The Payment Brand updates notification distributed recently by your acquirer has several very important updates that will require your immediate attention. The notice consists largely of interchange and fee structure changes, several new interchange and fee increases (a few decreases), additional emphasis on data and processing integrity, and a major change to managing declines; which will all have an impact on your business processes and your bottom line. Below are some of the more important highlights.
Just when you think you are starting to understand interchange, both brands unveiled several new interchange categories, complete with new tier structures and higher fees. Impacted are industries like B2B, Healthcare, Day Care, Travel and Supermarkets. If this describes your business, be on the lookout for the details of these changes.
In July, Visa eliminated EIRF interchange at 2.30% + $0.10 and replaced it with “Non-Qualified at 2.70% + $0.10. Though “Standard” interchange dropped to this new non-qualified category, all will see an increase in April to 3.15% + $0.10. This equates to a 37% increase on EIRF; which is a fairly common downgrade for most CNP merchants. This is expected to ignite merchant efforts to find less expensive options.
Perhaps the most impactful change is to “card-on-file” and recurring merchants. Visa’s Data Consistency Fee scheduled for April 2021 looks to classify declines into 1 of 4 “buckets”. Declines that should never be re-attempted, or “hard” declines will be assessed a $0.10 fee each retry, and $0.15 for cross-border transactions. The other 3 buckets carry similar penalties for excessive retries (15+ in 30 days). Another component to this new Data Consistency Rule pertains to any merchant resubmitting declined transactions with altered data within 60 days of the original decline. As more technically savvy merchants migrate to a multi-acquirer switch to salvage declined transactions, this rule could have big ramifications on the use of fail-over switching. Complete details included in the announcement should be helpful in navigating this change.
Not to be outdone, MasterCard announced a list of changes which include increases to Merit I and Merit 3, Key Entered, Standard, Supermarket, T&E and Utilities. The increases are between 6 and 30bps and should have a noticeable increase to cost of acceptance. They, too, are adding higher fees for transactions originating from US Territories like Guam, US Virgin Islands and Puerto Rico. Though MC is dropping the Auth Access Fee ($0.005), they are making several changes to B2B and Business cards.
The debit networks are also raising switch fees, assessment fees and “participation” fees. At Optimized Payments, we are seeing a 30%-40% increase in debit transactions since the start of the pandemic. We attribute this largely to the stimulus payments. With the stimulus check now only half of the original amount, we expect to see that increase taper.
Investing the time to understand interchange and how to qualify for the best rates can significantly lower your payment costs. If your organization does not have the resources to manage and optimize your payment costs, it may be a good idea to have an outside expert come in to take care of that portion so you can concentrate on your core business. By investing some time and/or resources now, you can improve your bottom line for many years to come.
