The Green Sheet Online Edition
August 09, 2010 • Issue 10:08:01
Determine the best interchange for each transaction
In addition to signing up with a low-cost provider, merchants trying to save money on interchange have a bag of tricks they can reach into at the POS. But using it the right way can be tricky.
A service from Merchant Warehouse called BINSmart is designed to help merchants lower interchange costs by calculating - using a host of factors - the competing interchange rates on PIN debit- and credit-based purchases. For any given purchase where the consumer uses a debit card, the program determines whether interchange would be lower as a PIN debit or credit purchase, and then prompts the customer to pay with the cheaper option.
"It's a technology that is able to determine or best estimate the best way to take a transaction," said Marianne Rocco, Marketing Director for Merchant Warehouse. "If the customer were to swipe their card, BINSmart would actually go through an algorithm and estimate the best cost and whether it should be credit or debit and also prompt the merchant for any additional information. A lot of merchants aren't savvy enough to be sure whether they should get PIN debit or not."
The service also produces savings by helping merchants avoid "downgrades" on card acceptance that can raise interchange. One way it does this is by prompting merchants who take corporate cards to enter "level 2 data," including customer code and tax information. By gathering this data, merchants can qualify for better rates with corporate card acceptance.
The service also has a feature that automatically batches out a merchant's transactions at the end of each day, helping avoid downgrades applied to late batching, according to Rocco.
Merchants who don't batch out within 24 hours are commonly downgraded to a higher, qualified rate for interchange, while those who wait more than 48 hours can drop to an even higher nonqualified rate. BINSmart subscribers avoid these scenarios by using the program's "autobatch" feature.
PIN not always cheaper
Regarding the choice of PIN debit or credit, it is common to think that PIN transactions are invariably cheaper,
and many merchants automatically push customers to use that option, according to Rocco. In fact, whether one is cheaper than the other depends on a range of factors, she said.
For example, PIN debit tends to be cheaper than credit for high-cost transactions, but credit is often cheaper for low-cost ones. Determining which rate is better can also depend on such things as the merchant's Standard Industry Code, ZIP code (because the various regional debit networks charge different rates), and the card brand or type. All of these things are factored in by BINSmart.
BINSmart is a web-based service hosted by Merchant Warehouse, but merchants without web-based terminals can still integrate the service using the Merchant Warehouse API. Some merchants can integrate the service into an existing POS system, and it is also available with certain Hypercom Corp., Ingenico and DejaVu Software Inc. terminals, Rocco said.
A second or two
For merchants who take card transactions using BINSmart, the first six digits of a swiped card are automatically routed to the Merchant Warehouse server, which returns a message that prompts the customer to enter PIN information or to accept the transaction as a credit card purchase.
"You swipe the card, the POS system grabs the first six digits of the card, sends it to us over the web, and it takes one to two seconds," said Markiyan Malko, Program Manager for Merchant Warehouse. "It's pretty seamless."
Rocco said customers who want to pay a different way than how they're prompted have the option of cancelling the transaction and starting over. Malko added that, because only the card's first six digits are transmitted over the network (which is enough information to determine the type of card being used), the program exists outside the scope of the Payment Card Industry Data Security Standard.
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