By Andy Waskey
I recently had the privilege to participate in the Mobile Payments Conference panel session panel to discuss, Surcharging & Cash Discounts…Separating Fact from Fiction. Surcharging as a business practice has gained momentum over the past several years and, when done correctly, can be a very useful tool to ease the costs that merchants and billers have traditionally absorbed as a cost of doing business.
Three primary business principals apply to instituting a surcharge business solution:
Effective Pricing – to ensure adoption and to minimize payer impact
• The offer of “free” merchant processing is very enticing to merchants/billers that month after month see their processing expenses cut into their bottom line. It is, however, important as a payments technology/service provider to educate the merchant/biller on the hidden cost of fee-based processing, including but not limited to customer satisfaction, customer retention, and timely payment submission.
• As a payment technology provider, Aliaswire’s DirectBiller® payment platform can assist merchants / billers in the establishment of their compliant fee-based program to balance the benefits of deferred cost processing. DirectBiller can be configured to set a customer-paid fee that will cover the cost of interchange/dues and assessments and a reasonable cost of service. This includes agreeing to spread (just as in pricing a traditional merchant) or perhaps a hybrid fee program that reduces merchant/biller cost as well as minimized payer impact. As a best practice, we at Aliaswire review our surcharge portfolio monthly and quarterly to identify card usage trends and adjust the fee accordingly to ensure that the fee to the payer is reasonable and appropriate. In short, it is essential to share with your clients the entire cost structure and agree to a fee solution that maximizes payment channel adoption.
Surcharge is best for certain markets
• Educating your merchant/Billers and sharing that information with their payers is an important responsibility, perhaps explaining to payers that paying a fee for a specific type of payment allows the business to keep prices down. Also, offering no fee ACH, as an alternative goes a long way to winning a payer’s trust.
• Traditionally, surcharging has been applied in retail/restaurant/card present environments, however, there has been a lot of push-back by consumers who can take their business elsewhere for the same product/service and not pay a fee. In our experience, we have seen successful surcharge in card-not present environments for merchants /Billers in financial services and B2B markets where ACH is always the “free option”
Being Compliant – to adhere to the changing state rules with technology solutions
• Merchants/Billers rely on their trusted partners to guide them and help navigate one of their most essential business functions, payment acceptance. This is true of any merchant processing experience; in the case of fee-based processing, this adds additional complexity.
• In a surcharge model, the merchant is ultimately responsible for association rules as well as state rules about payment acceptance, often in a CNP environment.
• To maintain compliance with card brand and individual state regulations, Aliaswire’s patented technology, TranCentives® instantaneously verifies multiple criteria of each individual transaction, such as the credit card BIN, ZIP code of payer, transaction value to verify compliance and block non-compliant transactions.
Aliaswire understands the challenges the modern Merchant/Biller face; our DirectBiller platform along with our patented TranCentives® transaction-level compliance and rate calculation engine, enables a compliant, full-service, fee-based solution for merchants/Billers.