Friday, November 17, 2023
What factors are making cash discounting and surcharging a contentious issue in the market?
Both merchants and customers want to have their cake and eat it too. They want to continue charging for debit cards and many merchants refuse to change the prices on shelves and menus or even hang the signs. Many are also unwilling to drop the surcharge rate of 4 percent to the April 15th cap of 3 percent. Consumers would simply like to avoid the fees, if possible, but still want card program rewards and conveniences.
What recent regulatory changes have you seen? What is their potential impact on these programs?
Government at the federal level has been somewhat quiet since the first Durban amendment on this issue. However, some states have certain laws that merchants and agents should be aware of. The card networks have come out with their terms and have levied fines, which could be as high as $25,000 per month for some merchants. The challenge continues for some acquirers to change their pricing plans to accommodate the different rates for the different types of cards.
How do some service providers fall short of compliance when implementing these programs?
They aren't taking the necessary steps to educate the merchant, and allow the merchant to run the programs as they see fit. Others need to address the issue of split rate to allow the merchant a lower fee structure for debit cards and higher rates on the transactions where they pass the fee to the customer.
How can service providers maintain compliance and address market uncertainties?
Provide detailed instruction, education and training materials for agents and merchants, explaining the programs and guidelines from the card brands and pair them with state of the art equipment that helps merchants maintain compliance, like debit card BIN blocking or dual pricing models.
What common misconceptions do merchants have about cash discount and credit card surcharging programs?
The confusion is everywhere. Many merchants think they won't pay anything at all, while others have been told that it is illegal. Some think they will drive their customers into the arms of their competitors or lead to an overall decline in bottom-line profit.
What are common misconceptions service providers have about these programs?
Many industry professionals are uncertain of the rules. Professionals sometimes give clients some wiggle room on the rules and tend to overlook cash discount programs which are actually surcharge programs because the prices on shelves and menus don't reflect the higher "credit" price. Also, many aren't aware that debit cards cannot be charged an additional fee. Others believe that they can still charge debit cards and some don't have clear definition of the differences of the terms and the various programs.
What steps can service providers take to educate merchants?
Help merchants by providing them the information furnished by the card companies. Provide websites and video training. However, we all know how busy an SMB owner can be, and many lack the time to really learn the intricacies of the rules.
What successful cost recovery strategies have you seen in select vertical markets?
Dual pricing has been the answer for many years in the petroleum vertical for agents and merchants alike. It provides a middle ground that allows merchant to recover some of the fees, and gives consumers the information they need to make informed decisions. 
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