Reducing Liabilities in Credit Card Processing

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Starting out as a Bay Area processing company in 2011, 360 Payment Solutions has since grown to have a presence in nearly all 50 states, processing over $2 billion a year in credit card sales.

Steve Ciabattoni says the company is mainly focused on the automotive service industry, and has seen firsthand some of the major issues these companies struggle with when it comes to credit card processing. He says his main goal with 360 is to help small businesses avoid misleading and deceptive rate structures, along with long-term contracts and non-cancelable lease programs.

In a conversation with Ratchet+Wrench, Ciabattoni shares some of the biggest issues shops struggle with in this area, along with his thoughts on the future of credit card processing.


What are some of the biggest issues shops struggle with when it comes to credit card payment processing?

I think the most unethical thing that happens in our industry is equipment leasing. A slick-talking salesman asks to see a merchant statement, then the guy runs a quick analysis and says he can save the shop $300 a month. Because the shop owner isn’t properly educated in payment processing—and I don’t blame them because it’s a highly convoluted industries—he has trust in the sales guy, and signs the document without properly reading it. Then he finds out that he’s in a non-cancelable 48–60 month lease, and is paying $80-100 a month for a credit card machine that retails at $350.

Our whole model is that the processor should disclose what they’re doing above wholesale cost. If you know a processor is making $100-$200 in revenue above wholesale, that’s the most you can save. Of course, we all have to make money, but at least you should at least know what you’re paying.

So some of those major issues are lack of disclosure on markup above interchange, and long-term lease contracts. Another issue is that there’s a lot of 1099 agents who claim to have their own payment company. They haven’t really been trained properly on how to properly analyze a merchant statement, and they make false promises.

Some competition in this space purposely trains their sales people in a way where they don’t really disclose how it works to the sales people. The sales guy is the one kind of doing the sleazy act, but it really stems from the CEO of those companies who tell reps to tell a shop owner they’re going to save so much money.


How can shop owners look out for this and avoid these issues?

If it sounds too good to be true, it probably is. That’s something I try to impress upon people. Don’t trust just one company—look at multiple companies to see if the pricing you’re being offered is in range. Ask for interchange plus pricing. That’s where you are getting true wholesale costs disclosed to you, and your processor discloses its markup.

One of the other things that’s really important for shop owners today is making sure they can read chip cards. That’s a big change that happened about 2–3 years ago now. There’s a lot of risk in not having one. If a customer calls them back and says they didn’t make that transaction, and the shop owner takes the card and swiped it, then they have no recourse. So it’s especially important they accept chip cards.

On a full engine repair that costs $2,000, a customer can call the bank and say they didn’t make that charge. Then they know they’re going to win automatically because the company didn’t take the chip. If they take it over the phone, that doesn’t apply—it’s only for card present transaction. But in general, transactions where the card is not present can be more risky. To protect themselves, the machine should prompt for street number and zip code. If it does not go through, they should ask the customer for another card. That could be a sign of fraud, and they could lose that transaction.


That liability falls on the company, right?

Yes, it’s the shop owners responsibility to do everything possible to avoid fraud on a card. Which is essentially getting a street number match, a zip code match, a CVV match. If they don’t all match, then they’re at risk if a customer calls in and says they didn’t make that transaction. Then they could lose that charge back. They should also maintain customer invoices. That’s a strong way to fight against chargebacks. Showing a signature that says the work was done, and the customer was satisfied.


What will the future of credit card processing look like?

I’m a big believer in shop management software payment integration. That’s what we’re doing today at 360. A shop should ask their management software for a methodology to integrate their payment processing company with their software. It reduces mistakes. Most systems or some systems should get signature from a payment onto the RO, which is what our system does very simply. That helps streamline the process, and avoid chargebacks. Then their software should maintain those invoices on the servers, print them out and not have lots of paper.

Most importantly, it gives their shop a professional look and feel. When you think of dealerships, most don’t have a junky side machine that they’re keying customers in. You have a nice customer facing point of sale with terminal, they sign their name on the pad, and all of that is right there.

It’s important to get shops to think about how they are competing against themselves and against the dealerships. They have to upgrade look and feel of the experience for the consumer. Consumers trust technology. When they see a shop that looks like they’re up to snuff with tech, they certainly have more trust in that shop. When you see pencil and paper, you think there’s a chance for discrepancy.

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