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What is your Processing IQ?

Anand Goel was recently quoted in an article on card processing fees in Convenience Store Decisions by David Bennett.  This is a great article that talks about the fees paid by merchants for accepting card payments.  Here is an excerpt from the article with a link to the entire article.

COST OF DOING BUSINESS
Perhaps no topic unites c-store retailers of every size as do interchange fees, better known as “swipe fees,” which are easy to define and almost impossible to escape. Basically, the term interchange refers to fees paid by the merchant’s bank to the issuing bank for this service. Interchange covers the cost to convert a charge on an account holder’s card to a cash deposit at the merchant’s bank account, including billing services, credit risk and fraud risk.

For small purchases, swipe fees can add up to a percentage of a purchase, eating into retailers’ margins.

How much? The Durbin Amendment limits debit card interchange fees to 21 cents plus 0.05% of the payment. An additional one-cent fraud-prevention charge is also allowed in some cases. Those rules only apply to “covered transactions,” which include cards issued by some of the largest card issuers. However, other card issuers can charge more.

For example, those rules only apply to banks and credit unions with $10 billion or more in assets. In 2015, the Federal Reserve reported that debit card transaction fees are typically around 24 cents per payment.

The Durbin Amendment is part of the 2010 Dodd-Frank law, which sharply lowered debit card interchange fees. Supporters said the measure, sponsored by Sen. Dick Durbin, D-Ill., for whom it was named, would lower prices for consumers by cutting retailers’ costs.

So how do convenience retailers lessen the operational impact of interchange fees? Experts agree that the more knowledge retailers have, the better they can fortify their payment processing position. The first question should probably be: What is your processing IQ?

Read the Article

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