What does PCI-DSS PED mean?
PCI-DSS stands for Payment Card Industry Data Security Standard. In short PCI-DSS represents a common set of industry tools and measurements devised to ensure the safe handling of sensitive information. The standards and principles that support PCI-DSS compliance are established by a Council chaired by American Express, Discover Network, JCB, MasterCard Worldwide, and Visa International. PED stands for PIN Entry Data. All machines with PIN entry options must follow the standardized PCI-DSS safety regulations. For further information concerning these regulations and standards, visit the PCI Security Standards website.
What is the Code of Conduct?
The Code of Conduct for the Credit and Debit Card Industry in Canada, which all payment card networks operating in Canada have adopted, sets out several rights that merchants have in relation to their contracts for payment card processing services. FCAC’s Commissioner has issued further guidance on some of the issues addressed by the Code to clarify the expectations of payment card networks and service providers that enable merchants’ access to the networks.
The discount rate comprises a number of dues, fees, assessments, network charges and mark-ups merchants are required to pay for accepting credit and debit cards, the largest of which by far is the Interchange fee. Each bank or ISO/MSP has real costs in addition to the wholesale interchange fees, and creates profit by adding a mark-up to all the fees mentioned above. There are a number of price models banks and ISOs/MSPs used to bill merchants for the services rendered. Here are the more popular price models:
Tier Pricing is the most popular pricing method and the simplest system for most merchants to understand, if not the most transparent. In Tier Pricing, the merchant account provider groups the transactions into 3 groups (tiers) and assigns a rate to each tier based on a criterion established for each tier. A possible drawback from the merchant's perspective, is that these "tiers" or "buckets" are variable from one processor to the next prohibiting any direct comparison from a Tier 1 provided by one provider to a Tier 1 provided by another provider.
First Tier - Qualified Rate
A qualified rate is the percentage rate a merchant will be charged whenever they accept a regular consumer credit card and process it in a manner defined as "standard" by their merchant account provider using an approved credit card processing solution. This is usually the lowest rate a merchant will incur when accepting a credit card. The qualified rate is also the rate commonly quoted to a merchant when they inquire about pricing. The qualified rate is created based on the way a merchant will be accepting a majority of their credit cards. For example, for an internet merchant, the internet interchange categories will be defined as Qualified, while for a physical retailer only transactions swiped through or read by their terminal in an ordinary manner will be defined as Qualified.
Second Tier - Mid-qualified Rate
Also known as a partially qualified rate, the mid-qualified rate is the percentage rate a merchant will be charged whenever they accept a credit card that does not qualify for the lowest rate (the qualified rate). This may happen for several reasons such as:
A consumer credit card is keyed into a credit card terminal instead of being swiped
A special kind of credit card is used like a rewards card or business card
A mid-qualified rate is higher than a qualified rate. Some of the transactions that are usually grouped into the Mid-Qualified Tier can cost the provider more in interchange costs, so the merchant account providers do make a markup on these rates.
The use of "rewards cards" can be as high as 40% of transactions. So it is important that the financial impact of this fee be understood.
Third Tier - Non-qualified Rate
The non-qualified rate is usually the highest percentage rate a merchant will be charged whenever they accept a credit card. In most cases all transactions that are not qualified or mid-qualified will fall to this rate. This may happen for several reasons such as:
A consumer credit card is keyed into a credit card terminal instead of being swiped and address verification is not performed
A special kind of credit card is used like a business card and all required fields are not entered
A merchant does not settle their daily batch within the allotted time frame, usually past 48 hours from time of authorization.
A non-qualified rate can be significantly higher than a qualified rate and can cost the provider much more in interchange costs, so the merchant account providers do make a markup on these rates.
Interchange Plus Pricing
Some providers offer merchant account services priced on an "interchange plus" basis. These accounts are based on the "interchange" tables published by both Visa Visa Interchange and MasterCard MasterCard Interchange. This type of pricing creates a discount rate by adding interchange rates plus a percentage and authorization fees. This is a common pricing model for very low and very high average tickets.
Terms to know-Following are some useful definitions that pertain to pricing merchant transactions
Basis Point: 1/100 of a percentage point. The term is used to describe discount rates, which are the bulk of card processing fees paid by merchants.
Discount Rate: includes fees, dues, assessments, markups and network charges merchants must pay for accepting credit and debit cards. Interchange is the discount rate's largest component.
Interchange: the fee paid to the card issuing bank by the card acquiring bank by way of the card brands. Interchange rates vary widely based on card type, transaction amount, risks and retail sector. Interchange is assessed on all Visa Inc.- and MasterCard Worldwide-branded credit and debit cards.
Mid-Qualified: the percentage rate merchants are charged when accepting credit cards that do not meet qualified rate requirements. Also known as a partially qualified, the mid-qualified rate applies in such cases as when cards are keyed into terminals instead of swiped or if the cards are of a special type such as rewards cards.
Non-Qualified: often the highest percentage rate merchants are charged for accepting credit cards. In most cases, transactions that are neither qualified nor mid-qualified fall into this category. The bulk of these transactions are done with corporate cards.
Qualified: the percentage rate merchants are charged when they accept regular consumer credit cards and process them with an approved processing solution in a manner defined as standard by their merchant account providers. Qualified is typically the lowest rate merchants incur when accepting credit cards.