Debit cards have two modes: signature-based debit card, and PIN-based debit cards. When you pay with a debit card in a physical store you swipe your card, and are then instructed to choose between Credit or Debit. If you choose Credit, the payment goes through the card network (e.g. Visa, Mastercard, American Express) to your bank account, your checking account (the account linked to the debit card) gets deducted immediately, and the merchant prints out a receipt which you sign for authorization. The process is very much like a credit card, except that the money comes out of your linked checking account instead of a credit line that the issuing bank (the bank that issued you the credit card) has for you.
On the other hand, if you choose Debit, the payment goes through the Interlink network (which, confusingly, is owned by Visa), and you’re asked to type in your 4-digit PIN number to verify your purchase, and no signature is necessary.
In most cases, a debit card issued by your bank allows you to use both modes: PIN and Signature. It is at the point of sale (the cash register, for example) that you’re prompted to select which mode to use: the Signature mode (by swiping a debit card and selecting, counter-intuitively, “Credit”), or the PIN mode (by swiping a debit card and selecting “Debit”). Merchants prefer you use the PIN number because it costs them less in fees, which is why they make selecting the Signature mode more confusing by marking it as “credit” despite that fact that it’s still a debit card. For the same exact reason (the higher fees), the card’s issuing bank (the customer’s bank) prefers you use the signature method and will often offer you rewards for using it in that fashion.
Online, there’s no way to enter a PIN number, so with cards that are issued by Visa/Mastercard/etc., you can either use a standard credit card, or use a debit card like a credit card, which means that it is used in signature mode (and the merchant gets your “digital signature” on the website by getting all your personal details).
Boleto Bancário is a payment method popular in Brazil which is gaining wide acceptance for online transactions. Unlike credit cards, debit cards and checks, all of whom provide a direct or indirect route to the customer’s bank account and potentially a route to identify theft and fraud, the Boleto Bancário grew as a way to avoid fraud and, in an era of mistrust of credit in Latin America, to avoid using credit when shopping online.
The Boleto Bancário online payment process starts with a customer placing an order on the merchant’s website and chooses to pay by Boleto Bancário. The customers are presented with a form where they fill out their payment details, and they can then opt to either pay immediately through an online banking option or to print out the filled form, bring it to a bank and pay for it with cash. When the payment is made at the customer’s bank, a confirmation of completed payment is sent to the merchant’s payment processor, and the merchant is notified. A couple of days later, the funds are transferred from the payment processor into the merchant’s bank account.
By providing the option to pay for goods and services online with cash, Boleto Bancário has opened the doors of online commerce to consumers without credit cards and those wary of the fraud risks associated with other online payments. This benefits merchants by allowing them to sell to a wider range of customers than were available before. An additional benefit to merchants is that the payment is irreversible by the consumer and chargebacks cannot be issued.
During my employment with various employers over the years, the subject of bonuses tied to MBO performance comes up often as an employee concern. MBO, or “Management By Objectives”, is a management style that tries to encourage certain behavior by rewarding it with bonuses. Most of my employers would have a quarterly MBO list of tasks they should be doing, and at the end of each quarter a score would be given for each employee for the completion of their MBO tasks. That score (usually a percentage) would determine how much of the total possible bonus they would actually receive that quarter. For example, if the total possible bonus for a given quarter is $2000, and the employee completed 70% of their total MBO task list for the quarter, then they would get as a bonus only $1400.
In most start-up environments that I worked at, employees usually have trouble allocating time during their busy, overscheduled workweek to working on their MBO tasks. Thus, some employees would try to cram these tasks at the end of the quarter, some will do them from home on their spare time, and some will not get around to doing them and complain about lack of time. The approach I’ve seen so far from managment is to lay the blame on the employee’s time management skills by saying that if their bonuses were important to them, they would find time to do their MBO tasks.
It always amazed me that the consequences of this statement never occured to them. Essentially, they were telling the employees the following: Your regular salary (a fixed amount, as long as you’re employed under the same contract) is not dependent upon the completion of specific tasks during a given quarter. So if you remain employed and perform at an adqeuate level that does not justify you getting fired, you’ll be getting this money regardless. However, the MBO bonus is tied to specific tasks that either will or will not get performed, and thus you either will or will not get your bonus. So, for an employee with an analytical mind and a desire to get the bonus, these tasks instantly become top priority.
Usually, management insists that day-to-day work would not be included on the MBO list, because employees should not get a bonus doing something that they’re already getting a salary to do. In fact, very often MBO tasks are non-critical,”nice to have” items. But for an employee trying to maximize their monentary compensation, this immediately means that the day-to-day tasks take a back seat to the MBO tasks.
Credit card chargebacks are the return of funds back from the merchant to the credit card owner, forced by the credit card issuing bank. The chargeback mechanism was put in place to protect consumers and is regulated by the Federal Reserve under the Electronic Funds Transfer Act. A consumer initiates a chargeback by contacting the credit card issuing bank a filing a complaint about one or more items on their credit card statement. Chargebacks are the consumer’s weapon against fraudulant merchants and in cases of identity theft where the credit card was stolen and used by an unauthorized party. Once filed, the credit card’s issuing bank will withdraw the money back from the merchant to which it was paid and credit it back to the consumer who owns the credit card.
Once a chargeback claim is filed by the consumer and sent to the credit card’s issuing bank (e.g. Bank of America), the issuing bank will send it to the approprate credit card network (e.g. Visa). The credit card network then forwards the chargeback claim to the merchant’s payment processor (the body that processes credit card payments on behalf of the merchant), which withdraws the money from the merchant’s bank account and sends the merchant a notice about the chargeback (typically, by fax). The merchant then has 14 days to dispute the chargeback, otherwise the money is permanently returned to the consumer.
Chargebacks can be caused by technical reasons (e.g. the credit card has insufficient funds), clerical reasons (e.g. duplicate charges caused by mistake) or fraud claims by consumers, where consumers claim to have not made the purchases disputed by the chargeback. Typically fraud is seperated into two types: true fraud, where consumers intentionally dispute purchases they’ve made, and “friendly fraud”, where consumers don’t remember making a purchase and file a chargeback claim by mistake.
In case of a chargeback claim, the merchant needs to prove that the consumer did indeed receive the good/service for which the payment is disputed. To do this, the merchant needs to keep track of their interaction with all their customers: phone calls, mail sent and received, store visits and online website activity. For online merchants fraud is harder to fight because of a lack of physical signature on the purchase receipt, so it is usually advisable for them to keep track of every page the consumer visited, as well as other information such as the IP addresses from which they visited the site.
For online purchases, there are several indicators of possible fraud that the merchants should keep tab on:
- Distance between the credit card’s billing address and the geographical location from which the consumer is logging in to the website (this can be inferred from the consumer’s computer’s IP address).
- Purchases done through proxy servers which anonymize web traffic and hide the originating computer’s IP address.
- Purchases done with a free email address provided by email providers who’ve had a high percentage of fraud in the past.
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