POS machine set code chaos analysis

Due to the lack of regulatory policies, the POS machine set-up phenomenon is now rampant among merchants. Statistics show that there were up to 1.6 million non-standard merchant names in 2014, including irregularities such as package or special billing. In the first half of 2014 alone, there were more than 180,000 merchants in the country that confirmed the existence of illegal code-setting behaviors, accounting for 40% of all illegal merchants.

At present, the bank implements a differential rate system for collecting credit card processing fees. Some merchants often sneak a bar on the consumer's consumption category in order to pay a lower card processing fee. This situation is called “set code” in the industry. Due to the prevalence of the set-up behavior, the market has been very vocal about the reform of the credit card rate.

A few days ago, the National Development and Reform Commission issued the "Preliminary Opinions on Improving the Pricing Mechanism for Bank Card Credit Cards (Draft for Comment)" (hereinafter referred to as the "Opinion Draft"), and the rate of credit card for merchants (excluding the bill of lading service) From 1.03% to 0.63%, the drop was 40%. Analysts pointed out that lowering the rate can improve the chaos in the offline payment market, but the remaining problems such as the POS machine set code have not been fundamentally resolved.

1. Adjust the bank card credit rate

The current fee collection fee for bank card credit card is mainly based on the Notice on Optimizing and Adjusting the Fees for Bank Card Credit Card Issued by the National Development and Reform Commission on January 21, 2013 (hereinafter referred to as the “Notice”). The fee processing fee for entertainment (including catering, hotel, entertainment, etc.) merchants is 1.25% (including 0.22% of the collection service fee); the general category (including department stores, wholesale, etc.) is 0.78%; the people's livelihood (including supermarkets, large warehouses) Stores, etc.) is 0.38%.

Due to the difference of the processing rate between the catering and Minsheng supermarkets by nearly 1 percentage point, many acquirers will provide lower-cost "MCC codes" (ie, merchant category codes) for merchants in the high-volume rate industry, resulting in cardholders. The name of the merchant on the person's bill is inconsistent with the actual merchant. This is the so-called set-up phenomenon.

Mr. Xiao recently found out that he had a purchase record in a large supermarket when he checked the details of the credit card, but he has never been to these places during this time. When he suspected that the credit card was stolen, Mr. Xiao also found that the amount of each credit card of the consumption details can be matched, and the total amount is exactly the same. Only the names of several merchants are inconsistent with the location of their actual consumption. After the explanation of the credit card customer service, Mr. Xiao realized that this is what the merchant called "set code" behavior.

The reform of the National Development and Reform Commission issued the "Opinion Draft" focused on the cancellation of the category of food and entertainment businesses, but did not directly cancel the credit card industry classification. The current category of merchants will be simplified into two categories. In the future, the “meal and entertainment” merchant category will be cancelled, and the catering, hotel, entertainment, and jewelry jewellery merchants will be merged into the “general category”. In short, it is to reduce the credit card rate (excluding the bill of lading service fee) of the restaurant and entertainment merchants from 1.03% to 0.63%.

2, POS machine set code chaos

Due to the lack of regulatory policies, POS machine set-up is now common among merchants. Statistics show that there were up to 1.6 million non-standard merchant names in 2014, including irregularities such as package or special billing. In the first half of 2014 alone, more than 180,000 merchants confirmed the existence of illegal code-setting behaviors, accounting for 40% of all illegal merchants. Especially in the service industry such as catering, the problem that the POS machine purchase order information is completely inconsistent with the information on the merchant's business license is particularly prominent.

The industry believes that the direct cause of the occurrence of the set-up behavior is that the bank card card uses a differential rate system, especially the rate imposed by the catering industry has been high, so many catering merchants will handle a different industry in order to reduce costs. POS machine.

At present, compared with the POS machine issued by commercial banks, third-party payment companies generally have POS machine outsourcing, and POS agent sales are rampant. Due to the price difference of handling fees between different merchants and different transaction types, a large number of "sets of code" and "set of channels" transactions were caused.

During the investigation, the author found that many POS machine agents claimed that they only need to provide personal ID card, mobile phone number and bank card account to apply for POS machine, regardless of whether the other party is a merchant or not, regardless of the merchant type and POS category. Is it consistent?

"To achieve the set of codes, you only need to virtualize a business license to operate." A POS agency agent bluntly told the author.

Another POS agent said to the author, "In the process of selling POS machines, it does not consider what type of customer the other party is. Finally, the rate of the customer's card swiping is determined by the channel, so that the set-up behavior will occur."

Generally speaking, the deduction rate of the POS machine is between 0.6% and 1.25%, and the agent can get a commission of about 0.25% from the middle. The larger the card amount, the more the division will be.

“The lottery is often not the merchant’s own fraud, but the dealers, third-party payment companies in order to save their own expenses or increase their profit share,” an industry source said.

A third-party payer said, "The revenue model of POS dealers is similar to converting retail to wholesale." He believes that third-party payment agencies can indeed provide merchants with lower rates, and then use the economies of scale to earn a certain price difference.

3. Unclassified pricing failed to materialize

Reducing the fee for catering card swiping has improved the chaos in the offline payment market, but the remaining problems such as POS machine set codes have not been fundamentally resolved.

The industry has always hoped to solve the "set of code" chaos in the current market by eliminating the classification pricing. However, this reform only reduced the rate and still failed to cancel the industry classification.

“There is a arbitrage space for the difference,” said a third-party payer. He believes: "According to common sense, in general, the final reform version is harder to change significantly than the "Opinion Draft", which indicates to some extent that the POS rate reform will not be realized once. 'Separation of borrowing and lending, uniform rate'. This means that the chaos of the bank card acquiring industry will continue. On the basis that the supervision is not fully implemented, the situation of the package and the rate will spread widely."

According to the analysts of Yinzhou.com, under the current classification of merchants, the mechanism of pricing separately according to the rate of return of each industry seems reasonable and reasonable, but there are loopholes. Because in the actual operation, as long as you do some hands and feet in the business classification, it is easy to achieve the mismatch between high-yield merchants and low fees, and the above behaviors are more difficult to supervise. Therefore, this pricing mechanism has to some extent breeds violations and illegal acts such as merchants' credit card cashing.

However, some analysts also said that considering the elimination of the classification pricing, there is a dilemma in the integration of the charging standards, and the low level of integration will have a greater impact on the income of the relevant operating agencies; if it is high or in the middle, it means lowering the catering and real estate. At the same time as the cost of merchants such as automobile sales, the charges for people's livelihood merchants have been raised, and the public may be equally unacceptable.

The above-mentioned joint-stock bankers believe that the flat rate will indeed hurt some merchants' interests. Before the unified rate is implemented, UnionPay should increase the penalties for POS violations.

4. The liquidation of the liquidation market will bring benefits to merchants.

In addition to POS card swiping transactions, at present, online trading methods such as QR code payment are highly respected by more and more merchants and consumers. This payment method also avoids the clearing service fee. To this end, the "Opinion Draft" proposes that it does not distinguish between "online and offline" trading channels, and uniformly releases the invoicing service fee, while the network service fee incurred during the liquidation through the bank card such as China UnionPay, the issuing bank service fee, etc. Continue to implement government pricing, and implement market adjustments through related expenses incurred in transactions through other channels.

According to the requirements of the National Development and Reform Commission, the splitting mode of credit card processing fee is 7:1:2 for the issuer, clearing institution and acquirer. The service fee of the acquirer can be within 10% of the standard set by it. float.

The market is more concerned about whether the regulatory layer will open the instalment service fee and will trigger a price war between the industries. The industry believes that the current visionary acquiring institutions are more to win the market with services and risk control, these services also bring benefits to the acquiring institutions, it is not impossible for the acquiring institutions to achieve zero charges in the future.

It is worth mentioning that since June 1st, the Bank of China's bank card clearing market has been officially opened, and the China UnionPay's more than ten years of monopoly era has officially ended. Prior to this, major third-party payment institutions 觊觎 clearing the market, looking forward to the opening of the liquidation market. "The opening of the clearing market will introduce competition, which is expected to improve service efficiency, reduce the cost of card printing, and bring more benefits to merchants." A payment industry expert analyzed.

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