By Dee and Emily Karawadra
Selling merchant accounts solely based on rates is part of the past. In our business, we always push technology or service over price. Nevertheless, every conversation ends up on price. One of our philosophies is we will get merchants on price but keep them with service. In the last two months, Emily has analyzed more than 400 statements, and we have found processors, ISOs and merchant level salespeople (MLSs) are hiding markup fees in several places. This article discusses several of those.
As of 2018, Mastercard set the Network Access and Brand Usage (NABU) fee at $.0195. All processors include this fee in their cost; however, some mark the fee up. If merchants are on pass-through-plus pricing, they will see this listed on their statements.
Theoretically, if merchants are set on a flat rate or tiered pricing, this fee should be included in their rate. However, more and more frequently, this fee is tacked into their fees section. If you are trying to find savings in a merchant statement, look at the NABU fee. We have seen these range from $.0195 to $.06 and higher. You can find savings here.
As an MLS, you know one of the most popular billing methods is interchange pass-through plus the markup. Previously, statement analysis was straightforward to perform for this type of pricing. Not so much anymore. We have found countless statements that indicated the merchant is set up on pass-through plus, but the interchange was marked up in addition to the agreed-upon markup on the statement. We've seen anywhere from .05 basis point to, in one case, 90 basis points. If you know interchange, it's easy to spot this and see that the interchange is marked up, and a discount rate is being billed. This is another great opportunity to offer savings.
PCI DSS stands for the Payment Card Industry Data Security Standard. It is a set of rules regarding secure credit card acceptance. Any business that accepts credit cards is required to be PCI compliant. In addition to taking measures to secure their systems, merchants are also required to fill out a Self-Assessment Questionnaire (SAQ) as part of their compliance.
Some processors require that a SAQ be completed every 60 days; others require it every six months. What this means is a merchant must know what the processor's timeline is and fill out SAQs in accordance with it. Merchants who do not do this are considered noncompliant. This is when some companies charge merchants big fees. We have seen anywhere from $19.95 to $125.00 a month for being noncompliant. This fee is charged every month in addition to the regular PCI compliance fee until the merchant fills out the questionnaire and becomes compliant.
Some processors are pushing PIN debit on their merchants, calling it debit optimization. The idea behind this is to move traffic from the card brands over to the debit rails by prompting for a PIN at the time of purchase. Some of the processors have a strategy to push this out to all merchants on their platform.
The big sell is to reduce the cost of processing by converting signature-based transactions to PIN debit transactions. This is enticing to merchants, as it reduces the risk of chargebacks if they are running more PIN debit transaction than signature transactions. The problem is that PIN debt isn't always a good fit for small-ticket merchants or high-traffic businesses.
We have seen that not only is PIN debit being pushed on merchants, but also the PIN debit interchange is being marked up. It's not just a transaction fee being billed the interchange-plus markup and an authorization fee. I have seen anywhere from .10 percent to 1.75 percent markup. This is another place where big savings can be found.
As an MLS, you need to fully understand the merchant statement format you are presenting to your merchants. If you are putting your markup in some of the areas mentioned above, be aware that your statements can be analyzed by competitors, and if your merchants realize they are not getting the rate they thought they were getting, they will lose faith in you and move to someone who can analyze statements honestly.
If you know some of the markups described herein are being added by your ISO or processor, meet with them and find a statement format that is much clearer. Merchants are getting educated on interchange and how it works. Chances are increasing they will find out if you are hiding a markup under the section where interchange is being depicted. This could result in loss of those merchants and your credibility.
All sales professionals dread what's-your-rate questions. To properly provide quotes to merchants today, perform a statement analysis to see what type of cards they take, how they are taking the cards and where savings can be found. Providing merchants statements that are straightforward and transparent is most beneficial for them as well as for the longevity of your business.
Dee Karawadra is president and CEO of Impact PaySystem, and Emily Karawadra is the company's chief financial officer. Since 2001, Impact PaySystem has been a leading provider of payment processing technologies and services to merchants throughout the United States. Through alliances with payments industry leaders such as Chase Paymentech, First Data, Buypass, Sage and more, Impact PaySystem offers tailored solutions to meet the unique needs of each merchant. Dee and Emily will welcome your questions and comments at firstname.lastname@example.org and email@example.com, respectively.
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