Making Transactions ‘Fatter’

 

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In the early days, when computer networks and processing power of point-of-sale and payment terminals was limited by then current-technology, the focus was on efficiency. Payment transactions generally only contained a few data elements of data required to process the transaction, and implemented technically in a manner that saved as many bytes as possible.  This was important so all of this would work over a dial-up line and only send required data for transaction processing. Much of the payment message formats are tied to this legacy heritage to this date.

In the world of ‘Big Data’ there is a growing trend of providing fatter transactions, and providing more data in these transactions.  These transactions consist of more then the final amount of the transaction and payment information, but now with market basket data and line item detail.

What does this involve from a payments system perspective ?

1) Expanding message formats and APIs to include list of skus and UPCs and other meta-data of market basket items.

2) Processing against a catalog to perform various value added services and processing.

3) Parallelism in transaction processing as certain items require processing that would take too long if processed in a serial manner.

4) Development of systems including robust engines and processing logic leveraging Machine Learning techniques to mine and process such data.

This isn’t new in concept as it has been performed locally in retailers for sometime now, as well as in some level-3 purchase/commercial cards.  Now there is a trend of more value added services to enhance payment processing such as item based loyalty rewards, when such data is available you have more options and capabilities to enhance the payment transaction.

Is that Transaction Result Code Hard or Soft ?

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Soft Decline vs Hard Declines

We were discussing Result Codes (aka. Response Codes) during a call today. We were discussing both “Soft” and “Hard” Declines and the differences of them in the context of reviewing a payment interface and which transactions could be Store-and-Forwarded (‘SAF’).

Result codes are returned in Field or Data Element 39 in an ISO-8583 message.

We use the term “Soft” decline when a subsequent transaction request containing the same pertient information could recieve a different result.

These typically occur from a transient system issue or payment network issue and are  temporary in nature.

Examples of some result codes that come to mind:

  • “19″ Re-Enter Transaction
  • “91″ Issuer Unavailable or Switch Inoperative
  • “96″ System Malfunction or System Error

Hard declines contrast from Soft declines in that on a subsequent transation request, the responses are repeatable; you will recieve the same result.

Idempotent Transactions

We recently were talking a lot about reversals this week in the OLS HQ, especially time-out reversals. Andy even mentioned his ever so famous “Refunds are not Reversals” So I was happy we were talking about reversals and not refunds ;)

Situation: What happens if you send a financial transaction to a payment system and we don’t get a response back? You are obligated to reverse it and keep on trying to reverse it (reversals are normally Store-and-Forwared (SAF) until you get a response back that the reversal was accepted.

You would be surprised how many implementations of payment software do not implement this important step, a disaster of not performing this is duplicate charges to cardholders during system or communication issues. This needs be be implemented in each path of a transaction. Terminal to Gateway, Gateway to Switch, Switch to EndPoint. for example. Many applications get-by, by ignoring reversals on Credit product types where cardholder have large open-to-buys and on Authorization Only Transaction Types. Reversal for Debit and and other financial transaction sets are a must.

On our Switch we handle Reversals with Idempotence. Wikipedia defines this as:

Idempotence ( /ˌaɪdɨmˈpoʊtəns/ eye-dəm-poh-təns) is the property of certain operations in mathematics and computer science, that they can be applied multiple times without changing the result beyond the initial application. The concept of idempotence arises in a number of places in abstract algebra (in particular, in the theory of projectors and closure operators) and functional programming (in which it is connected to the property of referential transparency).

Another website describes the problem as:

Problem: Network and server hardware failure can lead to lost messages, resulting in cases where a service consumer receives no response to its request. Attempts to reissue the request message can lead to unpredictable behavior within the service and the service consumer logic.

Solution : Design service capabilities capable of safely supporting repeated message exchanges.

Our implementation of reversals can handle multiple attempts of a reversal, we only process one but will accept any number of them. This is very important, Reversals are not “approved” or “declined” as the endpoint may or may not need to unwind anything. You as a caller don’t know whether the timeout was actually not processed at all, or if it was processed but you just didn’t get the response back.

We have the following ISO8583 v2003 based result codes in OLS.Switch for this so we can note the difference.

4000 Advice Accepted

4999 Advice Accepted – no Action Taken

That also means your logic is very simple – “send this reversal repeatedly on an interval until I get a response”

Q&A: Some questions on Payment Terminals

From the Mail Bag:

“I have a couple of questions you can help answer. Is it normal for a manufacturer to program POS terminals themselves? I have received contradicting answers to this question. Also, from the terminal, the [encrypted] cardholder information is sent to a processor. Do processors possess unique internet addresses that they give to the merchant to where the terminal can send this information?”

Great questions – let me take a stab at answering them:

“Is it normal for a manufacturer to program POS terminals themselves?”

It really depends – There are two models in play here, a) you can pay a terminal manufacture to development a terminal application, b) terminal manufactures also generally will sell SDKs, Software Development Kits, as well as required or optional training courses for independent developers to write payment applications for. From my personal experience, we have worked with both terminal manufactures as well as independent developers, as well as wrote very few in house.

” Also, from the terminal, the [encrypted] cardholder information is sent to a processor. “

This is true in certain situations and depending on the application, terminal, and communication methods. Most dial terminals send cardholder information in the clear across a private dial line. Many IP/SSL terminals will just use SSL encryption as a transport mechanism for encryption/security. More recent generation of terminals and those that implement End-to-End Encryption (E2EE) or Point-to-Point Encryption will use both a data level and transport level encryption/security. Our message specifications and when we can enforce it, we always try to use tokenization, or surrogate numbers for subsequent transactions (Refunds, Captures, Voids, Reversals, – do not require the full PAN to be passed in many of our systems that we develop)

“Do processors possess unique internet addresses that they give to the merchant to where the terminal can send this information?””

Payment Processors and/or payment gateways will provide either dial 800 numbers for dial payment terminals or an IP address or https/SSL based URL for IP/SSL based terminals to send transaction data. OLS has integrates to various dial concentrator devices/networks – Hypercom NAC, TNS, HB.Net, now Phoenix Managed Networks, for Dial delivery. We have developed our own secure SSL Transaction Servers with various interface options for our customers, IP SSL Sockets, HTTPS Post, RESTful as well as SOAP based web services.

Q&A: What is the difference between a Cash Dispersement or a Cash WithDrawal Transaction

Q & A Time from the mailbag:

Scott Asks:

In MasterCard, transactions Cash Disbursement and Withdrawal are regarded as two different transactions (They have different transaction type codes). What are the differences between these two transactions? What are their individual usage scenario ? “

Great question, A cash withdrawal is generally associated to a ATM or Debit Transaction where the full transaction amount can be immediately debited by the Card Issuer and Cash Provided to the Card Holder. While a Cash Disbursement transaction is generally something a Card Holder can request at a financial institution that he may not have a relationship with – Think of a cash advance of your Visa or MC card at a Bank, or if you have prepaid card or payroll card that you need to get money or cash from at a credit union that you don’t have an account with.



SSL / VPN / Direct Connection connecivity options

I came across this exchange discussing connectivity when reviewing some specifications for an interface that we are writing:

“Since both companies will utilize web services for the exchange of information, it is proposed that we use SSL instead of a VPN or Direct connection. SSL (https over port 443) provides security by encrypting the communications channel. This arrangement provides all the security of a VPN or Direct connection. Plus it requires less network configuration, less maintenance, greater flexibility (in case platforms move on either end) and eliminates a VPN or direct connection as a potential point of failure.”

I have a lot of problems with this.

1) Encryption isn’t security.

2) I find it hard to dispute that: Direct Connection > VPN > SSL over internet from a general security perspective.

3) SSL used in this manner lacks authentication, compared to a IP SEC point-to-point VPN (AH/ESP)

4) Exposing a web server to the internet introduces the risk of web server vulnerabilities, application layer vulnerabilities, among others ever more recent SSL vulnerabilities[1]. (Note that source based ACL’s are not recommend here either, nor are client side certificates for authentication)

5) The concept of “least privilege” from a networking perspective is not followed – only two parties need to talk to each other, why open it up to the world to attempt to connect to ? Another interface stated “We restrict all traffic by third party connections to the least access needed to support business. ” <– I like this much better.

6) SSL over the internet will require our customer to expose a secure internal system to the internet, when it was designed to have very controlled network access, as compared to a VPN and general firewall rules for network control.

7) I haven’t discussed direct connections or leased lines, mostly due to the nature and volume of this application. Normally this is our first choice for high volume, sensitive transaction data to third parties with multiple data centers. Where we use 2 leased lines on different carriers to different data-centers.

My Vote for this? SSL over a VPN – (Defense in depth) Could SSL be used ? Sure but we would need to add a list of controls around its implementation and quite possibly add a layer of applications (proxy the requests) to design around this which is more work and has a higher change of configuration failure then a standard site-to-site VPN connection.

[1] http://www.theregister.co.uk/2011/04/11/state_of_ssl_analysis/print.html

Transaction Types 101

Here is a list and definitions of common payment card transaction types:

Authorization

The Authorization transaction is typically used by a merchant to obtain the authorization of a transaction amount as a pre-approval for the purchase of goods or services later during the fulfillment process. Authorization transactions are typically submitted for authorization and then funds are held by the issuer until that transaction is captured or the authorization is reversed or expires. An example can be found with online retailers who initiate an Authorization transaction to guaranteed funding by the card issuer prior to the shipment/delivery (i.e. fulfillment) of the goods. An “Authorization” is also referred to as an Auth-Only transaction.

Sale

A “Sale” transaction is used by merchants for the immediate purchase of goods or services. This transaction completes both the authorization and capture in a single transaction request. The Sale transaction is an Authorization and Capture transaction that if approved is automatically included for settlement.

Forced Sale

A “Forced Sale” is a transaction initiated by a merchant with the intent of forcing the posting of the transaction against the customer account without receiving prior authorization by the card issuer, or receiving a voice authorization code from the merchant acquiring call center. An example would be when a merchant’s terminal is offline, requiring the purchase of goods being completed without receiving online authorization by the card issuer. Or they received a Voice Approval. In these cases the merchant would enter the transaction details and forward this Forced Sale transaction to the card issuer with the expectation of receiving funding for the goods or services rendered. A forced sale does not require a matching authorization. Forced Sales are also known as Off-Line Sales.

Refund

A Refund allows a merchant to refund a previously settled transaction and submit the refund for processing. Refunds are only allowed for financial transactions (Sale and Captured) and are typically limited to the original authorization amount, or a lesser amount, in some cases, multiple partial refunds up to the original transaction amount. Some systems incorporate a feature called Matched Refunds. Matched Refunds must match back to an original transaction to help control fraud. “ Refunds” are also sometimes referred to as a “Credit” transaction.

Void

Void transactions can reverse transactions that have been previously authorized or approved by the card issuer and are pending settlement. Merchants will only be allowed to void transactions that are in an open batch (pending settlement). Sale or Refund transactions are the most commonly voided transaction types.

Capture

The Capture transaction will allow merchants to capture a previously authorized transaction that is pending settlement, and submit it for clearing and settlement. An example is when online retailers who initiate an Authorization transaction to reserve funds by the card issuer prior to the shipment/delivery (i.e. fulfillment) of the goods, and then once fulfillment has been completed the transaction will be captured and submitted for settlement. A “Capture” is also referred to as a Pre-Authorization Completion transaction.

International Merchants with EMV no longer need to have PCI Compliance validated

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From Visa Bulletin today: Visa Introduces Technology Innovation Program for Merchants, Visa announces that:

Effective 31 March 2011, Visa will allow qualifying merchants outside of the United  States to discontinue their annual Payment Card Industry Data Security Standard (PCI DSS) revalidation assessment.

Note that this doesn’t mean that if you use EMV you are exempt from PCI Compliance (more on this below)

It is nice to see that Visa is rewarding investments in EMV and Card Authenication with a potential of lower PCI compliance costs:

Many merchants have invested time and money in the purchase, deployment and enablement of EMV POS terminals. These merchants have also invested in annual PCI DSS compliance assessments, which may require the use of a Qualified  Security Assessor and can be a significant expense. Visa is introducing the Technology Innovation Program to assist merchants in reducing the costs associated with annual PCI DSS validation.

If you are a non-US merchant and perform the following you are a qualified merchant:

1. The merchant must have validated PCI DSS compliance previously or have submitted to Visa (via their acquirer) adefined remediation plan for achieving compliance based on a gap analysis.

2. The merchant must have confirmed that sensitive authentication data (i.e., the full contents of magnetic stripe CVV2 or PIN data) is not stored, as defined in the PCI DSS.

3. At least 75 percent of the merchant’s transaction count must originate from enabled chip-reading device terminals (i.e., contact and/or dual interface contact/contactless terminals).

4. The merchant must not be involved in a breach of cardholder data. A breached merchant may qualify for TIP if it has subsequently validated PCI DSS compliance.

What about US Merchants ?

Visa has this to say about this program in the United States:

Despite industry interest in chip and dynamic data authentication, the program is not currently available in the United States because recent debit card regulation has cast uncertainty in the marketplace. Visa Inc. may consider implementation of TIP in the United States at a later date based on evolving environmental circumstances.

I think this announcement adds a new dynamic in the form of a potential incentive as it relates to EMV adoption in the US. US Merchants may now, in the near future, have an incentive or a discount to consider for EMV implementation (assuming implementation of  EMV processing infrastructure) in the form of less annual PCI compliance validation costs in the form of on-site audits to offset implementation of new card acceptor devices and updated payment software to support EMV.

If I use EMV we don’t need to be PCI compliant !!!

This is a fallacy that I fear that will echo. This announcement relates to the validation of compliance, not for on-going compliance to the PCI DSS, as stated by Visa below:

Although Visa may waive the annual validation requirement for qualifying merchants, all merchants are still required to maintain on-going PCI DSS compliance. Acquirers retain full responsibility for merchants’ PCI DSS compliance, as well as responsibility for any fees, fines or penalties, which may be applicable in the event of a data breach.

 

 

 

 

Whats the difference between Current and Available Balance ?

Andy and I were having a conversation with a group that we are working with on a new project.  When discussing integration to our API, transactional sets and fields within them. One of them asked the following question:

In the Balance Response message that you send us, can you tell me the difference between the “AvailableBalance” field and the “CurrentBalance” field?

 

Our response:

 

Current balance is the real, financial balance.
Available balance is the current balance minus any holds.
On the open loop side…
An auth does a hold – it affects only available.

A completion releases the hold and decrements both the available and current by the final transaction amount.