1 Report to/Rapport au : Finance and Economic

1
Report to/Rapport au :
Finance and Economic Development Committee
Comité des finances et du développement économique
and Council / et au Conseil
May 24, 2013
24 mai 2013
Submitted by/Soumis par : Marian Simulik, City Treasurer/Trésorière Municipale
Contact Person / Personne ressource: Ken Hughes, Deputy City Treasurer, Revenue –
Trésorier Municipal Adjoint, Recettes, Finance Department/ Service des finances
613-580-2424 ext./poste 13485, [email protected]
CITY WIDE / À L'ÉCHELLE DE LA VILLE
Ref N°: ACS2013-CMR-FIN-0004
SUBJECT:
IMPLEMENTATION OF IMPROVED PAYMENT CARD PROCESSING
SERVICES SOLUTION
OBJET :
MISE EN ŒUVRE D’UNE SOLUTION AMÉLIORÉE POUR LE
TRAITEMENT DES CARTES DE PAIEMENT
REPORT RECOMMENDATIONS
That the Finance and Economic Development Committee recommend that
Council:
1. Approve the following service fees for processing payment cards transactions
and enact the corresponding by-law, attached as Document 1:
a. 1.99% of any payment amount for those transactions that are equal to or
greater than $750.00 for any service, activity, or business line currently
accepting payment cards;
b. 1.99% of the payment amount for those transactions that are over $25.00
for any service, activity, or business line that begins accepting payment
cards after June 12, 2013;
c. $0.50 for those transactions that are $25.00 or less for any service, activity,
or business line that begins accepting payment cards after June 12, 2013;
and
d. The fee charged by third party service providers where payment cards
transactions are currently charged a fee by those providers;
2. Prohibit the use of payment cards for transactions totaling less than $1.00;
and
2
3. Delegate the authority to the City Treasurer to reallocate the remaining capital
funds from the Payment Card Industry (PCI) compliance project to a new
Hosted Enterprise Payments capital project, transfer the operating budgets
assigned to PCI DSS compliance towards the costs of the Hosted Enterprise
Payment Services Solution, and reallocate the transaction fee budgets in
accordance with the payment thresholds.
RECOMMANDATIONS DU RAPPORT
Que le Comité des finances et du développement économique recommande au
Conseil de prendre les mesures suivantes :
1. Approuver l’imposition des frais de service suivants pour le traitement des
transactions effectuées par carte de paiement et adopter le règlement
municipal correspondant, joint en tant que document 1 :
a. 1,99 % de toute transaction égale ou supérieure à 750 $, liée à un service, à
une activité ou à un secteur d’activité pour lequel le paiement par carte est
actuellement autorisé;
b. 1,99 % de toute transaction supérieure à 25 $, liée à un service, à une
activité ou à un secteur d’activité pour lequel le paiement par carte sera
autorisé à compter du 12 juin 2013;
c. 0,50 $ par transaction égale ou inférieure à 25 $, liée à un service, à une
activité ou à un secteur d’activité pour lequel le paiement par carte sera
autorisé à compter du 12 juin 2013; et
d. tous frais exigés actuellement par le tiers fournisseur de services, pour le
traitement des transactions effectuées par carte de paiement;
2. Interdire l’utilisation de cartes de paiement pour les transactions de moins de
un dollar; et
3. Déléguer au trésorier municipal le pouvoir de transférer les fonds
d’immobilisations non utilisés du projet de conformité à la norme sur la
sécurité des données de l’industrie des cartes de paiement (PCI DSS) à un
nouveau projet d’immobilisations visant la création d’un système de paiement
en ligne pour les entreprises; d’utiliser les fonds des budgets de
fonctionnement alloués au respect de la PCI DSS pour couvrir les coûts de ce
système; et d’ajuster les budgets associés aux frais de transaction en fonction
des limites de paiement.
BACKGROUND
The City offers a variety of payment methods for City services including the use of
Payment cards (debit and credit cards). Payment cards can be used through most
3
channels including the Interactive Telephone Voice Response System (IVR), over the
counter (face to face), over the telephone and secure Internet interface (on-line WEB).
In order to achieve efficiencies, avoid future cost increases, reduce risk and improve
processes, the City will be implementing a new Hosted Enterprise Payment Services
Solution to process payment card transactions where all card payments will be handled
by a third party service provider rather than the City. This new service solution is a
priority for the City, as it will contribute to the delivery of existing services and new
initiatives currently planned to be offered by Service Ottawa.
DISCUSSION
In 2012, the City processed over $94 million of payment card transactions (In 2011, the
City processed over $ 91 million). Accepting and processing these payment card
transactions has associated costs and risks. Currently as the merchant, the City pays
merchant transaction fees for each payment card transaction. The City is charged a flat
fee for processing debit cards and a percentage of the value of the transaction for credit
cards ranging from 1.63% to 2.82 %. The annual cost of the merchant transaction fees
is approximately $1.7 million.
As the City accepts and processes payment cards, it must maintain compliance with a
set of payment card industry requirements known as the Payment Card Industry Data
Security Standard (PCI DSS). Being PCI DSS compliant ensures the safety and
security of the public’s payment card information. Should the City not meet PCI DSS
compliance requirements or experience a breach of information, it could face an initial
fine of $500,000 per data security incident and fines from $25,000 per month for noncompliance with published standards.
Since 2011 the City has successfully achieved PCI DSS compliance of the common
infrastructure. To maintain PCI DSS compliance, on-going operating costs of
approximately $855,000 are required each year which have been included in the
budget. Expenditures cover the cost of staff in IT and Finance, as well as on-going
professional services.
The City pays approximately $2.5 million annually in merchant transaction fees and
operating costs to maintain PCI DSS compliance. The number of payment card
transactions will continue to increase as more citizen services are offered on-line
through Service Ottawa self-serve initiatives. As these new Service Ottawa initiatives
roll out, the City will face budget pressures with respect to increasing merchant
transaction fees and PCI DSS compliance costs. While payment cards are not currently
permitted for payment of property taxes and development charges by corporate policy,
residents regularly ask that this policy be reconsidered.
Consistent with Council’s priorities of Fiscal Responsibility and Service Excellence, staff
are implementing a new Hosted Enterprise Payment Services model where all card
payments will be handled by a third party service provider. This new solution was
selected through a competitive procurement process and will have the effect of:
4

transferring the responsibility and costs of PCI DSS compliance to the service
provider

allowing the implementation of a service fee for select payment processing
services

allowing for the expansion of payment card acceptance across multiple business
lines

creating savings in operating costs throughout the City by the reduction of
transaction processing fees, and the reduction in costs associated with PCI DSS
compliance and payment card processes

improving business processes
Approving the following recommendations will allow the City to provide payment options
that clients are requesting while protecting the City’s tax and revenue base from the
cost of merchant transaction fees applied to those payments.
Recommendation 1: Payment card service fees
It is recommended that a service fee of 1.99% of the payment amount be charged for
any payment card transaction to the City that is equal to or greater than $750 for all
currently accepted payment card transactions. The $750 threshold was selected after
an analysis of all the card payments currently processed and is set at a level that will
exempt 99% of the current transactions from a service fee. The City will continue to pay
this service fee for those users.
It is recommended that a service fee of 1.99% of the payment amount be charged for
payment card transactions that are over $25 for any service where a payment card is
not currently permitted, but which may be permitted after June 12, 2013, and that a
service fee of $0.50 be charged for payment card transactions that are $25 or less for
any service where a payment card is not currently permitted, but which may be
permitted in the future. For example, those citizens who wish to use a credit card to pay
their tax bill can do so without increasing the cost to the City, as the service fee would
cover the merchant fee.
It is recommended that the fee charged by third party service providers where payment
cards transactions are currently charged a fee by those providers be approved. This
includes payment of parking tickets and Provincial Offense fines that are paid on-line.
These two on-line transactions are currently hosted by third party service providers that
recover their costs through the use of a service fee.
The recommended by-law allowing these fees is attached as document 1.
Recommendation 2: $1 minimum on payment cards
The analysis on the transactions processed using all types of payment cards showed
there is no minimum value for acceptance of payment cards. Small transactions are not
cost effective for the City as there is a flat fee associated with the transaction. In many
5
instances, the cost exceeds the value of the transaction. In 2012, 914 transactions of
the 994,252 total transactions processed were of a value less than $1.00. The City’s
new contract with the third party service provider sets a flat fee of $0.50 for transactions
under $25. Based on the costs associated with small transactions, it is recommended
the City set a minimum transaction amount for the use of a payment card to $1.
Recommendation 3: Reallocate and transfer funds
In 2010, Council approved a capital budget to fund the Finance Department’s PCI DSS
corporate compliance project. In order to sustain operational PCI DSS compliance at
the City, budgets of $855,000 were approved to ensure work efforts were appropriately
maintained. With the implementation of a Hosted Enterprise Payment Services Solution,
the third party service provider will process payment card transactions and thus be
responsible for PCI DSS compliance. As a result, the City’s costs required to sustain
PCI DSS compliance would be significantly reduced and possibly eliminated.
Staff recommends that the remaining PCI capital project funds of $643,000 (905134) be
transferred to a new capital project for the implementation of the Hosted Enterprise
Payment Services Solution. Further, staff recommends that any of the various operating
budgets assigned to the maintenance of PCI DSS compliance totalling $855,000 be
redirected towards the cost of the Hosted Enterprise Payment Services Solution
implementation operating accounts and other payment services solution opportunities
as the Hosted Enterprise Payment Services Solution project is phased in. Staff will
report any identified savings to Committee once implementation is complete.
RURAL IMPLICATIONS
There are no rural implications associated with the recommendations of this report.
CONSULTATION
Consultation has taken place between the Finance Department; IT Services
Department; Parks, Recreation and Culture Department and ServiceOttawa
Department.
COMMENTS BY THE WARD COUNCILLOR(S)
This is a City-wide issue.
LEGAL IMPLICATIONS
Pursuant to Section 391 of the Municipal Act, 2001, local municipalities are authorized
to impose fees or charges on persons for services or activities provided or done by or
6
on behalf of the municipality. The recommended service fees are intended to
implement the terms and conditions of the City’s contractual agreement with the third
party payment processing service provider.
RISK MANAGEMENT IMPLICATIONS
There are no risk implications associated with the recommendations of this report.
FINANCIAL IMPLICATIONS
The approval of this report will allow for a new Hosted Enterprise Payment Services
Solution capital project. The balance of funds remaining from the Payment Card
Industry Compliance PCI project (905134) will be transferred into the new capital project
and therefore close project 905134. The new capital project will cover the costs of
business changes and other implementation costs of the new Hosted Enterprise
Payment Services Solution. The operating budgets assigned to the maintenance of PCI
compliance will be redirected to the Hosted Entreprise Payment Services Solution
implementation operating accounts and other payment services solution opportunities
as the project is phased in. Therefore, no new funding is required.
ACCESSIBILITY IMPACTS
There is no accessibility impact associated with the recommendations in this report.
ENVIRONMENTAL IMPLICATIONS
There is no environmental impact associated with the recommendations in this report.
TECHNOLOGY IMPLICATIONS
The Information Technology Services Department will continue to support the current
infrastructure until such time that the Hosted Enterprise Payment Services Solution
(HePSS) solution is in place and the City’s PCI obligations are reduced or removed. The
Information and Technology Services Department has worked with the Finance
Department during the procurement process and has some understanding of the
HePSS solution and project scope and will continue to work with the Finance
Department to ensure a successful outcome. Possible project budget requirements will
be identified by the Finance and Information and Technology Services Departments.
This budget may include professional services for integration of third party vendor
supported application as well as hardware and software requirements where applicable
to this project and identified by the HePSS vendor.
7
TERM OF COUNCIL PRIORITIES
Increasing payment options by removing limits on card payments is directly linked to
Council’s priority for Service Excellence. Transferring merchant transaction fees to
payment card holders is directly linked to Council’s priority for Fiscal Responsibility.
SUPPORTING DOCUMENTATION
Document 1 – Draft By-law to establish a service fee for payment card processing
services.
DISPOSITION
Operational procedures will be revised to reflect this implementation. Revenue Branch
will instruct City operational staff on the revised processes and will establish a schedule
of review to ensure procedures are being following appropriately.
8
Document 1
BY-LAW NO. 2013A by-law of the City of Ottawa to establish a service fee for payment card
processing services with respect to payment for City services and activities.
The Council of the City of Ottawa enacts as follows:
1.
Where a payment card is used to pay for a City service or activity, the
following service fees for payment card processing are authorized:
(a)
a service fee of 1.99% of the payment amount for any payment
card transaction that is equal to or greater than $750.00 for any
service where a payment card transaction is permitted by the City
as of June 12, 2013; and
(b)
a service fee of 1.99% of the payment amount for payment card
transactions that are over $25.00 for any service where a payment
card transaction is not permitted by the City as of the date of this
by-law, but which may be permitted by the City after June 12, 2013;
and
(c)
a service fee of $0.50 for payment card transactions that are
$25.00 or less for any service where a payment card transaction is
not permitted by the City as of the date of this by-law, but which
may be permitted by the City after June 12, 2013; and
(d)
service fees that have been charged by third party service
providers for payment card transactions prior to the date of this bylaw.
ENACTED AND PASSED this
CITY CLERK
day of
, 2013.
MAYOR