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The Almighty Buck

Mastercard Cuts Off Third Party Transactions 194

strredwolf writes "Mastercard has cut out third parties from charging on behalf of merchants. This affects folks paying their auctions and goods via Paypal, Yahoo! Paydirect, and potentially ebay's Billpoint. It may also affect Paypal's Mastercard-backed Debit Card, but there's no word from Paypal as far as I can tell." Word has it paypal is trying to negotiate a side deal with Mastercard.
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Mastercard Cuts Off Third Party Transactions

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  • So the credit card companies are single handely taking out the e-commerce industry with one fatal swoop? This can not be a good thing.
    • Well, apparently it's a move to stop porn and gambling sites from committing credit fraud. Mastercard's attempt is a bit ham-handed (the true sign of an upper management decision). on a sidenote: I haven't been able to use paypal for years. I lost my password. They won't respond to my e-mails. C'est la vie.
  • Large conglomerate shoots self in foot to hurt competition. Film at 11.

    Luckily, all my credit cards are Visa and Amex.
  • by Anonymous Coward
    I checked my MasterCard's and VISA's terms of use and as I remembered: I am not allowed to post the credit card number on the net unless the connection is secured by the card issuer's proprietary encryption/validation system.
  • for everything else, there's mastercard. and only mastercard.
  • by Backov ( 138944 ) on Saturday April 20, 2002 @10:47AM (#3379098)
    While this may affect Paypal, it may not affect the other processors like CCBill, IBill, etc that process for porn sites. Here's what a CCBill rep I know had to say about it on one of the webmaster boards I hang out on:


    CCBill, IBill, Epoch, I believe Jettis and WSB, all fall under the PSP category now, which was adopted by Visa given the range of services and type of operations we run. We are highly regulated, even more so almost every month, and we also report to Visa (and soon to be Mastercard it appears) the URLS of all sites we process for, on a monthly basis, along with a credit/chargeback report against sales for each of those urls.

    It would stand to reason that Mastercard, like Visa, wants to know who is using their card to accept payment for what, which is well within their rights as a company, and well within the mysterious and fluid agreements they have with merchant account holders.

    A company like Paypal, on the other hand, runs a sort of 'virtual currency' service, which is a true aggregator and a factor on the sellers side as well. Paypal doesn't qualify to be a bank, has zero regulation on what is bought and sold with Paypal transfers at the moment (or at least no enforceable regulations) and holds an absolute shitload of consumers money in trust. Since this money is transferred as a purchase instead of a cash advance, banks not only lose out on the cash advance fee they could be charging, they also stand to be liable for that money if Paypal were to go under and consumers started asking for chargebacks.


    I tend to believe her about this sort of thing, I'm not too worried. They're just moving for some more control.

    Cheers,
    Backov
    • Paypal extortion? (Score:3, Interesting)

      by zenyu ( 248067 )
      A company like Paypal, on the other hand, runs a sort of 'virtual currency' service, which is a true aggregator and a factor on the sellers side as well.

      So they are just trying to get a cut of PayPal?

      I'm prolly one of the few /. who like the service. It's convenient to be able to send money across the country without a wire service, and it's even convienient enough to send money to a friend that's buying me a theatre ticket. But usually those are small enough to just transfer it out of my bank account, for larger e-bay purchases I use a credit card and so this seems to be aimed mostly at micro-retailers. In NYC those are the ones that won't accept credit cards for purchases under $20 cuz they are charged $1 or $2 per transaction from CCBill type services, I'm sure things are similar elsewhere.
      • Yes, I like PayPal very much too, and I use the same practice you do - PayPal for small/medium amounts, credit card only for large amounts. The thing I like best is how fast it is. Minutes after the auctions closes the seller has my payment and can send out the package at his/her earliest convenience.

        If I pay with a check, I have to wait for the damn thing to get there, wait for them to deposit it, and then they will finally send it. And a lot of people I buy from aren't merchants, so using a credit card is not feasible. I'm aware of the risks of PayPal [paypalsucks.com], but it is worth it for me to use it the way I use it.

        I'm sure PayPal will work something out with them. Maybe it will be good - increased cooperation with the CC companies could result in better service/protection?
      • Snip

        e-bay purchases I use a credit card and so this seems to be aimed mostly at micro-retailers. In NYC those are the ones that won't accept credit cards for purchases under $20 cuz they are charged $1 or $2 per transaction from CCBill type services,

        End-snip

        Actually, as I recall the merchant agreement between the credit card and the vendor, they are required to accept the card for any purchase - they are in violation if they have a minimum amount for a credit purchase. The best thing to do is to complain to the credit card issuer in such case - until someone takes action, merchants will get away with limiting the usefulness of credit cards.

        And yes, I understand they may lose money on small sale s- but they have to weigh that against the big ticket sales they get from taking the cards. No one forced them to sign the merchant agreement, and I don't find it unreasonable to excpect them to honor it.

    • While this may affect Paypal, it may not affect the other processors like CCBill, IBill, etc that process for porn sites.
      I've noticed (shut up, I've heard it before) that some porn webmasters are abandoning CCBill and IBill in favor of other services, including PayPal. Costs, poor service. You have to wonder at an outfit like CCBill, which must be really huge, but can't seem to write a foolproof transaction script.

      Anyway, perhaps this move is a response to this flight? PayPay charges less than merchant banks, and presumably passes on even less to its own banks. Plus PayPal has small but significant incentives for users who pay with cash transfers instead of credit cards. If I were a merchant bank I wouldn't be happy about that kind of competition.

  • by Soul-Burn666 ( 574119 ) on Saturday April 20, 2002 @10:47AM (#3379099) Journal
    OMG!!! What will we do??? Where will go??? Taco, does Slashdot accept MS Passport now that it's a gov't ID? :-P
  • CYA (Score:3, Informative)

    by Alien54 ( 180860 ) on Saturday April 20, 2002 @10:49AM (#3379109) Journal
    The change would require those merchants to set up deals with banks so they could take MasterCard directly. That's a time-consuming and costly process, especially for small merchants. [...] The change is likely aimed at porn and gaming sites that have higher occurrences of credit card fraud and identity theft [...] One in 20 online consumers were victimized by credit card fraud last year.

    Sounds like Master Card is hurting, and is trying to drum up some more business or something to cover the nut.

    The information doesn't seem to have made their press release archive yet [mastercardintl.com]

    • Re:CYA (Score:4, Insightful)

      by osgeek ( 239988 ) on Saturday April 20, 2002 @11:08AM (#3379175) Homepage Journal
      Sounds like Master Card is hurting, and is trying to drum up some more business or something to cover the nut.

      I'm sure that that's a factor in their decision, however, one in twenty victims of online fraud is a rather alarming and actionable statistic in its own right .

      I really feel sorry for all of the shareware developers who depend upon Kagi.com to process their fees. This will really hurt the individual software developers who provide a valuable service.
      • Kagi (Score:3, Insightful)

        by Reziac ( 43301 )
        Do we know that this is going to affect Kagi? (serious question)

      • What will this do to address the fraud? Nothing! There's nothing about using someone else's creditcard that requires 3rd party billing. If I had your mastercard info, I could shop at buy.com, bestbuy.com, compusa.com all right now and still will be able to after this rule is in effect.
      • wired has a story how the urls generted by paypal were especially unsecure as far as product downloads go:

        http://wired.com/news/business/0,1367,51977,00.htm l [wired.com]

        The culprit, he discovered, was the cut-and-paste code provided to merchants by California-based PayPal for sending transaction data to the payment service. Examine the PayPal payment links closely and you could easily see where the software was stored on the server. If you pointed your browser accordingly, the software was yours without paying.

        this is not playing nice

  • mastercard sucks (Score:3, Insightful)

    by tiwason ( 187819 ) on Saturday April 20, 2002 @10:52AM (#3379123)
    Note they are not "cut off" until May 1...

    Anyways... Mastercards sucks... All the CC companies don't seem to care about the merchant at all.. Since internet transactions don't have a signature, there is little recourse for the merchant to do anything if a customer disputes a purchase, or is it easy to determine if a card is stolen in the first place. The whole system needs to be overhauled, but they make more money from chargebacks, so they aren't in any hurry...

    • Re:mastercard sucks (Score:4, Interesting)

      by mindstrm ( 20013 ) on Saturday April 20, 2002 @11:18AM (#3379213)
      Hmm?
      What do you mean the system has to be overhauled?

      One of the chief reasons the system is as big as it is is because the risk is shifted away from the client!

      It has always been heavily on the merchant to make sure things are valid, to ensure that the credit card is valid, that it's being used by the right person, etcetera, becuase the merchant is the one that loses if it's not.

      These companies cater to merchants by making sure they have a huge customer base who wants to USE their credit cards to buy things, and they reduce the amount of actual cash the merchant has to handle. THe onus has always been heavily on the merchant to keep things in order.

      Since internet transactions don't have a signature, yes, it IS easy for the merchant to get screwed. But it's their choice.. they know the temrs.

      • Re:mastercard sucks (Score:2, Interesting)

        by tiwason ( 187819 )
        --
        One of the chief reasons the system is as big as it is is because the risk is shifted away from the client!
        --

        I'm all for the client.. but at least give the merchant some recourse as well....

        --
        It has always been heavily on the merchant to make sure things are valid, to ensure that the credit card is valid, that it's being used by the right person, etcetera, becuase the merchant is the one that loses if it's not.
        --

        For non-internet sales that is all well and good. How do I tell if its being used by the "right" person online? Address verification does nothing... No signature to compare it against. If you in a biz where you are not shipping something, its basically going on your gut feeling if the person is genuine or not, which is not a good way to do biz.

        --
        These companies cater to merchants by making sure they have a huge customer base who wants to USE their credit cards to buy things, and they reduce the amount of actual cash the merchant has to handle. THe onus has always been heavily on the merchant to keep things in order.
        --

        You do know mastercard and the likes makes more money off of me for a fraudulent transaction... On top of you giving all the money back (obivously), they also charge you $10-25 per chargeback, so you loose money.. they have no risk..

        --
        Since internet transactions don't have a signature, yes, it IS easy for the merchant to get screwed. But it's their choice.. they know the temrs.
        --

        No shit, and I play by those terms.. but its a little too much to ask for some reform???

        • You and everyone like you who accepts credit card transactions from online customers, in spite of the risks, are all on a level playing field.

          IT's not too much to ask, no, however, the article sounds more like whining than asking.
      • by Sircus ( 16869 )
        I'm also a merchant, and wouldn't want the client to bear any more of the risk. The problem here is that whereas a bricks-and-mortar merchant gets a signature , there's no provision for anything like this for online transactions. Since the risk lies entirely with the merchant, there's no incentive for the CC companies to come up with even the most basic PIN-number systems to replace signatures for cardholder-not-present transactions. So they don't.

        Just because I know the risks involved in accepting online transactions doesn't mean there's not a better way. As far as I can see, it'd be possible to reduce the risks for all concerned, but since this would cost the CC companies money, I don't see it happening until someone legislates it, or someone big enough (Amazon?) starts demanding they do it.
        • As far as I can see, it'd be possible to reduce the risks for all concerned, but since this would cost the CC companies money, I don't see it happening until someone legislates it, or someone big enough (Amazon?) starts demanding they do it.

          Citibank is already doing it [accountonline.com]. The cost to the credit card companies is minor. The benefit to the merchants is pretty significant. The problem is you need to give consumers an incentive to use it, and the cost of that incentive should likely be borne by the merchant.

      • Re:mastercard sucks (Score:4, Informative)

        by bastion_xx ( 233612 ) on Saturday April 20, 2002 @12:49PM (#3379507)
        Since internet transactions don't have a signature, yes, it IS easy for the merchant to get screwed. But it's their choice.. they know the temrs

        Most merchants don't though. It's very similar to how often an EULA is read/understood. What a merchant should do is ask many questions of the company that processes their transactions for them. I.e., explain in detail what your company does to reduce the red flags or "gotchas" that come with being a merchant.

        The MasterCard announcement is nothing new. Processors have known about this for months now and I've seen numerous internal e-mails on making sure our merchants are notified.

        The assocations are starting to come down hard on the "master merchants". For MasterCard this is true in different regions too. Besides the U.S. (N/A) region, this new rule is in effect for Latin America/Caribbean (LAC) region. I'm unsure about Europay (the European region for MasterCard), as we're not processing merchant transactions over there yet (damn you B.T. for messing up our network connections :).

        The problem with Internet transactions is the same that merchants have for card-not-present (aka mail-order/telephone-order) transactions. You get a crappy discout rate, larger reserves, and bear the responsibility for most fraudulent transactions. Address verification (AVS) is only good for U.S. card holders (for the most part), and SET and 3DSET have been embraced like the plague.

        What can an online merchant do? For one, understand the fraud for your industry and account for that in your cost model. Digital goods == higher risk. But that doesn't mean tangible goods aren't at risk either. You can ship goods to someone, get a copy of the signed FedEx delivery receipt, and still lose when the customer's card issuer submits a chargeback to you. Note: this is with traditional card products like yourt standard VISA/MC/AMEX and not the new fangled chip cards.

        Europe is defintely ahead of the U.S. for merchant protection. PIN and chip-based debit is big, which assumably means better protection for merchants.

        Tip: Make sure your online ordering systems collect things such as CVC, CVVS, and other card verification methods (the 3 digit number on the back of the card that's not embossed). Better yet, have your processor provide you with a list of association updates that affect your business. These come out twice a year in the spring and fall.

        Dealing is credit products is an NP hard^H^H^Himpossible situation sometimes!
    • Re:mastercard sucks (Score:1, Informative)

      by Anonymous Coward
      "they make more money from chargebacks"

      Huh? Credit card companies make the most money on interest charges from people who don't pay their bill in full. It looks like this move by Mastercard is designed to reduce chargebacks. They looked at their records, found a high percentage of fraud and chargebacks relating to third-party transactions, where they have little control because they can't deal directly with the merchant, and said, hey, let's fix this. If they were making oodles of money on chargebacks they wouldn't be trying to reduce them.

      Perhaps you mean they charge the merchant a bigger transaction fee when there are chargebacks? That seems fair. It is the merchant's job to verify that the credit card is valid and that an authorized person is using it. That's the way it is with bricks-and-mortar stores, where they are supposed to check your signature and sometimes your drivers' license. Why should internet stores get to follow different rules? Can't verify cuz you can't read the signature? Find another way. MC, Visa, etc. give online stores a reasonably reliable way to accept payments. Don't like it? Then quit taking credit cards and make your customers mail you payments, see how many sales you get. Don't whine about how the system isn't set up in your favor.
      • Wrong twice...

        1) It is not true that credit card companies make most of their money on interest charges. Visa and Mastercard are not-for-profit associations of banks. They make their fees (when I worked for Visa, they called them "taxes") based on the authorization and clearing services.

        2) Banks make no money on the interest - on average. You may have noticed that late fees and over-limits fees, etc have skyrocketed. You may also have noticed that you now get your bill only a short time before it is due. This is because the banks lose so much money to fraud that they make all of their profit on the "fines" they asses!

        BTW... I know of one very large bank which intentionally mails their credit card bills from whatever mailing service has the *slowest* delivery to the customer's zip code. This enhances the likelyhood that they will collect late fees.

        BTW(2) Some number of late fees may make you *more* attractive to credit card issues.
    • Last I heard, Mastercard was working on a new system that would be in place by this summer that assigned a PIN/password to each credit card holder, similar to what you have with an ATM card (I hadn't heard whether they planned to make it numeric-only or alphanumeric, but I would imagine it would be the latter). When the credit card is used for an internet- or phone-based transaction, in conjunction with the PIN/password, the transaction would be considered "card-present," just as if you have physically been there and had your card "swiped" through a reader. Generally speaking, it's very difficult to do a chargeback on a card-present transaction unless you can demonstrate that the seller committed fraud. Basically, with a "card-absent" transaction, the burden of proof of fraud in the event of a chargeback is on the seller. With a "card-present" transaction, the burder of proof of fraud is on the buyer.

      I'm still not clear on a few points, such as whether or not the merchant will be allowed to store the PIN/password after the verification process for the transaction has been completed. Frankly, I would be against that as it would allow a hacker to get a large batch of CCNs & PINs together. Storing the CCN, the transaction timestamp, and the verification code issued for the transaction should be sufficient backup for the merchant in the event of a dispute.

      Another interesting point is that by doing this, MasterCard may be shooting itself in the foot. Many third-party billing services perform additional fraud detection on top of what the credit card companies provide. By eliminating this safeguard, they could actually increase on-line fraud. The only thing I can think of is that this measure they are proposing will drop the transaction volume to a low enough level where they come out ahead here...
  • by Uncle Gropey ( 542219 ) on Saturday April 20, 2002 @10:58AM (#3379152) Journal
    With today's "everywhere accepts every card" world, the only 2 reasons I can think of to use any certain card are: convenience and APR. I don't see how inconveniencing most of Mastercard's internet-using customers is going to help their bottom line.
  • This is funny. (Score:4, Insightful)

    by mindstrm ( 20013 ) on Saturday April 20, 2002 @11:03AM (#3379164)
    So paypal cant'just accept a proxy transaction for someone...

    but can I simply deposit money in my paypal account?

    See, that's a business transaction between me & paypal, not between me and a merchant, which is how it SHOULD be.

    Otherwise you get weird things happening, where MC can't deal with the merchant directly.

  • by Colol ( 35104 ) on Saturday April 20, 2002 @11:05AM (#3379167)

    Remember, you have to be a bank to issue a debit card. And it's been established PayPal isn't a bank -- which is exactly why, if you turn over your PayPal credit card, it isn't issued by PayPal.

    It's issued through a bank, and they deal with MasterCard. It's basically just another branded card, like a baseball Visa, or a leopard print Discover, or a Star Trek mastercard. Major League Baseball, forest animals, or Paramount don't manage your money -- the bank issuing the card does.

    In fact, that card isn't even issued to you. It's like a business card. From the back: This card issued to X.com, through Bank One, Indiana, NA, pursuant to a license from MasterCard International.

    And the "license from MasterCard International" has nothing to do with the recipient, but the bank offering the card. They have to be licensed to use the logo and the network -- about the only card you won't see that disclaimer on is an AmEx, because they issue their cards directly.

  • by Rahga ( 13479 ) on Saturday April 20, 2002 @11:11AM (#3379184) Homepage Journal
    The nice part about paypal is it lets you collect money without becoming a "merchant". Essentially, if someone wants to send $100 through paypal, they can use a mastercard and you won't have to sign a contract with various merchant services agencies to collect that money.

    What I see: Mastercard could make a killing by cutting out the middleman (PayPal) and starting a new "personal merchant" program of sorts. Now, you can use your Mastercard Auctionman account to collect money from anyone around the world!

    Makes sense....
    • And thus alienate the millions of banks and financial services companies that rely on selling (expensive) merchant accounts for their very livelihood.

      This business is multi-tiered, just like the alcohol-distribution business. You've got the Big Four at the top (Visa, Mastercard, Amex, Discover), the merchant account companies, the banks (who sometimes double as the merchant account company), and finally the merchant. You scratch my back, I'll scratch yours.
    • You ever set up a merchant account? It ain't worth it for $100 and if that's all you plan on doing you won't get one either.
    • To accept credit card payments on Paypal, you have to have a business account, which charges you 2.9% plus 18 cents per transaction. Personal accounts can receive money from electronic funds transfer (EFT) or existing Paypal balances but not from credit cards.

      Do your homework!
    • I think this is exactly what's happening. Expect to see MC/Visa to move in on Paypal's business, after letting them be the guinea pig.

      It's sort of like how Starbucks never goes into a neighborhood without an already established coffee house- they look for a local operation who has pioneered a local market, then go in and try to steal their business.

      As always, the pioneers usually get killed. It's the settlers who come afterward that get rich.
  • "PayPal has been one of the few Internet initial public offerings in recent years."

    Say WHAT???? Are these people stoned, or did they forget to put something like "successful" between 'few' and 'Internet'?
  • Porn sites (Score:3, Insightful)

    by techstar25 ( 556988 ) <techstar25 AT cfl DOT rr DOT com> on Saturday April 20, 2002 @11:18AM (#3379212) Homepage Journal
    Let's not forget that EVERY SINGLE porn site in existence uses a third party for billing. That is why the name on your credit card statement is always something like "California Billing". This means no more mastercard for porn sites at all. That will kill 50% of thier business. Porn sites probably make up the largest percent of online sales, so this doesn't bode well for e-commerce in general.
    • That is why the name on your credit card statement is always something like "California Billing".

      Actually, I wasn't able to find "California Billing" anywhere on my statement. My understanding was that goatse.cx was a free site...

    • No, that's because hotteensluts.com is really registered as Mature Services, Inc. so that you don't see hotteensluts on yor statement.. they do business as hotteensluts.com. Lots of adult places are like that. For example, there's an adult book store around here that D.B.A.s as Forbiden Fruit, L.L.C.

    • Given that most porn websites are owned by a group of about 7 companies it's not surprising that there are (generally) about 7 different entities billing for the majority of porn websites.

      They're not 3rd party at all. Symlinks are cheap, starting out isn't.
  • by loggia ( 309962 ) on Saturday April 20, 2002 @11:21AM (#3379218)
    - This is not definite yet until May 1. PayPal, eBay, etc may be able to negotiate - as it says in the article
    - This does not in any way affect any debit cards. Period.
  • by Anonymous Coward
    This affects folks paying their auctions and goods via Paypal, Yahoo! Paydirect, and potentially ebay's Billpoint.

    No, it doesn't affect Billpoint, not even potentially, because that's backed by Wells Fargo (so the transaction goes to Mastercard-partner from Wells Fargo, which has a merchant account).

    This isn't a big deal at all - most e-commerce operations have merchant accounts. My guess is that Mastercard wants established businesses to sign up with it rather than keep using PayPal when they've plainly gone past the "mom and pop" stage.
  • I wonder... (Score:4, Funny)

    by The Donald ( 525605 ) <Don@doneldr e d .net> on Saturday April 20, 2002 @11:28AM (#3379246)
    DVD : $15
    3 CD's: $35
    Tickets for concert: $85
    Unable to buy the stuff online with my mastercard........ PRICELESS!
  • by rnicey ( 315158 ) on Saturday April 20, 2002 @11:31AM (#3379253) Homepage
    I went and listened to what Mastercard had to say on the subject at the ETA conference in Orlando last week.

    There is a very blurry line here for what they call aggregators. On the one hand they do not consider Ticket Master and Amazon aggregators but they do consider us to be. When asked why, it was basically no comment. At some point they may have to choose.

    What they did make very clear is that they want to retain competitiveness with Visa. The adult industry, between top players mentioned in a previous post, process in excess of $1.2b every year not including Paypal. That kind of money can produce a lot of pursuading I can assure you.

    What I can also tell you is that Mastercard is being very cooperative in finding a solution with all these players and we are confident of finding a solution. Certainly nothing drastic is happening for quite a while.

    Robert
    WebsiteBilling.com
  • Let's not forget that there are entire companies out there that make their bread and butter, helping non-porn small companies, and even some large companies get e-commerced enabled

    Not all companies have the time and abilities to get through all the paperwork, much less set up the technological infrastructure to be able to create a payment processing system.

    Brian

  • Heh. I can understand why. Mastercard is probably getting reamed with Paypal scams and the like. I've heard of too many as of late...
  • by turg ( 19864 ) <turg@winston.PERIODorg minus punct> on Saturday April 20, 2002 @11:42AM (#3379277) Journal

    There's a longer version of the article [yahoo.com] at Yahoo (longer than the one on USA Today's own site - weird). There's a statement from MasterCard that I don't understand. Quoting the (longer) article:

    The change would not, MasterCard says, affect people who occasionally use third-party services to sell goods online -- only entities who sell goods or services ''on an ongoing basis,'' according to a MasterCard memo. The change would require those merchants to set up deals with banks so they could take MasterCard directly.

    I don't know how MasterCard would know the difference. What about the transaction would indicate to them who the PayPal user is and whether that user is selling things on an ongoing basis?

    Maybe they are referring to the fact that you need a Business account or Premierre personal account on PayPal to accept credit card payment?

  • If merchants are forced to deal with cardholders directly, this means that rather than using a trustworthy 3rd party a credit card number which is used to withdraw an ammount agreed apon by the cardholder, Cardholders must deal only with merchants, people they dont know. Some people would rather only pay with paypal, who they know isnt going to steal their number in a year. If I have to give out a credit card number directly to someone selling "I Fucked Your Mom" tote bags, well, I wouldnt, would you?
  • by zentec ( 204030 ) <zentec@gmail.HORSEcom minus herbivore> on Saturday April 20, 2002 @11:46AM (#3379293)

    This has been prohibited for as long as I've had my merchant account (over 12 years). It's called "factoring", and it's there to prevent account kiting schemes among other nasty types of merchant fraud.

    About time the CC companies started enforcing the policies they make every other merchant abide by, yet turn a blind eye when it comes to online transactions.
    • As soon as I learned of paypal around 1998, I instantly saw the possibilities of kiting. Just transfer $1000 to a friend that has agreed to give you $990 of it back to you and keep the $10 for themselves, bam, instant cash advance, without the associated fees and lack of grace period. You could string up tons of interest free debt if you played your cards right doing that. I believe it's also illegal, so don't try it.
    • Kiting, eh? There's something like that in Everquest, if I recall correctly, stringing MOB's along without them ever being able to hit you. Interesting since before hearing the EQ lingo at work, I never heard the term "kiting" before, but in this context it applies with interesting but not dissimilar connotations. I wonder if the compatible definition for "kiting" came from the financial world, or some common geneology.


  • Sigh. Just one more reason why Visa Is Everywhere You Want To Be [tm].
  • by SurfsUp ( 11523 ) on Saturday April 20, 2002 @11:57AM (#3379331)
    Paypal currently has several thousand dollars of mine tied under a 'restriction', when all I tried to do was transfer the money from my account to one of my familly members. This worked perfectly with a small amount of money, but the larger amount has caused me extreme grief. Paypal has had the money for a week now, and they refuse to return it to the original account (mine), even though I have jumped through all the hoops they set out for me - some of them several times. They have sent me on a wild goose chase of busy fax machines and even busier phone numbers, so that I can 'appeal' their 'restriction' of my funds. They requested documentation be sent by fax, to prove I am the owner of the account, and I did - three times. Dozens of emails went unanswered. Finally one email arrived informing me that my case would be forwarded to the 'appeals' department within 48 hours. No word on how long it would stay there. In the meantime, Paypal has my money, and is collecting interest on it.

    I believe that Paypal is intentionally going slow, and that much of the procedure they have imposed on me is merely a pretext to allow them to keep my money for a longer period, and collect interest on it. This is done under the guise of fraud protection, but I ask you, what harm would there ever be in returning money to its original owner, even if there was some suspicion that the money was not in fact transferred by the original owner. (In my case of course it was.) They collect the profits while I wonder if I will ever see my money again. It does not help to know that Paypal is not regulated as a bank, in fact, not regulated at all.

    Will Paypal compensate me for my time and expense in retrieving my money? Will they ever give me my money back? You tell me. I do not know. At this point, I would like to sue Paypal, if I could figure out how to do it. Unfortunately, I am not a U.S. citizen, and so I can not join one of the class action suits currently in progress against Paypal.

    I have only one more thing to say at this point: do not use Paypal.
    • I feel for you.

      But I'm curious. --Were the accounts you were swapping money between two Paypal accounts, or were you trying to move money from a Paypal account to a regular bank account?

      (My company is getting into Paypal regardless of my repeated cautions.)

      Anyway, good luck in your battle!


      -Fantastic Lad

      • But I'm curious. --Were the accounts you were swapping money between two Paypal accounts, or were you trying to move money from a Paypal account to a regular bank account?

        It was between two Paypal accounts. You know the really nasty thing? First they froze the destination account, then waited long enough for my bank to transfer my money into the source account, *then* froze it there. Ensuring they had something to collect interest on while they gave me the runaround. How do you like that for evil?

        (My company is getting into Paypal regardless of my repeated cautions.)

        Show them my post.
      • (My company is getting into Paypal regardless of my repeated cautions.)

        Oh, and check out Billpoint. It's operated by Wells Fargo. Perhaps with their long experience they have a clue how to inspire trust in their service.
  • by christrs ( 187044 ) on Saturday April 20, 2002 @12:01PM (#3379350)
    Having been the victim of credit card fraud, I personally think that this will be a "good thing".

    I tried paypal for a few transactions then closed my account when I realized they have an uncontrolled access the my $$$.

    So as far as I am concerned, Paypal is insecure, uncontrollable service and should be restricted from doing bussiness by Mastercard (which by the way has contractual aggrements to protect me and laws enacted to regulate their bussiness).

    Money Orders still work. Just a bit slower.
    Chris
    • I tried paypal for a few transactions then closed my account when I realized they have uncontrolled access [to] my $$$.

      That's why when I started to hear horror stories about PayPal I dropped by my credit union and started a second checking account. I told the woman I was talking with that I'd started to do some online purchasing and wasn't comfortable with having my regular account details out there, and she was more than happy to set it up. She started to ask if I wanted automatic overdraft protection from my main account, then answered herself "No, I guess you wouldn't want that."

      It's the same credit union (though banks should do it as well) as my main account, so all I have to do is dial up every once in a while and transfer a few hundred dollars over. If PayPal gets a bit twitchy with the account it might be a minor annoyance, but not much more than that.

  • by Anonymous Coward
    The whole premise is so fucked. People ask why capitalism sucks and here we are having to beg these assholes to make us into interest slaves.
    Type the word usury into Google and see why the Greeks and the Roman civilizations really fell. Why did the Chinese dynastys continually rise and fall? Any system based on wealth accumulation by usury gets top heavy and falls because the wage slaves on the bottom rung eventually get violent.
    The only thing that keeps american capitalism one step ahead of the game is the advances in technology keeping distractions within reach of the average disenfranchised joe. But that technology itself always been a direct result of the US's plural culture rather than some innate know how. In the same vein, the US's economic success has got jack shit to do with business sense. Economists are nothing more than pundits and sycophants, ask any statistician. The US is ahead so it stays ahead until it gets behind. Whoopdie fuckin' doo. That doesn't mean there's anything particularly special about its circumstances.
    The government should handle the currency, not these fucking user bastards. Why the fuck is it that Congress has thousand of hours to talk about whether free citizens of the US should be allowed to trade broadcast TV shows and songs, but they can't get off their asses and come up with an e-currency. That's what the government is SUPPOSED to be for!

    So, I'm ranting, I could edit it, but I think I'll just post anonymously.
    • What a socialistic mindframe. Many big civilizations fell because they became Empire, and were too difficult to control.

      Capitalism works because of Free Market premises -- in America, Capitalism has failed only because government has subsidized too many companies, and tariffed others. Get rid of ALL tariffs, subsidies, and embargoes, and the American capitalist system will succeed like no other in the world -- industries that rely on subsidies will fail, and those that have been embargoed and tariffed will blossom. That's what the laws of supply and demand dictate.

      It's people like you that make me sick to be an American. You probably also love welfare, social security, and social engineering. Ugh.

      Go read Why Government Doesn't Work [amazon.com] and tell me you still want government taking care of this.
    • This post is filled with hazy ranting, most of which is wrong and some of which is just funky. For example:

      But that technology itself always been a direct result of the US's plural culture rather than some innate know how.

      ????

      Economists are nothing more than pundits and sycophants, ask any statistician. The US is ahead so it stays ahead until it gets behind. Whoopdie fuckin' doo. That doesn't mean there's anything particularly special about its circumstances.

      Once again, ?????

      Economists are nothing more than pundits and sycophants, ask any statistician. The US is ahead so it stays ahead until it gets behind. Whoopdie fuckin' doo. That doesn't mean there's anything particularly special about its circumstances.

      The government does handle the money supply you cretin. The credit card companies transact the money supply, they don't grow it.

  • by spoonyfork ( 23307 ) <spoonyfork&gmail,com> on Saturday April 20, 2002 @12:14PM (#3379404) Journal

    I guess I don't understand why the established companies that are under threat by a new way of doing business don't offer those services themselves instead of trying to fight them.

    Take the RIAA companies for example. If they made their own "Napster" that didn't suck (and didn't cost an arm and a leg for very little content), they would be in like Flynn. The same goes for MasterCard, Visa and the like. If they created their own "PayPal" that didn't suck, they would be ahead of the game because they're already established.

    Frankly, I'd rather use MasterCard's "PayPal" rather than PayPal because we all know that PayPal is kinda shady [paypalwarning.com].

    • The reason they can't do this is because of the middle men.

      In the music industry it's they would be pissing of the distributors that make a significant cut of the record sales. For mastercard it would piss of the banks that make a good chunk of change off the merchant accounts.

      This is also why many brick and mortar retailer chains were slow to get online. The franchise holders basically told them that they would jump ship if they started selling online. So it took alot of negotations to come up with a sceme acceptable to the current francise holders.

      So alot of old buisness is in a catch 22 situation ... they need to keep the current middle men happy so they keep making money off their current market. But need to figure a way to get them out of the system longer term so they can be more efficcent and make it online.

      This is why you see some old francises moving to franchise controlled stors ... they can't gripe about getting a cut unlike the independents.

      subsolar

  • Great Timing Guys! (Score:4, Insightful)

    by The Cat ( 19816 ) on Saturday April 20, 2002 @12:26PM (#3379434)
    Right in the middle of a recession, lets beat up millions of small businesses! What a great idea! And because they're all working 17 hour days to find customers, they won't have time to do anything about it! Fantastic!

    Hear that Congress? They just cut the legs out from under half the market for the companies that are going to put most of the unemployed people in this country back to work.

    The big businesses win, and the small businesses pay. What a surprise.

    I've about had it with the "we're only trying to prevent fraud and abuse" line. NEWSFLASH: There will ALWAYS be fraud. This is just an excuse to screw over customers and merchants while grabbing at more money and control.
    • Regulating who should be given a merchant account and who shouldn't is crazy. They are in the business (Mastercard) to MAKE MONEY. If you force them to support everyone, then all that will happen is ALL Merchant rates will go up. For some small companies, they pay 7% to the merchant. For large companies, they pay 1.5%. Why is this? Because the large companies have a habit of getting customers who don't dispute their bills often, and don't give major headaches to the merchants account companies.

      I am a small business owner. I pay more for my merchant account than I would if I collected money through paypal. I probably only collect $5000 a year through my merchant account. I got the account because I KNEW the merchant account companies eventually would do this. If you want to be in business, its not that hard to get a merchant account. Have a bank account for a year, with a positive balance. Have decent credit. Have a business plan. Go get merchant account.

      This is NOTHING about big vs. small business. Those big businesses were once small also, and they had to go through WORSE hoops to accept credit and charge cards. Plus, when you see a tiny merchant on the Internet who accepts credit cards, what a lot of people think is "I may as well go for their cheaper-than-usual price, if I get screwed, the merchant account company will credit me back if I don't get anything." And that hurts all of us in added credit card overhead costs.

      No thanks, Congress. Keep your noses where the Constitution tells you to, and let the free market handle the rest.
      • Regulating who should be given a merchant account and who shouldn't is crazy. They are in the business (Mastercard) to MAKE MONEY.

        So are the small businesses. We have just as much right to MAKE MONEY as THEY DO. The difference is we don't have the opportunity to SCREW THEM OVER with some ARBITRARY BUNCH OF CRAP.

        If you force them to support everyone, then all that will happen is ALL Merchant rates will go up.

        I'd rather they just STAY OUT OF OUR CASH REGISTER. Thank you very much.

        For some small companies, they pay 7% to the merchant. For large companies, they pay 1.5%. Why is this?

        It's called price gouging. The small companies don't have the clout to fight it, so they pay extra. And it's not just the merchant accounts. It's everywhere. Simple as that.

        . If you want to be in business, its not that hard to get a merchant account.

        We already have our system set up. NOW they decide to screw over half our customers. So we pay TWICE because THEY decided to change. That is pure, unfiltered CRAP.

        Have a bank account for a year, with a positive balance.

        Try to do business, on-line, accepting money orders and checks, from all over the place. Oh, sure. Meanwhile back on Earth, the FACTS are YOU MUST ACCEPT CREDIT CARDS. Customers are not going to sit down and write out a check and mail it. It DOESN'T HAPPEN. If you're in business you already know this, so nice try.

        Have decent credit. Have a business plan. Go get merchant account.

        Excuse me, but NONE of that is Mastercard's
        #%*&@$ BUSINESS. We pay our fees. Our service bureau should not be punished by some arbitrary decision.

        This is NOTHING about big vs. small business. Those big businesses were once small also, and they had to go through WORSE hoops to accept credit and charge cards.

        Oh, cry me a river. This is ALL about big vs. small business. Big business can afford to set up transaction processing on their own site. Small businesses can't. It makes no sense to set up a full e-commerce structure for a low volume company. Better to spend that money on building a better product.

        This is a slap in the face to hard working small businesspeople, and Mastercard knows it. Anything else is spin.

        Plus, when you see a tiny merchant on the Internet who accepts credit cards, what a lot of people think is "I may as well go for their cheaper-than-usual price, if I get screwed, the merchant account company will credit me back if I don't get anything." And that hurts all of us in added credit card overhead costs.

        So we should just SCREW OVER the tiny merchant, and let some other company OVERCHARGE the customer so some third company doesn't have to pay extra. Yeah, that's the ticket. Beat up the little company, take the customer THEY EARNED and hand the money over to someone else.

        Do you have any idea how completely screwed that point of view is? That is the ultimate in arrogance and exclusivity. Only the people with perfect credit and a bank balance are allowed to make a living, huh? That tiny merchant has JUST AS MUCH RIGHT TO THE MARKETPLACE AS ANYONE ELSE. It is UNFAIR for Mastercard to deny them access to their OWN CUSTOMERS.

        and let the free market handle the rest.

        Yeah. The free market as dictated by Mastercard. I feel better already.
        • We have just as much right to MAKE MONEY as THEY DO.

          And by "just as much right to make money", you mean NO right to make money. There is no explicit right to make money anywhere, and I'm sick of this delusion that the right to profit is somehow granted by government. You only have the right to TRY to make money. Whether or not you succeed should be determined by free market forces based on the quality of what you are able to offer your customers, NOT by legislation trying to assure this mystic "right to profit" that is starting to become a dangerous ideology.


        • Have decent credit. Have a business plan. Go get merchant account.

          Excuse me, but NONE of that is Mastercard's
          #%*&@$ BUSINESS. We pay our fees. Our service bureau should not be punished by some arbitrary decision.


          They're a credit company. They can refuse to give you CREDIT if you can't prove you'd be a good investment.
          • They can refuse to give you CREDIT if you can't prove you'd be a good investment.

            We never asked for credit. We (always) pay our money through our vendors, we should get the service we paid for.

            Mastercard should not then, HAVING EXPLICITLY ALLOWED US TO ESTABLISH A GOOD FAITH RELATIONSHIP WITH THE MARKETPLACE, turn around and build a wall between us and half our customers.
    • by persaud ( 304710 )
      Having failed to compete with PayPal in the marketplace, the banks are resorting to regulation [cnn.com]

      Citibank is the largest issuer of credit cards, with 20% voting rights in MasterCard and 10% in Visa. Wells Fargo (Billpoint), Bank One (eMoneyMail) & Bank of America (Checkfree) have each exited their respective P2P payment service. The remaining bank-owned service, Citibank c2it, has a grand total of 350,000 customers to PayPal's 13 million members, even after spending a rumored $100 million for exclusivity on AOL in Aug 2000.

      A recent Hyperion whitepaper on identity management [hyperion.co.uk] claims 20% of credit-card fraud is due to fraudulent _merchants_ and only 2% is due to credit-card theft by non-merchants. Aggregators like PayPal protect an individual user from having to give their credit card number to a large number of smaller merchants.

      A free-market solution would compute risk profiles for aggregators, based on their customer screening policy. Higher risk would mean higher rates, providing impetus for better screening. Aggregators are a valuable extension of the existing banking system, having greatly increased the number of nodes in the online network (13 million for PayPal alone).

      As David P. Reed points out [kmcluster.com], the value created by Group Forming Networks (GFN) is exponential (he cites eBay as the prime example). It's not just the number of nodes in PayPal's network - it's the fact that repeat transactions are clustered around PowerSellers, effectively a "Group" in the PayPal GFN.

      The density of these clusters exists nowhere but PayPal. In other networks (MasterCard, Visa, eBay), the PayPal transactions are lost in a sea of unrelated transactions. Unique economic value that has been created by PayPal would be lost (by *all network participants*) if these transactions were forced onto a less-dense payment network.

      Visit Mondex [mondex.com]. What do you see in the upper left corner? MasterCard International, because Mastercard owns a controlling 51%. Mondex provides technology for e-cash via smart cards, pioneered in Europe. Citibank and Mastercard intend to own electronic payment online, but Mondex did not forecast the US emergence of PayPal prior to smart cards.

      PayPal now processes payments for more than one-fourth of all eBay auctions. In 2001, they cleared more than $3 billion in payments. They process more than 200,000 transactions daily. Although PayPal remains a fraud target, they are the micropayment solution of choice for small business, online service providers & many web communities.

      The proposed rule by MasterCard would take effect on May 1st, so there are 30 days for MasterCard customers to comment on the proposed change.
      • Having failed to compete with PayPal in the marketplace, the banks are resorting to regulation

        I'd call that observation insightful and profound. Sounds just a little like the ol' recording industry debate, doesn't it?

        The proposed rule by MasterCard would take effect on May 1st, so there are 30 days for MasterCard customers to comment on the proposed change.

        Actually, that leaves about 10 days. :)

        • by persaud ( 304710 )
          > Sounds just a little like the ol' recording industry debate, doesn't it?

          And how. Days before PayPal's IPO, CertCo filed a patent lawsuit [cfo.com]:
          Observers were a bit flummoxed by the timing of CertCo's suit. It would seem that the company could get substantially more cash out of PayPal once PayPal had substanially more cash -- that is, after the company's IPO. But the suit has definitely put the kibosh on PayPal's stock offering, at least for the moment.
          The suit delayed the IPO by a few days and dampened the IPO, but not substantially. Even by patent-mining standards, the timing of the lawsuit was strange. Who runs CertCo [certco.com]? Deutsche Bank AG and Bank One are both investors and directors. Chairman and CEO:
          As senior vice president e-commerce at Chase Manhattan Bank, June headed up wholesale e-commerce initiatives for one of Chase's largest business sectors and led investment activities on a number of strategic e-commerce investments. June played an instrumental role in creating Spectrum, a for-profit joint venture between Wells Fargo, First Union and Chase focused on electronic bill payment and presentment (EBPP).
          Unfortunately for the banks, the CertCo lawsuit did not derail PayPal's IPO. Next, they complained that PayPal was operating an illegal banking service, beginning with the fine state of Louisiana. As a result, the FDIC (federal regulators) began investigating whether PayPal "was a bank". Their investigation concluded that "PayPal is not a bank", since [com.com]:
          PayPal began depositing customer balances into FDIC-insured bank accounts. The company had asked for an opinion from the FDIC on whether it could pass the insurance protection on to its customers. In its advisory letter, the FDIC said the insurance protections--up to $100,000 per customer per bank--would extend to PayPal customers, even when PayPal deposited the funds for them, PayPal said.
          Score: Banks: 0, PayPal: 2

          This brings us to attempt #3, the bank option of last resort: private regulation: impose costs on *their own customers* to achieve what could not be achieved through (a) free-market competition, (b) patent extortion, (c) federal regulation.

          This is not new. The US Dept. of Justice has prosecuted [usdoj.gov] and partially won (10/09/01) [usdoj.gov] an antitrust suit [nyu.edu] against both Visa and Mastercard, whose largest controllers are Citibank and Chase Manhattan. More context [google.com] and history [mit.edu].

          The case is currently stalled (01/18/02) [usdoj.gov] pending appeal. Although the case is mostly about opening debit cards to Amex/Discover (instigated by Amex lobbyists?), the findings of fact and examples are relevant to the current discussion.
    • If there wasn't a law that ensured that consumers can't be held responsible for unauthorized purchases, you'd be singing a different tune.

      Just imagine for a second that you give a credit card number to amazon.com and it gets stolen from their server. Would you like to foot the bill that would be run up on it? I didn't think so. MasterCard is the first smart company I've seen.

      Think of it this way. Anyone that has your bank account number (which is published on all of your checks) can pose as a company that is directly withdrawing from you for bills you owe. There is nothing in place to stop them from doing just that with your bank account, credit card, whatever.

      If you could automatically generate one-use credit card numbers that have a specific ammount credited to them, that would be different. But I haven't seen any real implimentations of that done.

      Another option is to have the banks or credit card companies acting as their own 'paypal', so you can just go to mastercard.com and tell them to send $50 to amazon.com, and no more.

      Right now, it's a big free-for-all, and I think it's great that MasterCard is at least taking the first step to begin to tighten the reigns.
      • If there wasn't a law that ensured that consumers can't be held responsible for unauthorized purchases, you'd be singing a different tune.

        No I wouldn't. It's not the consumer's fault, and it isn't our fault either. It is the fault of the person making the unauthorized purchase. That law is probably 97% of the reason credit card companies are making tens of million$ a day.

        give a credit card number to amazon.com

        Mastercard wouldn't *dare* screw with Amazon.com

        There is nothing in place to stop them from doing just that with your bank account, credit card, whatever.

        Other than the fact that it is bank and wire fraud? Maybe not.

        Right now, it's a big free-for-all, and I think it's great that MasterCard is at least taking the first step to begin to tighten the reigns.

        At the direct and unfair expense of the smallest businesses.

        With all due respect to the fine people at Mastercard, this is their own responsibility, not ours. They set the system up this way, it is their responsibility to come up with ways to reduce (note I did NOT say eliminate) fraud, which I really don't think is as big a problem as they claim, and if it is, tough. That's THEIR PROBLEM.

        They have a lot of highly-paid, very intelligent people working for them (supposedly). I'm sure they can figure it out. Maybe they should call a meeting. (there are times when I truly appreciate the easy availability of sarcasm).

        They do not have the right to trample all over our businesses in order to fix it either. Maybe they might consider ASKING US to HELP them instead of issuing autocratic pronouncements from atop the corporate dais.
        • Well for one thing, my point was that, if it was your own money paying for fraud, you'd be cheering for anything that prevents fraud. It's only because you don't have to foot the bill that you don't give a damn.
          It's not the consumer's fault, and it isn't our fault either. It is the fault of the person making the unauthorized purchase.

          You are right, to an extent. If someone takes money from you, they have done something illegial. However, I don't know anyone that is so obsessed with that law that they are willing to leave the doors to their house unlocked, leave their wallet unattended in a public place, or anything else that puts them at great risk of being subject to theft. I can't understand why you and many others insist that credit card companies leave themselves at such risk without attempting to do anything about it.

          With all due respect to the fine people at Mastercard, this is their own responsibility, not ours.

          Quite right. It's their responsibility, and they just took care of it. End of story.

          Maybe they might consider ASKING US to HELP them instead of issuing autocratic pronouncements from atop the corporate dais.

          Everyone says that when a decision is passed down that they object to. However, when companies ask for consumers to fill out survey cards, most say 'screw you, do your own jobs'.

          Besides that, you just said that it's their problem, and they should take care of it.

          They do not have the right to trample all over our businesses in order to fix it either.


          A third party billing a credit card is not a protected right... It's not a law or in the constitution. If a business hitches their wagon to a practice, and the practice is stopped for whatever reason, it's their responsibility to either find a new way to do business, or step aside while a competitor does. That's what free enterprise is all about.

          Besides, that same speil about small businesses suffering is exactly what we heard when spammers objected to spam laws.

          • if it was your own money paying for fraud,

            It is our own money. What, Mastercard is footing the bill on their own? Why do you think the little guy gets stuck with a 6-8% fee?

            I can't understand why you and many others insist that credit card companies leave themselves at such risk without attempting to do anything about it.

            They're welcome to do something about it, up to the point where it makes it nigh-unto impossible for us to properly serve our customers.

            See, what a lot of people are forgetting here is that 30 days ago, Mastercard hadn't said a WORD about this. We were all working and selling under an agreement, and Mastercard was happily pulling down ten million a day in merchant fees. Now that we've established a relationship with the market, they switch terms and lock us out. That's flat out unfair. I don't care what they say about it either. We held up our end of the bargain (and PAID HANDSOMELY for it), they didn't. Period.

            It's not a law or in the constitution. If a business hitches their wagon to a practice, and the practice is stopped for whatever reason, it's their responsibility to either find a new way to do business, or step aside while a competitor does. That's what free enterprise is all about.

            Nope.

            We didn't "hitch our wagon" to anything. It is not our responsibility to find a new way to do business either. It is MASTERCARD'S responsibility to live up to the agreement they made with their merchants and customers to allow them to do business AS AGREED, (and still in effect as of today) BOUGHT AND PAID FOR WITH LONG GREEN DOLLARS without INTERFERENCE by the mighty trademark holder.

            Besides, that same speil about small businesses suffering is exactly what we heard when spammers objected to spam laws.

            ...and a fine red herring it is, but that is entirely different. We are being prevented from conducting commercial transactions with paying customers, not from sending advertisements to random people.
            • It is our own money. What, Mastercard is footing the bill on their own? Why do you think the little guy gets stuck with a 6-8% fee?

              It's true that you have to pay just a bit more, but most people don't think that way to the point that it would motivate them to do anything. Just like getting too much change at the grocery store, or a free can of coke out of a broken soda machine. It still doesn't change my point. If you got a bill for $1,000 that you didn't pay for, and there was no consumer protection, you'd be up in arms asking for what they are doing now.

              It is not our responsibility to find a new way to do business either. It is MASTERCARD'S responsibility to live up to the agreement they made with their merchants and customers to allow them to do business AS AGREED


              Apparently they have lived up to their end of the agreement, or else you'd be in court right now instead of complaining on slashdot.

              We are being prevented from conducting commercial transactions with paying customers


              No, you are prevented from billing through MasterCard in the same way you currently do. You can collect money in anyway you choose. You choose to bill by credit card, essentially hitching your wagon to MasterCard and others, and now you need to go another route.

              I guess credit cards have been around so long, people now think of them as government sanctioned currency! No one is depriving you of a civil right you once had... It was a convenience that MasterCard offered to you. Now it's gone. Adapt or go out of business. That's how it's always been, and how it always will be. The internet is the new gold rush. A few people got rich, and everyone though that anything they do on the internet was guaranteed to succeed. Now people like yourself need to hit the realization that the internet doesn't change the fundamental nature of business.

              I admit they should have had a much earlier notice but that's all I can fault them with.

              • It's true that you have to pay just a bit more

                The smallest merchants pay over 300% more than the largest. More than just a bit.

                Apparently they have lived up to their end of the agreement

                No, they haven't. They pulled the rug out from under thousands of businesses. Most of them do not have the time or the money to pursue it, so they lose. Thousands more unemployed too.

                Won't be long before people just don't believe a single word that comes out of a businessman's mouth.

                Adapt or go out of business.

                Yeah. You just lost half your market. Adapt. Sure.

                everyone though that anything they do on the internet was guaranteed to succeed. Now people like yourself need to hit the realization that the internet doesn't change the fundamental nature of business.

                Oh, please. We've been working at this for SIX YEARS. People like myself... please.

                I admit they should have had a much earlier notice

                For openers, but this was designed to be as painful as possible. I wonder how Mastercard's executives would respond if Congress made it illegal for them to do business west of the Mississippi? The whining would make a daycare center sound like a PBS round table.
                • The smallest merchants pay over 300% more than the largest. More than just a bit.

                  No, what I have been saying is that just a bit of the money goes to pay off fraud charges. It didn't have a damn thing to do with how much small business pay relative to big businesses.

                  No, they haven't.


                  That's great. I'll say "they would not have violated a contract for fear of legal retribution", and you say 'Yep, cause I say so'. Why not try pointing out some facts? Terms of your contract with them? Something more than 'No.'.

                  Yeah. You just lost half your market. Adapt. Sure.


                  Oh, I see. Half of your customers posess no other form of currency than a MasterCard... Great arguement there. Like I said, if you can't figure out an alternative you deserve to go out of business. That's how it works.

                  People like myself... please.


                  See above for evidence of how naieve/ignorant/etc. you are being.

                  I wonder how Mastercard's executives would respond if Congress made it illegal for them to do business west of the Mississippi?


                  When did MasterCard say your business had to stop doing business? You can't use MasterCard anymore. Use something else. Accept other credit cards. Get together with other small businesses and jointly purchase big-business privlidges. Bill via postal mail. Directly withdraw from bank accounts. Get a 900 number... Anything.

                  Or you can whine and complain about this, and noisly go out of business. Your choice. You have that option.

                  • if you can't figure out an alternative you deserve to go out of business.

                    The success of my business should not be the purview of Mastercard.

                    Half of your customers posess no other form of currency than a MasterCard...

                    Well, if they have a MasterCard, and no other credit card...

                    ...

                    People would rather buy on-line with a credit card. We aren't set up to take checks or money orders, because we can't afford it and nobody wants to pay by check anyway.

                    So, they want to buy...

                    ...with a credit card...

                    ...and all they have is a Mastercard.

                    And Mastercard just lost us a customer. If it happens enough, we go out of business. Why? Mastercard.

                    Now that I've drawn the map, hopefully it will be easier to understand.

                    Get together with other small businesses and jointly purchase big-business privlidges.

                    Like accepting Mastercard? Oh, wait... we're not allowed to. Is this making sense yet?

                    • You seem to be pretty dense, so I'll get right to the point.

                      Well, if they have a MasterCard, and no other credit card...

                      No. No ifs. You said this action by MasterCard cut you off from half of your customers. I asked a straigh forward question to ensure this wasn't an exaggeration, and you give me a lot of ifs.

                      People would rather buy on-line with a credit card. We aren't set up to take checks or money orders, because we can't afford it and nobody wants to pay by check anyway.

                      Yes, people would rather use a credit card most of the time. You said that 50% of your business would be cut. Now are you saying that 50% of your customers use MasterCards & are unwilling to use another form of payment if you offered it?

                      You say you can not afford to accept checks or money orders, but unlike credit cards, there is a very low-cost barrier to entry for checks and credit cards. It's ridiculous to say you couldn't easilly change to accept those payment methods. But there's been a lot of ridiculousness so far so I won't assume too much.

                      Like accepting Mastercard? Oh, wait... we're not allowed to. Is this making sense yet?

                      Well this was JUST A LESS LIKELY ALTERNATIVE OPTION. Keep that in mind.

                      MasterCard is not stoping their card from being used all together. They are merely stopping 3rd-party billing. You could still use their own business services, such as "SET":
                      http://www.mastercardintl.com/newtechnology/set/ .
  • I don't have a mastercard. I have two visa cards. I like visa better. This only proves my wisdom.
    Maybe when consumers start shreding their mastercards and apply for visa cards, MC will wake up and smell the coffee.
    • As a VISA cheerleader, you may find this letter I wrote to a VISA card issuer interesting:

      \documentclass{letter}
      \begin{document}
      \address{Robert G. Ristroph \\
      4533 Avenue A \#208 \\ ( no longer my real address, don't write me here)
      Austin, TX 78751 }
      \signature{Robert G. Ristroph}
      \begin{letter}{ U.S. Bank National Association N.D. \\
      P.O. Box 6300 \\
      Fargo, ND 58125-6300 }
      \opening{Dear Sir or Madam,}

      I read with some interest an unsigned note appearing in a bill for my VISA card (Account No. 4190 0043 1516 9544) (don't worry, it's not a valid account anymore!) on February 7th, 2001. The note is titled in large letters ``IMPORTANT CHANGES TO THE CARDHOLDER AGREEMENT GOVERNING YOUR ACCOUNT ISSUED BY U.S. BANK NATIONAL ASSOCIATION ND''. The note states that the late payment fee is \$27.00 the first two times inside any twelve months, and \$35.00 for additional late payments. It also states the following, which I quote in full:

      \begin{quote}
      Illegal Purchases:
      Your card must not be used for any unlawful purpose (for example, funding any account that is set up to facilitate online gambling). You agree that you will not use your card or account for any transaction that is illegal under applicable law.

      \end{quote}

      I don't want to disagree with this and thus cancel my account. Rather, I would like to agree with it and ask for the following clarifications:

      \begin{enumerate}
      \item Does the sentence ``Your card must not be used for any unlawful purpose (for example, funding any account that is set up to facilitate online gambling)'' mean that you are giving me legal advice that ``facilitating online gambling'' is against the law in my jurisdiction (or any other) ?
      \item Is U.S. Bank National Association ND a law enforcement organization, a representative of a law enforcement organization, or empowered with any law enforcement powers ?
      \item May I use this card and account to purchase insurance online ?
      \end{enumerate}

      I also read with intense interest the additional printing on the reverse side:

      \begin{quote}
      IMPORTANT CHANGES TO YOUR AGREEMENT

      If you do not agree to the changes in terms, \emph{you must notify us in writing within 25 days of the effective date.} If you notify us that you do not agree to the new terms, your account will be closed but \emph{your balance may be paid off in full or under the terms of your existing Cardholder Agreement.}

      If you do not notify us, you will have agreed to the these changes in this notice. By using your account after the effective date, you will have accepted the new terms, even if the notification period has not expired.

      \end{quote}

      I find it interesting that we can amend our agreement and that failure to object or use of the card constitutes agreement to the amendment. I am hereby notifying you of the following changes to our agreement, effective April 25:

      \begin{enumerate}
      \item[Illegal Activity] Reciprocal to the new terms you instituted that restrict me from using the Card Account for illegal activity such as online gambling, I restrict you by these new terms from using any moneys I pay to you for any illegal activity, including but not limited to bribery, undisclosed compensation of corporate officers, illegal tax avoidance schemes, illegal campaign contributions, payments to illegally hired workers, or any expenditure unproperly reported in your SEC filings.
      \item[Account Limit] The account limit on this card is now set to \$200,000. This includes merchant purchases as well as cash advances.
      \item[Yearly Interest] The yearly compounded interest on the account is now two percent.
      \item[Minimum Payment] The minimum payment will never exceed \$1,500 regardless of the balance.
      \item[Disclosure of Account Information] U.S. Bank Association ND will not disclose any information on this account, including but not limited to my name, social security number, address, purchasing history, or other account activity, to anyone, unless forced to disclose the information by a court order or search warrant; and should U.S. Bank National Association ND have to disclose such information, they will promptly notify me of the information revealed and the party receiving the information.
      \end{enumerate}

      If you do not agree to these terms, you must notify me within 25 days of the effective date (that is, 25 days after April 25, 2001). If you notify me that you do not agree to the new terms, the account will be closed, under the terms of the old agreement. If you do not notify me, you will have agreed to the these changes in this notice. By using the account (accepting a charge I make) after the effective date, you will have accepted these terms, even if the notification period has not expired.

      \closing{Sincerely,}

      \end{letter}
      \end{document}

      After I sent those guys this polite letter, you know what happened ? I got a note from them saying they were canceling my account "at your request" ! I think it is quite plain I didn't want my account to be canceled at all, and it was THEIR wish not to be bound by my new terms that lead to them canceling our aggreement.

      As a VISA patron, what are your thoughts on these revelations ? I want to hear your opinion.

  • by quartzeye ( 572281 ) on Saturday April 20, 2002 @01:42PM (#3379715)
    I agree that this move by Mastercard sucks but my neighbor happens to be a VP for them. He said it had to do with the number of charge backs they have been getting. Also, Mastercard is officially a non-profit corporation. Every dime they take in is spent within the fiscal year. I used to be a consultant at Mastercard and they were constantly starting up new software projects and doing charity promotions to insure that all the funds were spent Unfortunatly, the down turn in the economy has currtailed their efforts a bit. However, look at their website and check around. You'll see that they are a non-profit.
  • Most of the little online transactions are made through a 3rd party. If I can't use my Mastercard for registering shareware and stuff like that, I need a new card.
  • Cost of policy change to paypal: Millions PR cost to Mastercard: Lots Ultimate value to Mastercard's corporate coffers: Priceless
  • Speaking as someone who works [trustcommerce.com] in the credit card processing industry, this isn't too shocking. One merchant accepting payments on behalf of another is known as "factoring" and is generally a no-no, both legally and in terms of Visa/MC regulations. PayPal is a special case; how they negotiated their current deal, I'm not sure. Really good lawyers, I guess.

    Here's the reason why: merchant account providers are taking on risk on behalf ot the merchant. Because credit cards provide complete safety for the consumer (via chargebacks), if a merchant runs a bunch of charges one day, cashes out the bank account, and skips town, it's the card acquirer (or possibly the issuer) that are left with the responsibility to pay off the fraudulent charges to the consumer. By using a "proxy" merchant, ie factoring, they distance themselves from the consumer and make it that much easier to get away with fraud at this level.

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