transaction & I suspect that iTunes has a very low number of returns
per 1,000 orders.
It Apple "secures" the money, then grabs it later, they would be
doubling the # of cc processor transactions.
Haven't thought much about it, but I would prolly design the system as
follows:
For 1st n purchases by a customer, authorize each transaction as it
occurs (possibly at a loss -- processing fee exceeds profit)
Monitor the above to see if it makes a difference, if not bypass it!
Once sufficient history for each customer has been accumulated,
process his orders as batch orders:
Hold the iTunes purchases for each batch order customer until:
1) x hours elapse
2) y dollars are accumulated
(both of the above are adjustable)
When either of these trigger, process the cc authorization
So, they tend to maximize profits, minimize cc processor transactions.
And their exposure is limited to some low dollar amount (say 25
dollars), for some small period of time (say 8 hours), with proven
repeat customers only.
The low dollar amount transactions would tend to get approved by the cc
processor, even if the cardholder account is near or slightly over
limit.
In the event of a problem refusal, they (Apple) have the ability to
immediately flag a customer to prevent any further transactions.
Finally, because I know how apple works (Apple dealer for 11 years), I
suspect that Apple has negotiated with the cc processor and the music
providers to share the risk:
1) Apple will guarantee a certain high percentage of accepted
transactions (by their order processing and authorization methods)
2) In return for that, any losses are shared:
a) the cc processor fee is waived
b) the royalty fee to the music provider is waived
So all that any of the parties lose is the expense of their own part of
the transaction.
If the system is set up right (and I suspect it is), the customer can
conveniently make impulse purchases, they are handled efficiently, with
an acceptably low risk of loss.
Each party benefits -- especially, considering the alternative.
Dick
On Aug 21, 2004, at 9:24 AM, Jeffry Houser wrote:
> Low returns is not the bother of the CC processing place, however aside
> from that, I tend to agree with you.
> ��I'm sure Apple has the clout to get a special arrangement.
> ��I haven't delved too much into CC processing, or CC batch
> processing.
> ��Is it possible that when someone buys the from the iTunes store,
> Apple
> 'secures' the money using the CC processor?��And then at some point
> later
> they actually grab the money?��Possibly...
>
> ���Back to my day...
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