CrossCheck Blog

For 25 years, the Electronic Transactions Association has been the trade association for the credit card acquiring industry — the industry that enables merchants to take credit and debit cards as payment for goods and services. Today, it has branched out and embraced all kinds of payments, not just card based ones. There are 500+ member companies in the ETA and their big annual tradeshow is called TRANSACT. It is a really big show: over 4,000 attendees, an exhibit hall with over 200 exhibits (including 50 first time exhibitors) as well as keynote presentations and panels, and 40 educational sessions and seminars. It is a safe bet that anyone who is anyone in the acquiring industry was at the show.

Recently there was an article with this subject line in the Wall Street Journal. However, the author covered this subject in a simplistic and cursory manner. She didn’t really explore the numbers that drive this business, and she never really answered the question. Today, we are going to take a more in-depth look at it and come up with some answers. First, we should recognize that rewards are important for people who do use credit cards — about three-quarters of the population. In fact, about a third of them say that when choosing a card, rewards are their most important consideration. While most people think of airline miles, there are two other reward types: points and cash-back.

A study by repair data provider “CarMD” called the “2017 Vehicle Health Index” looked at average auto repair costs in 2016, and found that costs rose almost 3% last year and in 2015 too. The average repair bill for routine maintenance is $398. This is for minor repairs, not crash damage. The index (published April 2017) has 5.3 million repairs in its database, so I would guess it is a pretty comprehensive and reliable source. It turns out that there are five common repairs. The most common is a faulty oxygen sensor (8% of repairs). Next up is the catalytic converter (6.75%), followed by faulty ignition coils and spark plugs (6.23%). Amazingly, a loose gas cap was responsible for 4.16% of the “check engine lights, and the last one was a non-functioning mass airflow sensor (3.84%).

It seems like every time you pick up the business section of the paper you see an article in the personal finance column about the “impending retirement disaster” that is looming for Americans. These articles typically point out that most people are not saving anywhere near what they will need for retirement, and thus, will not have enough money to live on when they do. In this article, we will evaluate the statistics behind these observations; and then point out how CrossCheck can help your customers. The median wage earner retiring at 67 years of age will typically get a social security monthly check for $1606, or $2409 if there is a spousal benefit. Compare this to someone who is working and making $54,000 a year, who would keep about $3500 a month after taxes and their contribution to their 401(k) plan.

If you’re reading the CrossCheck blog, you’re undoubtedly interested in what’s happening in the payments industry and may be attending TRANSACT 17, the mega trade event produced by the Electronic Transactions Association (ETA). CrossCheck’s Partner & ISO Relations department will be behind booth 924 to discuss lifetime residuals for ISOs, our most popular merchant programs, and Focus, our desktop app that places merchants one click away from check guarantee services. Those of us who have been here for a while tend to forget there are many new entrants every year: new merchant-level salespeople and independent sales organizations (ISOs), new vendors, new payment platforms and new hardware manufacturers — it’s a busy place!

Last December, the Experian credit bureau released data from its FileOne database (per the Credit.com blog) about what happens financially when someone dies. Yes, this is a pretty sobering subject, and one that we are familiar with here at CrossCheck. You see, CrossCheck has hundreds of funeral homes that rely on us to help them every week. We stand in at the point of sale in a funeral home to help the bereaved pay for the cost of a funeral without having to apply for credit or pay interest or take out another unsecured credit card. Some consumers call our product a “life-saver,” but we wouldn’t use that phrase in this case.

At CrossCheck, we are vitally interested in payments industry security while identifying and uncovering schemes to defraud the merchant. After all, our core business is managing risk and protecting our merchants by guaranteeing a stream of payments to be deposited in the future. This is a risky business to begin with, and we always want to be aware of what is going on around us in the financial and payments ecosystem. Today, it seems like there is a never-ending stream of ways that fraudsters and criminals can penetrate the banking system to steal credentials, identities and of course, funds in a merchant’s bank account, to say nothing of ransomware and other newly invented categories.

Today we’ll take a look at three types of debt, the true cost of debt, and discuss how to be smart about taking on debt. First, let’s look at having a mortgage for your house. About 63% of Americans have a house and most of them have a mortgage. The Federal Reserve Bank of St. Louis reports that the median sales price of a new home is $316,000. Obviously, most people wouldn’t have that kind of money in liquid assets, so they would need a mortgage. Another way to look at it is if you want to build a 2,000 square foot house, it will cost you at least $150 a square foot, which is $305,000 right there. Aside from being a kind of “forced saving,” a mortgage has another benefit: it is also “preferred debt.” This means that the interest is tax-deductible. Contrast this with non-preferred debt, such as revolving credit card charges, car loans, and student loans.

When it comes to headlines in the payments industry space, data breaches have dominated the news in the last few years. My favorite example is a 2015 event: two “forums” — where gamers illegally trade free (bootlegged) copies of Microsoft’s Xbox360 games and Sony’s PlayStation games — were attacked by fraudsters. The thieves who stole from their fellow thieves took 2 ½ million e-mail addresses, passwords and IP addresses. It seems that there is no honor among thieves!

Recently, The Pew Charitable Trusts released data it collected on the subject of overdraft fees. Nobody seems to be happy with overdraft fees in payment processing, except for the banks that charge them of course. How happy are the banks? Well, would you believe that fully eight percent of the total net income for all U.S. banks was attributable to overdraft fees? “How can that be?” you ask. Banks have enormous spreads from making loans, virtually free deposits (CDs are paying 1%), hugely profitable credit card portfolios which revolve at 14-21%, trading and investment income, and fee-based income from other services such as treasury management.