Category Archives: Cards

Square “Violations”

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16 March 2011 (Updated 17 Mar)

My top issue w/ mobile swipe is clearly customer behavior and potential data loss.  I’ve been asked to provide a basis to decline Square transactions (debit particularly) so, rather than sending out multiple e-mail responses, I thought I would share. Issuer Top 4 reasons to decline Square

  • PABP/PCI compliance
  • Collection and use of ancillary customer information
  • Paper Signature requirement
  • Chase has all of the equity upside

Visa developed the Payment Application Best Practices (PABP) in 2005 to provide software vendors guidance in developing payment applications that help merchants and agents mitigate compromises, prevent storage of sensitive cardholder data.

http://usa.visa.com/download/merchants/validated_payment_applications.pdf

 

Phase V of PABP went into effect on July 1, 2010. This phase required all Acquirers to ensure that their merchants and agents use only PABP-compliant applications. A list of payment applications that have been validated against Visa’s PABP /PCI DSS is available at www.visa.com/pabp. Note Square is missing, how can Chase acquire for merchant/aggregator that is in clear violation?

UPDATE 17 Mar (Thanks Bob Egan) Evidently PCI has revoked certification of all mobile swipes until new rules have been created. See related post  http://storefrontbacktalk.com/securityfraud/pci-council-confirms-multiple-mobile-applications-delisted/2/

From the Visa Operating Reg, (pg 428)

While Square does not “require” mobile number or e-mail address, it is collecting it at time of transaction (plus your location). As this information is associated with the transaction, it must be managed within PCI. The business risk here is that Square will use address and location information for something else.. or Chase gets the e-mail address of all of your card customers. This is why the rules were created.. so this does not happen.

Last is Visa requirement for paper receipts. From Visa’s Transaction Acceptance Device Guide

Chase bears all of the burden here, I hope they have taken a holistic view of the fraud and data compromise risk.. not just approving their own cards… but for every card ever swiped by Square.  Advanced fraud schemes take 18mo-2 years to develop.. so it may take some time for risk to materialize.. and for them to pull back.  Chase.. these future losses will easily wipe out the 15% of Square equity that you hold.  Perhaps they are moving so aggressively here because one of their key partners (ie Apple) is falling down in NFC.  Which brings to mind the larger question: Is Chase Anti NFC? 

Remember just 4 weeks ago that all of the US banks were looking at a future where ISIS would control NFC on the handset. Perhaps this is Chase’s way of developing an alternate strategy to address NFC’s biggest weakness: infrastructure.  If this is true.. then Chase I apologize.. your strategic play here was indeed valid. As of this month, we are looking at a ISIS crash and burn and NFC control with RIM, Google and Nokia. My hope is that Chase will abandon Square once the threat, of MNO control over payments, has been eliminated. 

Recommendation for banks

  1. Educate your customers. DO NOT give your personal information out when you use your card
  2. Start to educate your customers on mobile payments in general.. how will it work?
  3. Encourage use of credit over debit.. greater consumer protection and better margin for you
  4. Set some common sense rules .. use your card with trusted vendors (Apple, Grocery, … )
  5. Educate your customer facing employees from branch to call center..
  6. Think about your small business value proposition, how can you help small businesses accept cards?
  7. Issuers, think about declining Square transactions.. particularly for debit

Visa and MA take a bath on proposed debit fees

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The banks knew it was coming, so don’t let anyone fool you that it was a “suprise”. The idea of a flat fee of $0.05-$0.15 has been floated for some time. As you can see from graph on right, Visa lost 10% of its value after the announcement. While Banks and Issuers are returning their Christmas presents tonight, the merchants are having a party.. particularly large ones like Wal-Mart who in 2009 had interchange costs of $1B.

As a banker, we invited Wal-Mart to come in and talk to us in 2005. They certainly did not mince words then, I remember a few quotes explicitly “what service do you provide that justifies taking 2% of my sales”?. Another memorable quote “we want to find a model where you pay us to take your card”.  Something we laughed off back then, after all who on earth in the bank wanted to design that model? Banks “had it coming”… The interchange rate creep bore too many signs of a

“network” run amok and NO ONE stopped the train.  Banks launching campaigns like “skip the PIN and win” to incent consumers to pursue signature debit transactions (200bps+) vs PIN debit.  We only need to look at the federal reserve chart on the right to see the lack of market forces here.

I believe this is a “tipping point” event in US cards. We will see merchants aggressively incent use of debit, and the Visa and MA logos will start to come off of our debit/ATM cards, as they do in Canada and Australia (Interac, and EFTPOS). What will the banks do about this revenue loss?

All are looking for new ways to drive other revenue streams into the payment services, particularly around marketing/advertising (see my Blog on Apple iAd). The Visa and MA relationships with the large banks was already showing signs of strain. The large banks will not wait for Visa and MA to develop an alternatives, most are assessing new networks and value channels which they can control (see Googlization of FS). I’m short on V/MA because of this dynamic.

The Federal Reserve’s proposal is open for comments, and there may be a change. But the starting point for the negotiations is quite a bit lower than what the banks were hoping for.  My message to Bank CEOs: drop the fight here and find a new model for payments. Don’t let Apple and Google eat your future as well. What will it take? Well for one thing it will take a little collaboration, re-energize a few of your existing consortiums like NACHA, The Clearing House, Early-Warning to develop new models for payments and seed these team with top executives. You can’t take your eye off of this ball, retail payments is less than sexy.. but it is core to your daily interaction with customers.

Square Up update

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11 Dec 2010 (updated)

Previous post http://finventures.wordpress.com/2010/03/02/squareup-take-4/

Today’s Telegraph (UK)

Dorsey is a marketing machine! It’s just amazing how much buzz he has been able to create (yes I am envious). The Square application is stellar from a customer experience perspective. Although appshopper shows them in the top 20 free finance apps (~1M downloads), I estimate they are sitting on only 5k-15k active customers (this is the nature of a “free” app).  It also seems that they are in a holding pattern until they resolve fraud and risk issues (I covered this in last blog). From their FAQ

Until recently, Square was facing a big hardware shortage, but that’s now coming to a resolution. The problem has transitioned to something we’ve been working on simultaneously, a credit processing and risk issue: we need to strengthen our underwriting infrastructure so that we can handle the huge demand for readers and still manage the risk of chargebacks and fraud. This is the last thing preventing us from shipping readers as fast as we’d like, and we have almost the entire team working on it. We look forward to sending you a Square!

My guess on the hold up? iPhone cannot be made PCI compliant without first encrypting the card BEFORE it gets into the iPhone (see the Verifone solution). As you can see from the Visa PCI DSS list, Square is certified in 3 areas:

  •  IPSP (E-commerce)
  • Payment Gateway
  • Process Magnetic-Stripe Transactions

 This means that Square’s data center is approved to handle card data in these areas (ex. not leaving card numbers sitting around unencrypted). This does NOT mean that the Square Application or Doggle have been certified. In fact, a search in the PCI org’s list of approved applications has no mention of Square. Where Verifone’s Payware is shown approved (below).

This is certainly a driver for PayPal’s recent partnership with Verifone to enable PayPal to act as merchant acquirer (see Verifone Press Release)

My (somewhat educated) guess is that Square must redesign the “Square” for encryption AND its Application AND get it certified by the issuers. This is a 12-18 mo process … as I said last year.  Of course I could be wrong on this.. perhaps they are indeed near certification. Assuming they do get the US mag stripe issues resolves it will not translate into any global adoption. I laughed quite a bit after reading the UK Telegraph article.. particularly given the EMV (Chip and PIN) requirements in EVERY country outside of the US.  So a new “redesigned” Square for magstripe won’t work in europe.. that is yet another design challenge with its own certification process. Who said payments was easy?

The card networks and issuers want Square to be successful, as increased card acceptance means increased payment volume. But there is a reason that acquirers and merchant agreements exist. Fraud usually is 18mo-2 years behind a new payment method as its not worth the fraudsters time (and resource) to invent a compromise. Square will face unique risks not seen before by any acquirer. For example:  merchants accounts denied by other acquirers, physical card fraud rings, skimmers looking to take the cards and auth codes for use off line, virtual card fraud rings looking to “pump” card data through 100s of easy to set up Square accounts.

Square has a use, but the market is small. I expect many small merchants to give the service a try, but once they realize that it takes 30-60 days to settle and that they have a new burden (under reg z) for returns and consumer transaction dispute (ex reserves) they will decide that the headache is not worth it.  In other words they will face the same barriers that the large acquirers have in moving down market.  Dorsey was in a WSJ video yesterday outlining potential benefits for issuers using square. This is a soft repositioning of his company for a potential exit. He knows that the market is limited and is hoping for alliance plays with large issuers/acquirers. Banks are certainly in a better position to roll this out.. particularly because of their ability to manage card risk (but customer support is a “little” more robust as well). As I stated previously, smart money would wait for Dorsey to gain adoption and struggle through the issues before investing.

The problem that Dorsey is trying to solve is core to the acquiring business: how to grow card use among small merchants. Question remains on whether this is this a “technology problem”, or a business problem? For banks wanting to dip their toes in the technology: it is already available through teams like Verifone. For Small Merchants with a need for a convenient easy to use method for accepting cards:  go to www.paywaremobile.com and sign up with FirstData. For consumers: think twice about giving your card to the hot dog vendor..   banks own the risk (in the US), but there is still a big hastle in shutting down your account.

As I stated in my Jan 2010 blog, Square presents a risk to the payment system

The acquirer that takes this on will likely have a few headaches when the first major craigslist merchant starts using the device to skim and resell card information (among other things). There is a reason for PCI compliance and for my “securing” my physical card and CVV. I can’t wait to see Square’s Payment Services Agreement (PSA). Operationally, the issuer’s have control over card authorization through systems like HNC’s Falcon or SAS Raptor. This means that if SquareUp is found to have contributed to a data loss, or has a high number of fraudulent transactions (see link) customer would see their card transaction declined, or the network (Visa/MC) would shut SquareUp down.

The great thing about the PayPal model is that the customer funded the account after agreeing to terms. In Square’s model, consumers are unregistered, Square is acting as an agent of the merchant. For Square’s investors, there is atypical risk which they will see through “unique” bonding/insurance requirements from the acquirer.  Just as with any company, Square will face unlimited liability associated with loss of consumer information (think TJX). To get an idea for potential mis-use see you tube video below.. crooks invest quite a bit in technology here… will SquareUp make it easier for every iPhone owner to become a skimmer?

[youtube=http://www.youtube.com/watch?v=svzZxB0o8J8]

Target REDCard – Back to the Future?

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Target’s 10-Q was published Friday for quarter ending 10/30/10. I’ve started following Target’s financial services performance given the US launch of their new REDCard decoupled debit.  All of this seems a little like back to the future… 40 years ago each store had their own closed loop branded card, 100 years ago small stores offered their customers store credit. Target’s innovation is creating a card that couples 0% interchange, with loyalty program that they control, in an infrastructure that already exists (Target’s card group and Target bank).

Financial services execs within: big banks, retailers and the payment networks are keeping a close eye on this product. Target has a very unique competency in payments through its ownership of Target Bank and associate card processing. Historically, Target’s card portfolio has been either a millstone or a jetpack. REDCard takes out the majority of the credit risk (aka the millstone) and leverages the card processing infrastructure to provided a competitive advantage.

The REDCard launch looks like a smashing success, and through the 10-Q we can estimate the initial adoption for the 15 days within the national launch (adding a small base within the Kansas City test market).  On page 14 and 17 we see that Target accounts for REDCard’s 5% rebate as reduction in sales, with the card unit reimbursing a portion of this cost (operations and marketing). In other words the “net cost” of to the card unit: REDCard’s 5% less card processing costs (ie interchange, …etc). 

  • Reimbursed amount: $26M
  • Less 10% one coupon run off: $19M (Estimated).
  • Card Net Reimbursement for REDCard: $7M

Red Card TPV (Assuming 200bps average cost of payment)

REDCard 15day TPV = $7M/(500bps-200bps) = $233M

(out of quarterly sales of $15.2B)

Admittedly, I do not have a way to resolve the difference between this number and the market penetration number below (from 10-Q). As stated below REDCard includes Target Credit card, Target Visa Credit Card, and Target Debit Card. When will these cards recieve the 5% off? Perhaps after new terms are agreed to and deposit accounts are linked (comments appreciated).

Beginning April 2010, all new qualified credit card applicants receive the Target Card, and we no longer issue the Target Visa to credit card applicants. Existing Target Visa cardholders are not affected. Beginning October 2010, guests receive a 5 percent discount on virtually all purchases at check−out every day when they use a REDcard at any Target store or on Target.com. Target’s REDcards include the Target Credit Card, Target Visa Credit Card and Target Debit Card. This new REDcard rewards program replaced the existing rewards program in which account holders received an initial 10 percent−off coupon for opening the account and earned points toward a 10 percent−off coupon on subsequent purchases. These changes are intended to simplify the program and to generate profitable incremental retail sales.

We monitor the percentage of store sales that are paid for using REDcards (REDcard Penetration), because our internal analysis has indicated that a meaningful portion of the incremental purchases on our REDcards are also incremental sales for Target, with the remainder of the incremental purchases on the REDcards representing a shift in tender type.

Note a) on Pg 17

Loyalty Program discounts are recorded as reductions to sales in our Retail Segment. Effective with the October 2010 nationwide launch of our new 5% REDcard rewards loyalty program, we changed the formula under which our Credit Card segment reimburses our Retail Segment to better align with the attributes of the new program. In the three months and nine months ended October 30, 2010, these reimbursed amounts were $26 million and $60 million, respectively, compared with $19 million and $59 million in the corresponding periods in 2009. In all periods these amounts were recorded as reductions to SG&A expenses within the Retail Segment and increases to operations and marketing expenses within the Credit Card Segment.

Congrats to Target on a great launch. Already we see some of their strategic plans to refocus the across the board 5% incentive to something more “targeted” (pardon the pun). As reported in Mashable, ShopKick is being trialed in 242 stores.  I would hope Target looks to white label this to make it their own service, unless they have an equity piece to incent them to build ShopKick’s network. Issue here is that they checkout process is still rather complex. The great thing about ShopKick is that it is focused on keeping foot traffic in the store when a prospective buyer finds a lower price somewhere else, shopKick can help generate a specialized offer to keep them. This works well for big ticked items, but for more than 1-3 items it will be a nightmare as the POS integration is not there.

Is this the beginning of more store cards? What is the “tipping point” which makes this model attractive to other retailers? Will customers take one more piece of plastic in their wallet? Can Target sustain this level of rewards, or will they look to target incentives after critical mass of acquisition? Will merchant acquirers and processors respond with new services?

The competitive barriers are high, as bank licenses and card teams are not formed overnight.  How would I leapfrog Target? First tell me where I go to buy a Flux Capacitor?

Decoupled Debit

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8 November 2010

Winston Churchill may have been referring to Payment systems in the US when he said:

It is a riddle, wrapped in a mystery, inside an enigma

The macro economic impacts of the recent US card legislation portend substantial business change for Visa and Mastercard. The US debit card market is soon to resemble Australia and Canada with other countries soon to follow (See China and India). Retail Payments over the next 20 years are likely to morph substantially from their current issuer/network dominance. In addition to regulatory changes, new technologies and new value networks are creating a new competitive dynamic which will bring more than $5-10B in capital investment into the payments within the next 2-3 years.

My wife’s visit to Target this week prompted a revisit to the decoupled debit space. Target’s value proposition: hand me your check and sign a release form, you will then receive a RedCard linked to your checking account and good for 5% off all future purchases. Will we see more of this type of value proposition (which Durbin enables through its steering provision)?

From TSYS

Decoupled debit is interesting for several reasons:

  1. The issuer is not required to be a bank in order to offer an account and issue a card
  2. The products can exist as private label products or co-branded products
  3. The products can potentially build significant loyalty
  4. The products reduce costs when delivered and managed correctly
  5. The products leverage the existing payments infrastructure and standards

Retail Business Case

Retailers have a different mindset when it comes to alternative or decoupled products because they are stakeholders in the product, not just the transaction. They look at the product as a way to help them:

  • Reduce cost of payments
  • Build loyalty
  • Offer merchant-designed promotions
  • Drive more store sales
  • Segment and target customer groups
  • Leverage ‘spend information’

For those outside the US I recommend reading:

Debit Card in Peril?

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27 October 2010

The biggest story of the week has largely gone unreported. Bank of America (BAC) has taken a $10.3B goodwill impairment charge in 3Q.

The Merchant Payments Coalition responded to the impairment charge (reference above)

“With a Federal Reserve decision on debit interchange rates not expected until mid-2011, today’s claims by Bank of America dramatically overstate reality and represent a feeble attempt to divert attention from its mortgage foreclosure problems,” said Doug Kantor, counsel to the Merchants Payments Coalition.

In the 8-K, Bank of America said it plans to take (ref The Street)

 “a number of actions that would mitigate some of the impact when the laws and regulations become effective,” but it didn’t provide details about what those actions might be.

Will write more later, but I can assure you BAC is looking for debit alternatives. Given their size, most anticipate a new product driven from both their retail and global card team (including merchant services). So in addition to AT&T/Discover, we will now have another major bank led team developing a new payment product with a multi billion dollar incentive.

What does this mean for MA and Visa? Not good news for US growth.

Related Article

Ruminations: Durbin and Debit

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13 Aug 2010

Time for a blog with many questions and few answers. My natural perspective is that of a banker. Banks are created to act as trusted intermediaries of commerce, and I’m concerned when their ability to act on this charter changes. I want banks to win and to create products that satisfy the customer, build trust, and effectively serve in commerce.

A friend and I were discussing the impact of Durbin’s 2 tier debit structure (Excellent analysis by Mercator here) on the incentives for large banks to continue to issue debit. My perspective (as a banker) has been greatly altered from my time at 41st parameter working with the largest retailers in the world. I’ve developed a new view and a new appreciation for the pain felt by merchants. It would not be too extreme a statement to say that there is a deep hatred of the cards networks. The feeling is both visceral and reasoned. I remember when a senior executive from Wal*Mart came to Wachovia for a presentation and was asked what he thought were appropriate interchange rates for credit and debit. He said “0” dead pan.. then during the quiet of the audience, he said “actually we think we should be paid for accepting your cards” and emphasized that this was not a joke.  

Will Merchants loose sleep if debit goes away? Answer probably rests with what will take its place. The retail banks are very unorganized around payments. With few exceptions (Chase, WFC, USAA, ..) bank payment executives do not get the focus of their retail organizations.  In general, retail banks are challenged to relate payments to profitability (and hence the overall retail strategy). Debit was a clear exception to this challenge and a “killer product” for cash/check replacement.

The bank value proposition for debit was clear. However, what was the merchant value proposition? Certainly reduction in check fraud, funds availability… but at what costs? The federal reserve studied interchange rates in graph to the right. What exactly drove this step creep? How did it drive value? What were the economic forces that pushed back against it? What additional investments did Visa/MA make in their network?

Will banks develop a debit replacement? Clearly Durbin has reduced banks incentives to push debit (w/ assets over $10B). I project that the market is ripe for a merchant friendly payment method that is much different than the products available today. Instead of funding the card product on merchant interchange.. perhaps mobile advertising?

Can banks/cards regain the trust of merchants as intermediaries of retail commerce? Could the wholesale or merchant acquisition business which drives a new payment product (ie Amex Revolution Money)?

 Thoughts appreciated

Visa Payclick

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30 June 2010

Summary on Visa Payclick: “Partnering with banks” is very challenging…. do banks want Visa to deliver a “bank friendly” PayPal competitor.. or would banks prefer to create something they can control? View Payclick today as an Australia “test market” of something Visa intends to grow, with an initial consumer focus on digital goods.

Visa just launched Payclick (www.payclick.com.au) with plans to expand globally. I see this service competing more with Bango (see http://www.bango.com/) and payforit (www.payforit.com) than PayPal. There is no way for a consumer to withdraw funds placed in the wallet, or to be paid..  (it is not a wallet), it allows for the addition of current account funds through BPAY integration (note BPAY is a bank owned consortium in Australia providing common services like telephone and online bill payment). Allowing multiple funding instruments provides for a lower cost of funds, and BPAY penetration is over 80% in online customers. However the inability to credit the wallet, while  simplifying risk and fraud operational challenges, limits the consumer value proposition and the addressable market. Given these wallet restrictions, Visa has chosen an initial market focus on teens buying digital content… this narrow market focus may provide Visa the opportunity to “kick the tires” on the system before expanding it (geographically and demographically).

Re: Expansion.  I understand that Visa is “in flight” with expanding the AFT/OCT transaction set (See Patent) which is the heart of the Visa Money Transfer service. My global card contacts tell me that Visa is attempting to get issuers on board with credit push in an updated issuer agreement (see Visa Money Transfer Overview – Issuer presentation). The “incentive” for issuing bank to accept new agreement is a $0.50 revenue share. Banks are not biting on this (subject of another blog on Visa and card remittances).. hence my guess is that the Payclick service has “visions” for being bi-directional.. but not until issuers sign off on accepting OCT transactions.

We should not assess Payclick based solely upon current functionality, given Visa’s substantial investment here there must be plans for additional transaction types. The CYBS acquisition gives Visa assets to develop something much more comprehensive. For example, with the CYBS could serve as an acquirer for Payclick as a “light” tool for small merchants selling digital goods in mobile market places and app stores.  On the consumer side, Visa has a steep hill to climb in creating a value proposition which would drive consumers to store card information with Payclick (particularly given the competing payment methods above).

Risks I see for Visa in Payclick:

  • Initial target demographic is well served by both Bango, Paypal, iTunes Wallet, prepaid card (for my teen), payforit (UK), MNO billing, …
  • “Send only” functionality will not create critical mass in either consumers or merchants
  • Banks will not bite on OCT transaction set and service functionality will not be able to expand
  • Visa will loose focus after core innovation team departs
  • CYBS can acquire and service… but it will take serious marketing dollars to create a new consumer brand… as well as a solid value proposition.

Add these risks to Visa’s existing “dynamic” with  retailers (a group that is not favorably inclined toward assisting Visa nor any card network) in creating another payment type  (issues w/ interchange, compliance, fraud, payment system integrity, ..). Since Visa’s IPO,  Banks are no longer in control and also view Visa’s efforts through a new competitive lens. Banks also like the idea of having their own brand on payments. Thus, Visa is stuck managing a complex 4 party system with limited ability to create an innovative value proposition which all parties can agree on.

Visa is facing head on competition from “unshackled” teams like PayPal. In fact PayPal just launched mobile instant checkout today .

Feedback appreciated

PayPal Virtual Terminal – Accept Cards at POS

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PayPal Virtual Terminal

6 June 2010

Great job PayPal…. bringing down the cost of card acceptance to $30/mo. No hardware, no special agreements.. just add the service to your existing merchant account.

The only downside seems to be for the 5+ Valley start ups like SquareUp that were targeting physical POS acceptance in a “Craigslist” type environment. The head of payment strategy at a top 3 bank told me that making merchant acquisition easier was a priority for driving new card volume. Looks like VT can both drive TPV growth and address potential down market competitive threats at the same time.

I can’t help but wonder how this pricing will effect Chase Paymentech (PayPal’s partner and merchant acquirer). Small merchants may indeed think twice of having their own merchant services agreement and specialized terminals.

Thoughts appreciated

US Senate tinkers w/ card rules and rates

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http://on.wsj.com/coPzIH

US Senate Amendment Text

14 May 2010

The press seems to be focusing attention on the TBD rate setting and “swipe fees”, from my perspective the bigger long term impact to banks and networks will be elimination of restrictions associated with discounts (and steering) on competing forms of payment.

Amendment Text

“(b) Limitation on Anti-competitive Payment Card Network Restrictions.–

“(1) NO RESTRICTIONS ON OFFERING DISCOUNTS FOR USE OF A COMPETING PAYMENT CARD NETWORK.–A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to provide a discount or in-kind incentive for payment through the use of a card or device of another payment card network.

“(2) NO RESTRICTIONS ON OFFERING DISCOUNTS FOR USE OF A FORM OF PAYMENT.–A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to provide a discount or in-kind incentive for payment by the use of cash, check, debit card, or credit card.

…

In June 2003, Visa and Mastercard signed the settlement agreement which provided for steering.

D. Merchants shall also have the right to encourage or steer customers from Visa and MasterCard debit transactions to other forms of payment.

This ability to steer has been somewhat ambiguous, outside of cash. For Example, the Mastercard rules show

5.9.1 Discrimination
A Merchant must not engage in any acceptance practice that discriminates against or discourages the use of a Card in favor of any other acceptance brand.

5.9.2 Charges to Cardholders
A Merchant must not directly or indirectly require any Cardholder to pay a surcharge or any part of any Merchant discount or any contemporaneous finance charge in connection with a Transaction. A Merchant may provide a discount to its customers for cash payments.

and Visa Rules

5.2.D Discounts at Point of Sale
5.2.D.1 Advertised Price
Any purchase price advertised or otherwise disclosed by the Merchant must be the price associated with the use of a Visa Card or Visa Electron Card.
5.2.D.2 Discounts
5.2.D.2.a A Merchant may offer a discount as an inducement for a Cardholder to use a means of payment that the Merchant prefers, provided that the discount is:
• Clearly disclosed as a discount from the standard price and
• Non-discriminatory as between a Cardholder who pays with a Visa Card and a cardholder who pays with a “comparable card”

Will update this blog later, but the US Senate’s amendment will have substantial impact on merchant payment strategy. I see a strong future for new cards issued by  merchants that embed strong loyalty program.. outside of the Visa/MC network (?ACH?.. PayPal…) with a substantial rewards program to drive adoption. Perhaps ACH POP will take on new life..

Card networks and issuers should get active in the merchant funded rewards space.. before the merchants own it

http://www.paymentssource.com/news/merchant-funded-rewards-spark-card-issuers-interest-2637491-1.html