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  1. #1
    Super Sh!t Stirrer SSanf's Avatar
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    MasterCard to stop third-party transactions

    By Andrew Backover, USA TODAY

    A new rule by MasterCard could crimp online commerce by stopping merchants from accepting credit card payments through third parties, such as the popular PayPal, USA TODAY has learned.

    Unless a settlement is reached, on May 1 Internet merchants and other mom-and-pop firms that rely on third-party billing could miss out on sales via the USA''s No. 2 online credit card. And MasterCard holders could have a harder time using their cards at many sites that use PayPal and similar services, says Gartner analyst Avivah Litan.

    "The promise of the Internet was that anyone could set up shop and get paid," she says. "It''s not a level playing field anymore if this rule goes through."

    According to MasterCard, its 15,000 members, such as banks and credit unions, won''t be able to process credit card transactions using third-party services such as PayPal. They are used most often by small merchants who cannot afford to take MasterCard, other credit cards or checks.

    Even if the MasterCard change goes through, consumers would still be able to use the card to buy goods from Web sites that deal directly with MasterCard.

    The biggest third-party system is PayPal. It has about 13 million registered users, most of whom are small Web merchants or people who frequent auction sites.

    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 reason for the change, says MasterCard spokesman Alex Lau, is to protect financial institutions and card holders from fraud and identity theft.

    Based on the rule''s wording, it could affect other third-party services such as Yahoo''s PayDirect and eBay Payments, Gartner''s Litan says. Yahoo could not be reached. EBay says it does not expect to be affected because its services work through Wells Fargo.

    PayPal is working hard to get an exemption, it says. Catering to small Web merchants and individuals, PayPal will sign them up with fewer hassles and lower fees than banks. PayPal uses its agreements with big banks to process credit card payments for these customers. PayPal has been one of the few Internet initial public offerings in recent years. It closed Thursday at $24.46.

    PayPal spokesman Vince Sollitto says PayPal is "hopeful and confident" it will come to new terms with MasterCard. Visa says it still accepts PayPal. American Express still accepts PayPal and one other service.

    The change is likely aimed at porn and gaming sites that have higher occurrences of credit card fraud and identity theft, Litan says. One in 20 online consumers were victimized by credit card fraud last year, she says.

  2. #2
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    It just gets better and better.Somebody get this target off my back!

  3. #3
    Domain Addict / Formerly known as elbowcreek Thomas A. Rice's Avatar
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    Ummm.....if I had a mastercard, and they started interfering with my ability to buy stuff, I'd switch to Visa.....is Mastercard hiring ex-Overture employees now???

  4. #4
    ABW Founder Haiko de Poel, Jr.'s Avatar
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    It looks like MasterCard is acting like MasterMind [img]tongue.gif[/img] (Fred ... J/K).

    It is idiotic to loose all those transactions just because a possible case of fraud .... geez, the software is out there to make sure that orders are real, they are just being idiots!

    Haiko

  5. #5
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>they are just being idiots<HR></BLOCKQUOTE>

    Not only that, I really believe they are simply doing what big biz has always done.

    Squeeze the little guys out, PERIOD.

    F*** em, Don't let the B@$+@^6$ wear you down!

  6. #6
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    Talk about ironic - my PayPal Debit Card is a Mastercard!

    I find it difficult to believe that fraud loss is what is really behind this rule. I don't see where it is any easier to sneak a fraudulent purchase past a 3rd party processor if the third party takes the necessary precautions(I used to be in banking).

    Mastercard is shooting themselves in the foot if they can't work something out with PayPal and some of the other more popular and reputable third party processors.

    Many people have more than one card. I don't know about Yahoo but PayPal now takes Discover and AmEx not to mention direct cash transfers so this could just end up being lost revenue for Mastercard. I've found both as a provider and as a a customer that once a customer commits themselves to purchase a particular good or service from a particular party they are seldom deterred by the fact that they can't use a certain credit card if there are other payment methods are available.

  7. #7
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>It is idiotic to loose all those transactions just because a possible case of fraud .... geez, the software is out there to make sure that orders are real, they are just being idiots!

    <HR></BLOCKQUOTE>

    Haiko, I think what is really behind this is that Mastercard thinks it will be able to force all mom and pops to deal with them directly by getting merchant accounts which means a bigger cut for them and their banks. Of course they are in fantasy land because there are too many other ways to pay now.

  8. #8
    ABW Veteran Student Heyder's Avatar
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    Fraud is always a good excuse and it doesn't hurt to inflate numbers to make your case (1 in 20 my @ss)

    The fact is that x-thousands of small time merchants are not paying them for merchant accounts.

    Everything is always about money and issues like fraud are simply the excuse for the public to choke on.

  9. #9
    ABW Ambassador mailman's Avatar
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    Where does one find out about direct payments?
    Gerry

  10. #10
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    I also think it has something to do with merchant accounts. Its a way to get us small business owners to get a merchant account directly with them. In all honesty, most of my customers are Visa users anyway...if MC will no longer accept third pary processers, then I guess we won't be accepting MC...pretty simple formula, and I imagine we wouldn't be the only ones in that boat.

  11. #11
    ABW Veteran Student Heyder's Avatar
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    Yeah this isn't going to stick unless Visa follows suit.

  12. #12
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    Hello again all,

    It just so happens that I was just talking about this type of thing with a family friend over the weekend who is a Supervisor over at First Data Corp, (FDC), in the credit card fraud / risk management division, and he was telling me how their Melville, N.Y. , and Coral Springs , Fl offices are working hard to close down ALL third party payment providers .

    According to him, his company has got the power and reach to do it , and they have allready closed down many BIG $$$ third party merchant accounts in the past few months , making it almost impossible for them to get new accounts anywhere else !


    He babbled something about how they
    "just got Mastercard", and how they are going to close down places like Pay Pal , and other third-party payment providers .

    Why?
    Because they recently branched out to ecommerce from their long, ever-growing list of services, and subsidary companies
    ( Merchant account services for a huge list of major banks, ATM's worldwide, Western Union services , Production, encoding and activation services of new credit cards for all of Bank of America, National City Bank, and a HUGE list of other banks , etc., etc., etc. )

    Supposedly, according to this guy from First Data Corp., the percentage of internet credit card fraud is at the highest level with 3rd party merchant accounts , and the biggest bank losses are found with these type of merchant accounts .

    Ideally, they want to see one vendor to one merchant account , and if their stock price (FDC), and growth rate is any indication of their power and reach,
    Pay Pal may just be a thing of the past real soon , with Visa more than likely the next one to cut it's ties with Pay Pal .


    But then again, what do I know ? Maybe Mastercard IS making a mistake ?


    Lisa

  13. #13
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    In Canada a non-signature (internet) merchant account requires a deposit of approximately $15,000 vs as low as $0 through a third party. How many Mom and Pops are going to pony up that kind of cash to continue to accept MC?
    I know we can't [img]/infopop/emoticons/icon_frown.gif[/img]

  14. #14
    Domain Addict / Formerly known as elbowcreek Thomas A. Rice's Avatar
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    And, of course, there's nothing to say PayPal can't just create their own charge card (cough)

  15. #15
    ABW Veteran Student Heyder's Avatar
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    EC that was just on the tip of my tongue.

  16. #16
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    Realtity check for e-commerce...

    Increase the entry cost of new players, decrease the competition to existing players.

    Lucky I have a direct CC processing account.

    Sort of like, you know anyone starting a railroad of late. Even God couldn't afford the entry price.

  17. #17
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    Just thought of something...

    Suppose I make everyone an affiliate and I become the direct order taker and pay them thru Payroll Debit Card - ala clickbank, then the orders would be direct. Hmmmmmmm.

  18. #18
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    I think they're blowing smoke trying to start some sort of ball rolling in the credit card business. MasterCard hasn't been the leader in the credit card business since the early days and certainly are not as agressive as Visa and others. They are just testing the waters to see if the competition thinks it's a good idea or not. It's standard practice for business to issue idiotic statements such as this to see if they can gain support in their own industry. The other card companies are too interested in making a profit to bite at this one!

  19. #19
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    Here's an article that's more revealing of Mastercard's real motivation behind this move.

    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Litan said credit card issuers like PayPal because it allows smaller, less well-established merchants to accept card payments by charging lower user fees than the networks. PayPal might charge a retailer 3 percent of its card payment revenue whereas MasterCard would charge double that.

    However, once a company is on its feet and has been in business more than a year, MasterCard would prefer they drop PayPal and pay the higher fees that MasterCard charges, Litan said, adding that MasterCard has not made specific statements to that effect.

    The rule change would force PayPal clients to contract directly with MasterCard.

    "MasterCard banks are saying we don't mind companies going through PayPal, but once they build up a credit history...now is the time when they (MasterCard) want them to start moving into the banks," Litan said.

    <HR></BLOCKQUOTE>
    http://money.cnn.com/2002/04/19/news...ypal/index.htm

    Pure greed! I think it'll backfire on them.

  20. #20
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Pure greed! I think it'll backfire on them. <HR></BLOCKQUOTE>

    Agreed. That's how Visa got to be #1 in the first place. Visa has been running ads for years pointing out the fact that they are the only card being accepted at certain events or at certain attractions and venues; and "the most accepted card" - I don't think they are going to suddenly switch strategies.

    I think PayPal has gotten a little too big now and become much too popular for this not to backfire.

    [ 04-23-2002: Message edited by: eaglefire ]

  21. #21
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    This was in the CNN article :

    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>"Both Visa and American Express said they still accept PayPal. Amex also accepts one other service. "

    "American Express spokeswoman Judy Tenzer said the firm plans to continue its relationship with PayPal because it allows card holders more flexibility and because Amex already has policies in place that limit exposure to risky ventures. "<HR></BLOCKQUOTE>

  22. #22
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    Heh, I'm glad I'm accepting payments by e-gold. [img]/infopop/emoticons/icon_smile.gif[/img]

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