BNZ has admitted that part of the reason for charging merchants more for online transactions than cash or Eftpos purchases is to persuade merchants towards “card-present electronic capture terminals” — Eftpos-type devices.
BNZ product manager for electronic payments Russell Briant says a fee differential exists around the world to encourage the use of card-present electronic capture terminals. “This is both for the greater efficiency and because more of the card security features on the magnetic stripe can be captured and passed to the card issuer for validation,” he says. “The online equivalents, such as Visa’s 3D-Secure [which requires a password], are only just emerging.”
The ratio between charges for a “card-not-present” and a “card-present” transaction may be as much as double for a small-scale retailer, says Woolworths e-commerce manager Richard Harrison. Woolworths has a big enough volume of trade to negotiate a smaller transaction-charge premium, but still pays more if a card is not present.
Harrison says there has been no significant shrinkage of the charge differential since March, when the issue was first raised (Woolworths warns banks over net fraud).
He says an alleged higher instance of fraud through card-not-present transactions is not a valid reason for charging more, since the merchant ends up carrying the costs of the fraud in most cases. There has also been no significant movement from the banks on problems for the merchant with the time taken over checking fraudulent use of credit cards in electronic transactions, says Harrison.
Woolworths has tightened its own checking measures and achieved a higher apprehension rate of fraudsters — at some expense, he says.
For example, a customer who requests delivery to an address other than his/her residential address will come in for closer atttention.
“We have done our part, and now it is up to the banks to do theirs,” says Harrison. One group of electronic fraudsters Woolworths uncovered were using a credit card number that had previously been associated with fraud and should have been blocked by the bank, he says. “The information had simply not been presented to the right unit of the bank.”
Briant says most New Zealand businesses now process credit card transactions through Eftpos, and typically get charged a lower rate than online merchants as a result. Those that process by non-electronic means such as paper voucher would be more likely to see similar charges to an online merchant, he says.
Another reason is that a higher proportion of online transactions involve overseas customers, he says.
The merchant’s bank pays higher fees to Visa and MasterCard for overseas cardholder transactions to offset the cost of setting up worldwide networks. The last charge component is risk, he says. The merchant’s bank has to pay when a merchant goes broke or is themselves dishonest.
Briant and WestpacTrust spokesman Peter Thornbury liken the protection to insurance: “If the risks are greater in your industry, you pay a higher premium.”