Litle Returns to Credit Card Processing With DM Focus

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An experienced hand is returning to the credit card processing business with the resurrection of Litle & Co.

Headed by industry veteran Tim Litle, the Lowell, MA, company is targeting mid-sized catalogers and e-commerce players with promises of more personalized service and lower fees than other credit card processing firms.

"The interesting fact for catalogers is the percentage they pay for credit card processing has increased faster than the percentage they pay for postage and printing," said Litle, who is company chairman.

Card processing companies typically charge 1.9 percent to 3 percent of the transaction. About seven years ago, when the original Litle & Co. was sold to First USA which is now Bank One's Paymentech, credit card payment processing charges were a little more than 1 percent.

Printing and postage costs are rising as well, but not in proportion to card processing fees. Such fees hover between 16 percent and 30 percent of the transaction revenue.

Litle will charge 1.9 percent to 2.6 percent for processing cards. This is a bit more competitive than rivals like First Data, First of Omaha and Paymentech, which accounts for more than half of direct marketing transactions.

Litle was in card processing for almost two decades before selling his company in 1995. He is largely credited with pioneering installment payments on Visa and MasterCard, which stagger the charges to the card instead of a lump sum.

Litle's systems back then also lowered chargeback write-offs, which are consumer-disputed amounts on card statements that ultimately are swallowed by merchants, from 2 First USA and is now Bank One's Paymentech percent to as low as 0.1 percent.

"In direct marketing, when goods are delivered without signature, the consumer can chargeback the item, claiming he or she never got it," said Chris Long, vice president and general manager of Litle.

"So that's why chargebacks are a much bigger issue for non-face-to-face merchants and why a processor working on behalf of direct marketers must have a sophisticated system to reduce chargebacks in such card-not-present situations."

StudentUniverse has already signed on as a client. The Watertown, MA, company handles discounted airfares for the student sections of travel sites and Other undisclosed Litle customers are in the loyalty and book clubs area.

A card processor collects the name, address and credit card number of the customer once a transaction is completed. That information is relayed to the card-issuing bank for money to be sent to the merchant. The processor handles issues relating to refunds, chargebacks, regulations and questions.

Following the money trail is important, Litle said, especially when there is potential for conflict of interest. The bulk of the processing fees go to the card-issuing banks.

"And obviously if the card-issuing banks are in charge of payment processing, they're reluctant to plead the merchant's case," Litle said.

Litle says the systems of many card processors are rooted in the 1970s and have a retail focus, while his company's 14-person staff will be in the direct marketer's camp.

When charging clients, Litle considers the size of the transaction, the creditworthiness of the merchant, the risk and the number of chargebacks.

In retail, the store clerk typically verifies the cardholder's identity. But because the card-not-present rule applies in direct marketing, risks are higher for the merchant and the authorization more complicated.

For example, a cataloger may accept a $200 order for three items, but ship only two of the items totaling $150. When the third item is ready to be shipped, the merchant again needs authorization. Litle claims his company's technology would make that authorization seamless, thus rendering redundant the piecemeal deposit of funds.


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