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Jump Start Program Learning Organization

Confidential & Proprietary to First Data Corporation Developer: 10 Rev 03/03/2011 V2.0 Agenda

– Card Brands – Card Types – The PiProcessing Flow – Selling Merchant Processing – Knowledge Check

Confidential & Proprietary to First Data Corporation. 2 Credit Card’s 5 Major Brands

• Visa Credit Cards ‐ credit cards issued by Financial Institutions that are members of Visa, cards carry the Visa Logo on the front of the card. • Master CdCard Cre dit CCdards ‐ cards idissued by Financ ia l IiiInstitutions that are members of MasterCard, cards carry the MasterCard logo on the front of the card. • Credit Cards ‐ cards issued by American Express , or their partner Financial Institutions, cards carry the American Express logo on the front of the card. • Discover Credit Cards ‐ cards issued by Services, or their partner Financial Institutions, cards carry the Discover or Novus logo on the front of the card. • JCB Credit Cards (Japanese Credit Bureau) ‐ cards issued by Financial Institutions (usually foreign Financial Institutions), cards carry the JCB logo on the front of the card.

The common characteristic associated with each type of credit products: • Each credit instrument used to make the purchase/ is associated with a line of credit that must be repaid to the issuing financial institution. Funds are not pulled out of a Bank or Government funded account.

Confidential & Proprietary to First Data Corporation. 3 What Do They Mean By Card T ype? Type of Card – Type refers to the card presentdted by the consumer at the time of purchase. – Card types are Consumer, Commercial, Signature, and Rewards card products. – These have additional breakouts within such as Signature, Infin ite, Corporate, Purchhiasing, etc. – See Next Slide for a comparison of the card types.

Confidential & Proprietary to First Data Corporation. 4 Card Types and Descriptions

Card Type Product Type Description Traditional Credit Consumer Credit The basic Visa card type where funds are deducted against a consumer line of credit with the issuing bank.

Traditional Rewards Consumer Credit The first level of Visa “consumer rewards”, this card grants the cardholder specific sets of “rewards” for purchases made on the card. Common rewards include but are not limited to airline miles, cash back and merchandise. Signature Card Consumer Credit The medium level of Visa “consumer rewards”, this card grants the cardholder an enhanced set of rewards over and above those given to “Traditional Rewards” cardholders.

Signature Preferred Consumer The highest level of Visa “consumer rewards”, this card is considered Credit the most exclusive Visa card product in the market and offers its hold ers additional lllevels of service incl ldude 24/7 dedi cat ed customer service and travel arrangement privileges. Signature Debit Consumer Debit Commonly known as either a “Check Card” or “”, signature (offline) debit cards deduct funds from a consumers “bank./dda” account. It is also important to note that “pre‐paid cards such as “Gift” and “FSA/HRA” cards are considered “Signature Debit. PIN Debit Consumer Debit Commonly known as either a “Check Card” or “Visa Debit”, PIN debit (online) cards deduct funds from a consumers “bank/dda” account. Consumer enters a Personal identification Number (PIN) which starts the authorization process. Commercial Commercial Comprised of Business, Corporate, Fleet and Purchasing, Commercial cards are issued to businesses to make purchases.

Confidential & Proprietary to First Data Corporation. 5 The Transaction Process

How does the merchant get paid?

Confidential & Proprietary to First Data Corporation. 6 Three Steps to Card Processing The following presentation explains how credit card transactions are processed and settled. • When a cardholder uses a credit card to purchase merchandise, the transaction moves thhhrough a process that ilinvolves authihorizati on, clearing and settlement. • Each step of the process involves an exchange of transaction data and money that must be settled and balanced. • This process ends when the cardholder pays for the merchandise listed on his/her monthly statement.

Confidential & Proprietary to First Data Corporation. 7 Five Actors on the Stage

Cardholder –The consumer who owns the card.

Merchant – An entity that contracts with an Acquiring Processor to originate transactions.

Acquiring Processor – An entity that communicates to Visa to gain approvals to complete cardholder transactions. First Data is an acquiring processor. Visa ‐ The largest association member. Visa is the largest , enabling 14,000 financial institutions to process over $1 trillion in annual transaction volume. Other associations are MasterCard, Discover, American Express, or JCB. Issuing Bank – The financial institution who issues the credit card. For example, , Chase, .

Confidential & Proprietary to First Data Corporation. 8 The Credit Card Transaction Process Step 1 ‐ Authorization • Cardholder makes a purchase using a credit card. The merchant must obtain authorization for the purchase from the bank who issued the card. Step 2 ‐ Clearing • If the transaction is approved, the next step is clearing. In this phase, the Issuing Bank obtains basic transaction data from the merchant such as the amount, date and location of the purchase. This data is then sent to the credit card issuer for posting to the monthly credit card statement. Step 3 ‐ Settlement • In the fina l step, settlement , the fdfunds are collec te d from the IiIssuing BkBank and transmitted to the merchant. When a consumer uses a credit card, the merchant does not receive payment at the time of purchase. The bank credits the merchant’s bank account. The bank then sends payment to the processor who sends the payment to Visa. The cardho lder receives a monthly stttatement and settles with Visa for purchases made using the credit card.

Confidential & Proprietary to First Data Corporation. 9 Credit Card Transaction Flow

CHALLENGE:Credit Can Card you identifyTransaction the Three Steps: Flow Authorization, Settlement, and Clearing?CHALLENGE: Can you identify the Three Steps: Authorization, Settlement, 1. Mercandh htan Clearing?t 2. First DDtata 3. Visa sends 4. IIissuing BBkank swipes 1card.. Merch htant receives2. First infoDDtata 3‘Open. Visa sen tod sBuy” 4. IIissusendsing BBkan approvalk or swipes card. andreceives requests info ‘Openrequest to Buy” to sends approvaldecline or to Visa. and requests request to decline to Visa. ‘Op‘Oenpen To To Bu Buyy”” IssuinIssuing Bank.g Bank. fromfrom Visa. Visa.

8. Visa 8.request Visa request 7. 7.Merchant Merchant 6. 6.First First Data Data 5. Visa 5.sends Visa sends funding from batches sends approval approval or fundingIssuing from Bank. terminal,batches sends orsends decline approval to decline toapproval First or Issuing Bank. terminal,$ request sends to theor Merchant. decline to Data.decline to First $ requestFirst Data to. the Merchant. Data. First Data. 9. Issuing Bank 10a. Visa funds 11. First Data funds funds Visa. First Data. . 9. Issuing Bank 10a. Visa funds 11. First Data funds funds Visa. 10b.First Issuer Data. bills Merchant account. cardholder. Confidential & Proprietary to First Data Corporation. 10 10b. Issuer bills cardholder. Confidential & Proprietary to First Data Corporation. 10 CreditCredit Card Card Transaction Transaction Flow Flow ANSWER KEY: Authorization, Settlement, and Clearing ANSWER KEY: Authorization, Settlement, and Clearing

1. Merc1.h ht Manerct h htant 2. Fi2.rs Fit rs DDtt DDtataata 33. Vi. Visasa sen sends ds 4. IIissu4ing. IIissu BBkaningk BBkank swipesswipes card. card. receivesreceives info info ‘Open‘Open to toBuy” Buy” sendssends approval approval or or and requests request to decline to Visa. AuthorizationAuthorization and requests request Authorizationto Authorization decline to Visa. ‘Op‘Oenpen To To Bu Buyy”” IssuinIssuing Bank.g Bank. from Visa. from Visa.

8. Visa request 7. Merchant 6. First Data 5. Visa sends 8. Visa fundingrequest from 7.batches, Merchant sends sends6. First approval Data approval5. Visa or sends Clearing fundingIssuing from Bank. Settlementbatches,$ request sends to sendsor decline approval to Authorization declineapproval to or First Data. Clearingthe Merchant. First Data. Issuing Bank. Settlement $ request to or decline to Authorization decline to First Data. the Merchant. First Data. 10a. Visa funds 9. Issuing Bank 11. First Data funds First Data. funds Visa. Merchant account. Settlement 10a. Visa funds 9. Issuing Bank 10b. Issuer bills 11. First Data funds Firstcardholder. Data. funds Visa. Clearing Merchant account. Clearing Confidential & Proprietary to First Data Corporation. 11 Settlement 10b. Issuer bills

cardholder. Clearing Clearing Confidential & Proprietary to First Data Corporation. 11 Keep This In Mind TimelinessTimeliness requirement requirement Timeliness Timeliness – Refers to the time between the Authorization date and the – RefersSettlement to the Date time between the Authorization date and the Settlement Date • To obtain the best rates, transactions should meet a 2 day settlement • Totime obtain frame the. best rates, transactions should meet a 2 day settlement time frame. – Example: Auth Date 08/01, submitted to First Data 08/02, Submitted to – Example:Association Auth 08/03 Date 08/01, submitted to First Data 08/02, Submitted to Association 08/03 • Generally, the next best rates are at a 3 day settlement time frame • Generally,with some the programs next best extending rates are slightly at a 3longer. day settlement time frame with some programs extending slightly longer. – Example: Auth Date 08/01, submitted to First Data 08/03, Submitted to – Example:Associ a ti onAuth 08/04 Date 08/01, submitted to First Data 08/03, Submitted to • GreaterAssoci a than tion 08/04 3 will generally result in the worst Interchange program • Greaterbeing assessed. than 3 will generally result in the worst Interchange program being– Example: assessed. Auth Date 08/01, submitted to First Data 08/04, Submitted to Association 08/05 – Example: Auth Date 08/01, submitted to First Data 08/04, Submitted to Association 08/05 Confidential & Proprietary to First Data Corporation. 13

Confidential & Proprietary to First Data Corporation. 13 Timeliness requirement Impact of Timeliness – Authorization expires after 30 days. – Simply put… transactions with an invalid authorization (longer than 30 days), no authorization, or transactions that have been reauthorized can be charged back by the issuer immediately without recourse. – Customers often question the charges because they are long forgotten by the time they appear on thhieir statement. – In addition, Risks should be weighed as “ fees” as outlined within the Merchant Processing Agreement could apply. – MasterCard Issuers can also assess a $25 fee per chargeback for unauthorized transactions.

Confidential & Proprietary to First Data Corporation. 14 Selling Credit Card Processing Credit Card Acceptance Benefits

Merchant Benefits Consumer Benefits • Multiple ppyayment options • Potential for increase sales. catering more toward the • Prevention of lost sales. customers preferred method of • Higher average ticket. payment by accepting credit • Speed of checkout. cards, debit (online and offline) as well as checks. • Ease of use. • Fast and convenient payment • Reduced risk of fraud/losses metho ds. associated with cash and check.

• Accepting both credit cards electronically offers the merchant the ability to accept more forms of payment with reduced risk, at the same time reducing the delay in funding. • Customers are loyal to a business where they can choose their preferred ppyayment methods.

Confidential & Proprietary to First Data Corporation. 16 “Hello, Mr. / Ms. Merchant….” Sample Opening Statement “Hello, Mr. / Ms. Merchant, my name is (AE) with (ALLIANCE) Merchant Services. We process more electronic than any other merchant processor in the U.S. We have developed a custom program for (Auto Repair, Salon, Hotel, Restaurant, etc…) merchants that can lower processing cost, reduce banking fees, and bring more new customers in every month! I would like to meet with you to discuss how our program can help you compete more effectively. When would be a good time to set up a brief meeting? “ Sample Closing Statement “So I am prepared, could I get a copy of your most recent statement? Here is my card. I have written our meeting time down on it for you. Thanks for taking the time to see me. Have a good day.”

Confidential & Proprietary to First Data Corporation. 17 Getting a Statement For a merchant who is already processing, why is it important to ask for a merchant’s statement?

• Prepare yourself before you meet with your merchant for the appointment by analyzing a recent merchant statement. • Look for fees and charge backs that are currently costing the merchant. • You can now EDUCATE the merchant during the appointment on processing as well as point out how First Data can save him/her costs.

Confidential & Proprietary to First Data Corporation. 18 Objections

“We don’t do that many credit cards / we are too small to mess with.” We work hard for all of our merchants big and small. Allow us the opportunity to earn your business We would be honored to have you as a valued client. “What’s your rate?” Rate is only one component of the total cost. If we can give you a better return every month isn’ t that what is most important. More money in your pocket month after month! “A ton of you guys have looked at my statement and never can do any better. ” First Data is a leader in the industry if there is someone who can find a better way it’s us. Let the best of best show you why over 2 million merchants process with us.

Confidential & Proprietary to First Data Corporation. 19 Who are Our Competitors?

• Elavon Global Acquiring Systems • Heartland Payment Systems • Fifth Third Bank • RBS WorldPay. • Chase Paymentech

Confidential & Proprietary to First Data Corporation. 20 Summary You have just learned how credit card transactions are processed and settled.

Each step of the process involves an exchange of transaction data and money that must be settled and bblalance d.

Let’s check your understanding.

Confidential & Proprietary to First Data Corporation. 21 Knowledge Check Multiple : Select the best answer from the options. 1. Which role does First Data play in the Credit Card transaction process?  A. Acquiring Processor B. Association C. Issuing Bank D. Merchant

2. Which term best describes the clearing step? A. Approve B. Post C. Process D. Transmit

3. What is the merchant benefit of offering multiple payment options? A. Three‐in‐one POS terminals B. Reduced risk of fraud C. Customer loyalty to their business

Confidential & Proprietary to First Data Corporation. 22 Knowledge Check Answer Key 1. Which role does First Data play in the Credit Card transaction process?  A. Acquiring Processor B. Association C. Issuing Bank D. Merchant

2. Which term best describes the clearing step? A. Approve B. Post C. Process D. Transmit

3. What is the merchant benefit of offering multiple payment options? A. Three‐in‐one POS terminals B. Reduced risk of fraud C. Customer loyalty to their business (Why?)

Confidential & Proprietary to First Data Corporation. 23 Credit Card 101 MerchantPro Express 1.888.333.1374 www.merchantproexpress.com First Data Learning Organization