Like his previous article discussing the merchant services industry, Michael Conticelli has done it again with a must read insightful report in the Ft. Myers Small Business Examiner titled “New trend in merchant statements hides rates and fees”.

Michael specifically calls out SunTrust for purposely redesigning their merchant statements to eliminate all rate and fee detail, leaving merchants no clue as to how charges are calculated. SunTrust made the decision to keep merchants in the dark about their “surcharge fees, bill backs, annual fees, PCI fees, etc.” because when merchants “don’t actually see the rates and fees month after month” they can’t ask questions.

Michael warns “Merchants need to be vigilant in monitoring their merchant fees.”

We couldn’t agree more! In fact, Vantage Card Services takes the exact opposite approach with our clients. Not only do we provide a very detailed merchant statement, we also provide our PayView analytics tool to help merchants explore stats and trends, chart their sales, manage their Interchange qualifications and track their effective "real rate" calculations month after month.

PayView is a user-friendly dashboard and analytics reporting tool that merchants can use to gain greater insight and more transparency into the cost of accepting card payments. This added layer of business intelligence empowers our clients with a greater understanding of where fees come from, best practices to keep costs down and a historic tracking of processing expenses.

Read more and take a tour at http://vantagecardservices.com/payview.

Update 3/3/2011: MasterCard is creating new small ticket Interchange charge types as discussed below but NOT introducing new rates. MasterCard is implementing these new buckets for small ticket likely so they can track the volume separately from other regulated debit transactions. We expect that companies like USA Tech will continue to opt out of accepting MasterCard debit until they lower the small ticket debit Interchange rate.

Vantage Card Services specializes in providing card payment processing services at direct and transparent Interchange pricing to merchants and businesses of all sizes.

For our B2B and B2G clients, VantageB2B.com is a resource focused on the payment acceptance policies, strategies and best practices to lower cost, increase productivity and enhance security. An integral part of our service is helping our clients manage Interchange qualifications when accepting commercial card payments. Given this B2B processing focus, we are particularly engaged with the recently announced Interchange modifications by Visa to become effective April 2012. We work with clients daily to establish and manage Level 3 merchant services. A significant number of Interchange modifications have been announced impacting Visa commercial card rates.

• Visa will make changes to their existing Corporate Card Level 3 and Corporate Electronic with Data Interchange programs.
• Visa will implement a new P-card product and associated Interchange Fee programs that will be available to commercial card issuers in the U.S.
• Visa is making changes to existing Interchange rates in their business, corporate, commercial and purchasing card categories as well with the most significant change coming for the Purchasing Card Large Ticket category that today requires a Visa registration fee.
• Visa will separate its non-regulated Business debit card from Business credit programs.

Another interesting and potentially significant change was announced from MasterCard. MasterCard will introduce new Regulated debit small ticket debit and credit Interchange programs in April 2012. While we don’t yet know the specific details, for companies like USA Technologies this is a welcome development.

Vantage is home to world-class payment solutions and features the best value package of price, terms, service, solutions and incentives available in the payments industry. For more information, follow Interchange developments as they happen here.

As we head into the start of a new year, now is a good time to review your card processing procedures. Many of the highest Interchange rates result from transactions that downgrade for preventable reasons. Please take a moment to review your card acceptance procedures and follow best practices as they are important in qualifying your transactions at the very lowest Interchange rates available.

Here are the most common issues:

• If you are accepting key entered transactions, the most common cause of downgrades is due to missing AVS (address verification service) which looks to match the cardholder’s zip code at the time of authorization. Best practice: always enter the zip code. Check with your staff and your system to make sure you are entering and passing the zip code with each non-swiped card transaction.
• Other reasons for transactions to downgrade to higher Interchange rates include a mismatch of Authorization and Settlement dollar amounts (except in certain industries where tips are allowed) and forced/offline transactions in which a previously obtained authorization code is key-entered to settle a transaction. Transactions also fail to qualify for the best Interchange rates when transactions are not settled in a timely manner (typically 1-3 days depending on your industry). Best practice: settle your batch every day and avoid obtaining pre-authorizations.
• Non travel and entertainment merchants accepting commercial cards (Business, Corporate, Purchasing cards) should upgrade to a Level 3 payment gateway or virtual terminal. Level 3 refers to passing line item detail of the invoice with the standard payment data. Best practice: don’t use a retail terminal to process commercial cards. Vantage specializes in B2B transaction processing. Please contact us with any questions and visit http://vantageb2b.com for more information.

For personal assistance, give us a call at 800-397-2380 for a free consultation.

Effective Interchange Rate Savings: September to October 2011 

Card-Not-Present

Rate

Retail

Rate

9/30/2011

1.58%

9/30/2011

1.36%

10/31/2011

0.70%

10/31/2011

0.70%

Savings

0.88%

Savings

0.66%

Lodging

Rate

Restaurant

Rate

9/30/2011

1.45%

9/30/2011

1.57%

10/31/2011

0.61%

10/31/2011

1.05%

Savings

0.84%

Savings

0.52%

Emerging Mkt / Public 

Rate

Supermarket

Rate

9/30/2011

1.02%

9/30/2011

1.70%

10/31/2011

0.31%

10/31/2011

1.22%

Savings

0.71%

Savings

0.48%

Business-to-Business

Rate

QSR

Rate

9/30/2011

1.57%

9/30/2011

1.81%

10/31/2011

0.90%

10/31/2011

1.83%

Savings

0.67%

Savings

-0.02%

Debit Card

Rate

Visa Total Non-Regulated Debit

1.51%

Visa Total Regulated Debit

0.63%

MasterCard Non-Regulated Debit

1.53%

MasterCard Regulated Debit

0.57%

Debit Card

Rate

PIN Debit Non-Regulated

1.03%

PIN Debit Regulated

0.35%

Merchant statements soon to reveal who gets savings from lower debit Interchange.

Next week, most merchants will get their first chance to see if they saved money on their card processing fees due to the Fed’s mandated lower debit rates that took effect October 1st. Typically merchants receive monthly statements at the beginning of each new month showing both processing activity and how fees were applied. Some merchants don’t open their statements and many merchants don’t understand how to read them when they do, but clearly if there was ever a statement to pay attention to, it would be the October statement that’s about to be delivered.

Merchant service providers are not required to directly pass the reduced rates of the Fed regulated debit transactions (and the associated savings) on to the merchants they process transactions for. The Fed’s rule lowered the debit Interchange rate, yet Interchange is only one component of the discount pricing schedules merchants pay to process transactions.

So the yet unanswered question is will YOUR merchant service provider pass all, some or none of the savings on to you? The answer awaits you when you open your October statement.

At an industry level I believe we can go ahead and make an educated guess as to the answer to this question now. And the answer is… it depends.

If your processor already actively promotes an Interchange pass through pricing model and works to educate merchants on how to best manage Interchange qualifications like Vantage does, then yes, chances are that you will see the all the savings available.

However, we don’t expect that merchant service providers who don’t do this today will change course and pass through all the possible savings. Consider for a moment that to do so would mean that they would have to change their entire business philosophy, company culture, and business model. All of their merchant statements would have to be reformatted. All of their merchant contracts would need to be rewritten. Their entire sales force would have to be re-trained, all the training materials rewritten, all the recruiting ads and marketing material changed.

We just don’t expect a mass exodus of sales organizations to move away from their current “rate as low as” marketing and non-qualified pricing approach. Just the opposite, moving forward we expect merchants to be bombarded with even more calls and marketing messages like this one:

In all offers like this, merchants must pay close attention for undisclosed fees and recognize that long term contracts indicate introductory rate quotes, so read the fine print carefully.

The smart shopper knows that Interchange pricing is the key to merchant savings. Vantage has lots of resources available to help. Fax us your merchant statement to 888-857-2207 for a no obligation analysis. And get an instant Interchange quote at http://merchantrates.com.

On the Visa Q4 2011 Earnings Call yesterday, Visa stated "We're also moving forward with our modified debit economics, including the implementation of our network participation fee and the reduction of variable acquiring fees on debt, Visa debit and Interlink. As stated last quarter, we believe this offers merchants greater incentive to route transactions over our network and an opportunity to lower their per-unit transaction costs. As for details, we anticipate providing the specific pricing information to merchants and acquirers in January, which will go into effect on April 1."

Visa introduces a new pricing model, but provides only limited details. As reported in the International Business Times, Visa will be implementing a new fee called a “Network Participation Fee” that will apparently be a fixed site fee billed according to number of merchant locations accepting any U.S. Visa debit, credit, or prepaid card.

While Interchange fees are scheduled to move lower in October, this new Visa fee (like other Visa fees charged to acquirers) will be pass through to merchants in one form or another. Given this fact, the idea is that the more Visa transactions a merchant accepts, the lower this new fixed location fee becomes on a per transaction basis.

Now that the final Fed rules give merchants control over the routing of transactions, Visa hopes that this new fee structure will incent merchants to choose its network over others in an effort to have enough transaction volume to make the fix location Network Participation Fee irrelevant.

How much will the fee be, when will it start and how will MasterCard respond? We will post details as they come available.

Wow! This post on TheBreakFreeProject.org titled 5 Deceitful Tactics Credit Card Processors Use To Get More Of Your Money really captures the very points Vantage has been making now for 15 years! Everyday we work with merchants being aggressively pursued by both fly-by-night organizations and big-name-mega banks who use all 5 Deceitful Tactics.

Tactic #1: The “Rate Game”

Tactic #2: The Binding Contract

Tactic #3: Early Termination Fees

Tactic #4: New PCI Fees

Tactic #5: The Bewildering Statement

This post does an excellent job of explaining the pitfalls of these tactics and recommending solutions. Of course you MUST pay attention, ask questions and read the fine print for yourself to identify these tactics. You can NOT rely on “knowing the rep” or the “brand name” bank to be your guide.

So where can you find the solutions outlined in this article? Look no further than the home page at http://vantagecard.com. Here you find the best value package in the payments industry: Interchange rates, personal service, month-to-month terms, payment-solutions by industry and Vantage Points Rewards incentives.

And one last important footnote
Another key lesson in this article is that when either a merchant or a sales agent selects a merchant services provider, they are investing in that organization’s way of doing business. Don’t reward those with deceitful business models. And don’t try to fix them by negotiating and “waiving” terms and fees. Help weed out the companies that go-to-market like this by spotting these tactics and walking away. There are other companies like Vantage that struggle everyday to get our message out into the marketplace. Support them with your business or talent and together we can change things for the better!

Vantage Card Services was awarded the 2010 Small Business Standard of Excellence WebAward for its MerchantRates.com site. 

The Web Marketing Association is the producer of the WebAward Competition.  Now in its 14th year, the WebAwards is the premier annual website award competition that names the best Web sites in 96 industries while setting the standard of excellence for all website development.  Entries were judged on design, copy writing, innovation, content, interactivity, navigation, and use of technology.

MerchantRates.com provides instant merchant Interchange rate quotes and merchant applications.  MerchantRates.com also provides educational resources, best practice guides and helpful frequently asked questions and answers. 

The Interchange amendment to the financial reform bill, sponsored by Senator Richard Durbin (D-IL), was adopted Thursday night.  The measure gives the Federal Reserve authority to regulate Interchange fees, using a "reasonable and proportional" standard.   The amendment also allows merchants to discount lower costs payment options and allows minimum card purchases.  Once the Senate passes the financial reform measure, it will have to be reconciled with a House version that does not include the Interchange provision.

What does this mean for U.S. merchants?  First, take a look at your most recent April merchant statement.  If you are not on a direct Interchange pass through pricing plan already then you need to take action.   Open your browser and Keyword search "merchant Interchange rate quote".  

If the government forces Interchange lower, you will want to immediately and directly benefit.  You can't if your merchant rates are billed on a bundled, blended, tiered, or non-qualified surcharge basis.   Not only must you insist on Interchange pass through but you must also insist on a month-to-month merchant services agreement and read all of the fine print.  Avoid 3-year terms with early termination penalties (a red flag for introductory offers that are unsustainable).  If you are going to have terms "waived" then have an attorney review before signing. 

Direct Interchange pass-through merchant rates will result in lower processing expenses.  With mounting pressure from legislation, litigation and alternative payments, it appears Interchange may be headed lower.  All merchants should put themselves in a position to take advantage of these developments.