the way facilities operate:

  • Compliance
  • Cost
  • Alternative payments

Compliance

In the credit-card arena, compliance has been a buzzword for the last five years. In the past, merchants had to deal with competing requirements from Visa, MasterCard, American Express and Discover. In January 2005, however, a set of uniform requirements was released. These 12 basic requisites, known as the PCI Data Security Standard, outline security requisites for members, merchants and service providers that store, process or transmit cardholder data.

In addition, compliance now affects all merchants. Most self-storage operators fall into the Level 4 category, which comprises any merchant that processes fewer than 20,000 Visa e-commerce transactions or up to 6 million standard Visa transactions per year. The recommended observance is an annual self-assessment questionnaire and penetration scan.

Cost

When it comes to whether a business will accept “plastic,” cost is always an issue; and several important meetings occurred during 2005 that will have a major impact on charges. The most significant was held during the summer by the Kansas City Federal Reserve. It addressed Interchange, the amount an issuing institution receives every time a cardholder uses his card.

Participants asked the question: Should the government regulate Interchange, and is the current methodology justified? System-wide prices changes were put into effect, including a reduction in the cost of debit acceptance and an increase in the cost of “reward points.” Finally, a number of new Interchange levels were introduced, as were some new categories. Categories supersede traditional levels, of which there are currently more than 100.

Alternative Payments

Alternative payment methods such as debit cards and electronic checks are gaining significant momentum. During 2005, debit transactions exceeded traditional credit-card transactions, which is important because the cost to the merchant for debit vs. credit is significantly less.

The use of electronic checks through the Automated Clearing House (ACH) continues to increase. The cost of receiving ACH payments is also significantly less than the cost of accepting credit cards. This year, we saw the long-reaching effects of the Check Clearing for the 21st Century Act (Check 21), which went into effect in October 2004. This act allows an electronic image of a paper check to be substituted for the original at a bank or in a court of law. There have been regulatory conflicts related to this, but they are being resolved.

Ross Federgreen is a co-founder of CSRSI, which provides an integrated approach to the analysis, design, implementation, deployment and management of electronic transaction services and systems. Since 1999, the company has helped more than 350 public and private institutions reduce the cost of acquiring money and minimize the liability exposure related to payment transactions and customer data. Its products include the Credit Card Analysis System. For more information, call 866.462.7774, ext. 1; e-mail rfedergreen@ccas-payment.com; visit www.csrsi.com.

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