The Durbin Amendment: a costly price control experiment

Most Americans would be surprised to learn that the federal government is still in the business of setting the prices that one industry can charge another for its services.  That kind of economic micromanagement seems archaic and outmoded in 2016.  But a retro regulation is exactly how one sector is protecting its profit margins – and it’s time to make it history.

Buried deep in federal law is the “Durbin Amendment,” an obscure provision that instructed the Federal Reserve to study the complex and fast-changing electronic payments market and then divine the correct price that retailers should be charged for accepting debit cards.

When a consumer uses a debit card, the bank or credit union who issued the card receives a fee from the merchant to offset the cost of running the debit card system.  Known as “interchange,” this fee is invested in ensuring that the debit card system (comprised of hundreds of millions of participants) operates efficiently, safely, and keeps up with consumer needs.Before the Durbin Amendment, the market set the price of accepting debit cards.  Retailers eagerly signed up as debit cards became a popular substitute for cash and checks.  Since retailers had exited the resource-intensive payment card business years before debit cards took off, stores relied on financial institutions to issue debit cards, build the system to process them, and to open and maintain the underlying deposit account attached to the card.  In exchange for a turnkey payment solution which assured payment for valid transactions (and cut down on costly check and cash processing), merchants agreed to interchange as a cost of doing good business.

But the Durbin Amendment represented a major government intervention by making the Fed the arbiter of debit interchange, a task they did not request.  The debit price control law was hastily assembled and tacked onto the virtually unrelated Dodd-Frank Act at the 11th hour.  It passed with little notice and without hearings or robust debate, handing one industry a victory without considering the unintended consequences of government second-guessing the market.

For one, the Fed wrote a regulation which differed from what retail lobbyists anticipated.  They sued for a better deal and lost.  Their arguments did not impress economists or judges when put under strict scrutiny, and yet the litigants ensured that all three branches of government were drawn into the minute mechanics of market forces.
Read more »

Accounting Tips for Small Business Startups

Accounting is by far one of the most important aspects of starting and operating a successful business. So, business owners beware. While it’s easy to get caught up in the glamorous task of designing your website or choosing the perfect business name, without a solid understanding of the numbers, you will not survive.

The streets of entrepreneurship are littered with former business owners who ignored the financials of their business only to discover too late that they were operating at a loss, not a profit.

One-Third of Small Businesses Fail Because They Ignored the Financials

The Small Business Administration (SBA) complies a list of the top eleven reasons that cause small business to fail. Out of these nearly one-dozen reasons, four of them focus on the financial structure of a small business. And, according to the SBA, the number one mistake entrepreneurs make is “believing you can do everything yourself.”​

Hiring an Accounting Professional

Unless you’re a bonified numbers wiz or have a degree in accounting, you need to engage the services of a professional to set up your accounting systems. To get a grasp on your small business accounting and financials, the first thing you have to ask yourself is whether or not you should hire a bookkeeper or an accountant.

What a Bookkeeper can Do

Each startup situation is unique but generally, most startups can begin with a bookkeeper. A bookkeeper’s services make sense for uncomplicated start-ups which don’t plan on building an empire.

A bookkeeper can get you going with a good record keeping system, handle your financial transactions, and produce your financial statements.

Read more »

Customer Centric Culture

In my exclusive column for CustomerThink last month, I shared my “top tips” for creating the right culture to enable an organisation to become genuinely customer centric. Whilst the list of seven things is by no means exhaustive, in my experience, together they provide a remarkably solid foundation to embedding the right environment and supporting behaviours to turn talk of customer centricity into reality.

For the next few months, I am going to explore each one of my seven tips in a little more detail, starting with tip number 1 – how to make Customer Experience a priority for the whole company. This is what I said in last month’s column on this subject:

“Now it may sound obvious, but if an organisation aspires to have a customer centric culture, then it MUST make customer experience a priority for everyone. It is not exclusively the domain of the customer experience team; or marketing; or customer service. It is not a project or an initiative. To transform the culture of a business to one that is focused on enabling everyone to THINK and ACT in the interests of the customer, then everyone must be clear about the role they play in making that a reality. In practice, linking performance objectives and remuneration of every single employee to a continuous improvement of customer experience is the most effective way to achieve this.”

Let me start with a question – is Customer Experience really a priority in your company? In my seventeen years as an employee of a variety of large corporate organisations in Financial Services, FMCG and Retail, I can categorically say that much of the time this was NOT the case. Business leaders may convince themselves that the Customer is a priority, but 99 times out of 100, the only priorities that get traction and attention are those related to things that their businesses are actually interested in – sales and profit.

I make no secret of my opinion that too many organisations around the world subconsciously (and often consciously) believe that they exist to make money. In my opinion, they do not – they actually exist to fulfill a purpose – the better able they are to fulfil that purpose, the more money they will make. A very subtle difference of language, but a hugely significant difference. The reason why it is significant, is that if ‘making money’ is the overriding reason for an organisations existence, then the only thing that organisation will prioritise are those things that will allow the business to make more money for itself. It will only focus on what is important to the business. Read more »

3 Reasons Websites Are Vital for Small Businesses

Running your own business is no easy task, and your to-do-list is guaranteed to never end. This said, you shouldn’t use this as an excuse to take short cuts when it comes to having online visibility. Beginning with your website, it’s vital to position yourself online with a strong, professional destination that gives customers the impression you mean business and the motivation to want to engage more with your business. With this in mind, consider these five reasons why having a strong website is important.

First Impressions Count 

Let’s face it – we live in a world where people Google GOOGL +2.45% before they shop, visit online review sites like Yelp YELP +1.51% before they buy and “check-in” via Facebook as they go about their days. Because of this, you want your first impression to be the best it can be. Beginning with your website, consumers are passing judgement and making decisions about whether or not they will even visit your store, restaurant or office. They’re likely to dismiss you entirely, as well, should they believe your website doesn’t reflect the kind of experience your business – or a business like yours – should offer.

Window Shopping Isn’t What It Use to Be 

Strolling down your local Main Street isn’t the only way people check out stores and other small businesses nowadays. With routine visits to Yahoo YHOO +0%, Bing, Google, Yelp and other online sites, customers are constantly seeking where they plan to make their next purchases. Make sure your business is well represented on these sites by first and foremost, having a website – but by also being represented among each of the online search engines, review sites and other online spots your business may be considered for customer review. Beyond having your URL address available, also be sure your street address, phone number and email is easily visible. Social media links can’t hurt, either, but only include these if you are actually active on social media.

No Website Means Losing Business 

By now it’s clear that if you don’t have a website, you’re missing out on opportunities for customers to identify who you are and if they want to spend money with you. This said, if you have a bad website it is better to have no website. While no website equals missed opportunities, a bad website can actually be worse since it literally makes your business look bad. With so many template-based websites available nowadays, for you to customize for your unique business, there’s truly no excuse for your website to look unprofessional and sloppy. If you can’t proudly promote the website you have currently live and available for the world to see online, take it down. A bad website is far worse than no website – but let’s be clear… both are bad for business.

Whether you are a one man or woman show or operate with 100 employees, your website should appear as if you have a team dedicated exclusively to keeping your online presence strong and noteworthy. The key here is “appear” versus actually having someone updating your website everyday. For most small businesses, this is simply not necessary. However, having a professional, polished looking website that functions easily and offers customers easy navigation, strong photo images, professional quality content and an overall experience that engages them enough for them to want to do business with you is key.

Nicole Leinbach Reyhle is the Author of Retail 101: The Guide to Managing and Marketing Your Retail Business, as well as the Founder of Retail Minded and the Independent Retailer Conference.

6 of the Biggest Small Business Challenges

Times are tough for small businesses in particular, who are facing issues that are unique to their situation in an economy that still certainly looks and feels as if it’s suffering a recession. There are a number of key small business challenges that recur over and over in business forums as major problem areas.

Small business problems and solutions

As every small business knows, the reality is that there are dozens of issues lurking out there – however, we’ve had a look at six of those you can take definite action on and set out ways to conquer them. Let’s get to work!

1. Cash Flow Issues

Money problems in their various forms are top of most lists of company woes, and for small businesses the major worries are clients stalling payments, unexpected outgoings, and outstanding bills that won’t wait to be paid.

There are some tried and tested money management tools that can help you to manage cashflow, multi-talented apps that can create budgets, calculate VAT, automate bill payments, alert you to unusual outgoings and provide a free credit score.

Using online invoices and reminders is also a powerful way to persuade reluctant clients to part with money. There is great software out there that can do this for you, including Hiveage, which provides free invoicing and can accept payments and automatically charge clients.

2. Tiredness

It’s tempting to try to do everything if you’re a small business owner, and long hours add pressure. Fatigue, one of the most commonly overlooked small business challenges, can leave you disorganised, forgetful and cranky, not paying as much attention to clients as you should, and making mistakes.

Business owners have to pace themselves, which includes embracing strategic delegation, something that for any highly motivated individual isn’t an easy ask. Start by identifying business elements that don’t require your expertise, such as mailing, and take on an assistant, even part-time, to help out – after all, it’s an investment that frees you up to do what you do best!

You could also consider delegating tasks that are outside your skillset to specialists, such as accountants or legal experts – the results will likely be more professional and can save you endless headaches.

Read more »

Managing Sustainability Risks and Driving Value

Sustainability is a hot-button issue for modern businesses — it impacts everything from raw material sourcing to employee retention. By finding ways to manage sustainability risks, you can avoid costly problems and drive value where it’s needed most.

Set Up Sustainability Metrics

Like any other part of your operations, metrics are a key part of managing sustainability risks. After all, if you don’t have defined items to track, it’s difficult to spot trends and potential problems. Before you do anything else, it’s important to identify the factors that affect your company’s sustainable practices and create a metric for each one. Start with material basics such as energy consumption, water use and emissions. Be sure to track conservation efforts, such as energy-saving efforts and carbon offsets, so you can calculate the net result. Other possible metrics include total environmental fines, violation notices, physical waste and recycling programs.

Merge Financial and Sustainability Reporting

Chances are, you run financial reports at regular intervals to keep an eye on your company’s performance. Compare that to your reporting process for environmental and social issues. If you examine these numbers less frequently — or not at all — you could be missing out on valuable opportunities to manage sustainability risks. Integrate the two sets of metrics together, and run the reports at the same time. This strategy achieves two goals. First, it forces you to examine performance on both fronts. Second, it enables you to see connections between financial performance and sustainable practices, so it’s easier to spot opportunities to drive value.

Keep an Eye on the Supply Chain

The sustainability risks for your business are not limited to onsite operations; problems far down the supply chain can trickle back to your company. If a raw-material provider is found to have serious environmental violations, for example, it can disrupt production and cast your products in a bad light. The only way to mitigate this type of risk is pay close attention to your supply chain. Establish relationships with each company, and check in frequently to learn about procedural and operational changes. In addition, conduct your own research. Set up Google alerts for supplier names, locations and industries to stay abreast of current events news items that might impact your suppliers and your business by extension.

Monitor Regulatory Changes

Regulatory compliance is a key part of managing sustainability risks. Violations can lead to high fines, revoked licenses and strict consequences that damage your ability to do business. To avoid accidental problems, make a point to track key governing bodies. Scan the websites of key agencies and subscribe to relevant news feeds to stay updated, and partner with your legal team to understand and interpret complex policy changes. This step takes time and effort, but it can pay off significantly in the long run.

Every company is vulnerable to sustainability risks, both in house and down the supply chain. With proper management, you can head off problems before they compromise operations.


Author:  Gina Deveney

About Chip Cards

  • Hide Show Why does my Bank of America credit card or debit card now include a chip?

    As chip technology will soon become the security standard in the U.S., many merchants are beginning to accept chip cards and we want you to be ready. You’ll enjoy greater security when making purchases at a chip-enabled terminal since the chip provides better protection against counterfeit fraud. Chip technology is already used in over 130 countries around the world, including Canada, Mexico and the United Kingdom, so you’ll enjoy greater acceptance when traveling internationally.

  • Hide Show What is a chip card?

    A chip card is a standard-size plastic debit or credit card that contains an embedded microchip as well as a traditional magnetic stripe. The chip encrypts information to help increase data security when making transactions at terminals or ATMs that are chip-enabled.

  • Hide Show What is a smart card or an EMV card?

    You may hear chip cards referred to as “smart cards” or “EMV cards” – they’re all different ways of referring to the same type of card. Similarly, an EMV terminal is the same as a chip-enabled terminal.

  • Hide Show Where can I use my chip card?

    More terminals and ATMs are becoming chip-enabled throughout the U.S. You’ll also enjoy greater acceptance when traveling: Chip technology is common in over 130 countries around the world, including Canada, Mexico and the United Kingdom. Your chip card will still work at terminals and ATMs where only magnetic stripe transactions are accepted.

  • Hide Show Are chip cards secure?

    Yes. Chip technology has been around for over two decades and is already the security standard in many countries around the world. When purchases are made using the chip feature at chip-enabled terminals, the transaction is more secure because of a unique process that is used to determine if the card is authentic. This makes the card more difficult to counterfeit or copy.

    While magnetic stripe cards are still considered secure, chip technology is the next step to providing enhanced security to our customers. Whether you use the magnetic stripe or the chip to make your purchase, you can have confidence in the protection and security features we provide for all credit and debit card accounts.

    Remember, if you notice any suspicious activity on your account, notify us immediately by calling the number on the back of your card.

  • Hide Show Will chip cards prevent third-party data breaches?

    Chip card technology provides an additional layer of security when used at a chip-enabled terminal. The technology may help reduce certain types of fraud resulting from data breaches; however, it will not prevent a data breach.

  • Hide Show Will chip cards prevent all fraud from happening?

    No. As the industry continues to develop new ways to protect consumers, perpetrators continue to look for new ways to commit fraud. Chip cards provide an additional layer of security at chip-enabled terminals, on top of the fraud prevention monitoring we currently provide. As always, your purchases are also covered by our zero liability protection, where Bank of America credits your account back for fraudulent charges.

  • Hide Show Will chip cards allow others to track my location?

    No. Chip card technology is not a locator system. The chip on your card is limited to supporting authentication of card data when you make a purchase.

  • Hide Show Is a chip card the same as contactless payment (for example, PayPass, PayWave)?

    No. Contactless cards employ near-field communication technology (NFC), which has a radio antenna that transmits account information, and work by waving or tapping your card in front of a device. Chip cards must be inserted face-up into a chip-enabled merchant terminal that allows the chip to make contact with the reader to authorize and complete a transaction. (Remember to keep your card inserted into the terminal while the transaction is processed.)

  • Hide Show Do the same benefits come with my chip card that I had with my prior card?

    Yes. You’ll continue to enjoy the same benefits with your chip card as you do today with your debit or credit card.

Read more »

The Durbin Amendment Explained

Every time you swipe your debit card, you draw into the Durbin Amendment – a law that costs consumer an estimated $4 billion annually.

The amendment, part of the 2010 Dodd-Frank law, sharply lowered debit card interchange fees — charges that stores pay banks when a customer makes a purchase. Supporters said the measure, sponsored by Democratic U.S. Sen. Dick Durbin of Illinois, would lower prices for consumers by cutting retailers’ costs.

But when the rules took effect in 2011, big banks started recouping lost revenue — $14 billion a year, according to a 2014 Federal Reserve paper. Consumers faced increased fees and a reduction in perks, such as debit card rewards programs and free checking.

Opponents, such as banks and credit unions, have said the law actually has hurt consumers overall and hasn’t resulted in lower retail prices. A study from the George Mason University law school determined that retail prices didn’t drop after the law passed.

But supporters, including retail trade groups like the Merchant Payments Coalition and the Association for Convenience and Fuel Retailing, say that prices have dropped and that there should be more swipe-fee changes. The amendment didn’t affect credit card interchange fees, for instance. These trade groups have made reducing credit card transaction fees a high priority, even as they push for further curbs on debit card costs.

Effects on consumers

After the Durbin measure went into effect, fees on deposit accounts increased an average of 3% to 5%. The increases consumers faced included:

  • Monthly account maintenance charges (with higher minimum balance requirements to avoid those monthly charges).
  • Insufficient-funds fees.
  • Inactivity fees.

Read more »

Security Standards Council

Official PCI Security Standards Council Site – Verify PCI Compliance, Download Data Security and Credit Card Security Standards

The PCI Security Standards Council is constantly working to monitor threats and improve the industry’s means of dealing with them, through enhancements to PCI Security Standards and by the training of security professionals.

Keep your systems secure, and customers can trust you with their sensitive payment card information. When you stay compliant, you are part of the solution – a united, global response to fighting payment card data compromise.

For a better understanding of credit card payment processing please click on the link below. Read more »

Basics of Internal Control

The Internal Control Integrated Framework published by The Committee of Sponsoring Organizations (COSO) is the recognized standard for establishing internal controls. COSO defines internal control as:

“a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

Effectiveness and efficiency of operations
Reliability of Financial Reporting
Compliance with applicable laws and objectives”
The first objective deals with the entity’s achievement of basic business objectives. The second refers to the reliability of financial information (both internal and external) that is used by decision makers. The third deals with complying with laws, regulations, and policies.

Five Components of Internal Control
Under the COSO model a system of internal controls is a process that is made up of five interrelated components. All are applicable to organizations of any size or type, but organizations can apply them in different ways. The five components are aimed at achieving one or more of the objectives listed above. The five components are:

The control environment is the “tone” of the organization and is the foundation for all other controls. Some of the factors that affect the control environment are the integrity, ethical values, morale, and competence of the entity’s employees; style of management; organizational structure; clear assignment of authorities, duties and responsibilities; the industry and business environment in which the organization operates; economic and regulatory events; and the attentiveness of governing bodies. One of the largest factors influencing the control environment in an organization is the “tone at the top”. This is a term that is used to define management’s leadership and commitment towards openness, honesty, integrity, and ethical behavior.

All organizations and levels within an organization face a myriad of operating risks. Risks affect the organization’s ability to survive, successfully compete, maintain financial strength and positive public image, and to maintain the quality of services and products. This component therefore, deals with the organizations ability to set clear operating goals and objectives, identify risks that could impede achievement of those objectives, and to mitigate exposure to those risks to acceptable levels.

These are policies and procedures that have been put in place to ensure that management’s directives are carried out. This is the component that most people consider when they think of “internal controls”. Examples of control activities include reviews of performance and exception reports, approvals and authorizations of transactions, proper segregation of duties, physical safeguards, maintaining proper documentation to support financial transactions, reconciliations, IT Access and Security Controls, and information system controls (logs, check totals, etc.) Control activities should be established so as to mitigate identified risks as well as to achieve one of the three objectives under the COSO framework.

This component concerns the way in which information is communicated throughout the organization. Communication is essential for achieving all three of the objectives outlined in the COSO framework.

All internal control systems and processes change over time. Some controls continue to evolve. However, some may lose effectiveness because they are no longer performed, are not consistently applied, or are applied incorrectly. This may be the result of training, staff turnover, lack of management response and attention to violations of control, time or resource constraints, or any number of other reasons. Because of this, controls must be monitored. This is typically done in two ways, on an ongoing basis and on a periodic basis. Ongoing monitoring is typically done during regular operations. Separate monitoring is typically performed by auditors, peer reviewers, or through self-assessments. Read more »

Powered by AWS