Positive Interchange Henry Helgeson, President and Co-CEO, Merchant Warehouse
A down economy brings up many questions for business owners regarding spending, saving and profitability. One issue that merchants are becoming more and more interested in is how they can decrease costs associated with payment processing Interchange fees.
By being aware of the ways in which VARs can help their customers reduce their processing expenses, they can gain a competitive advantage to sell more systems and add more value to their products with enhanced features.
Interchange fees are what card networks, such as Visa and MasterCard, charge merchants for conducting signature-based debit and credit card purchases. These fees make up the majority of a merchant's processing expenses and have been a pain point for business owners. This issue has elevated even more recently, so much that Congress is considering the "Credit Card Fair Fee Act of 2008" in response to merchant protests.
To address these growing concerns, recent technological advances are helping to give more control back to store owners, allowing them to significantly lower their overall processing costs. Although the technology is complex, the theories and practices behind the solutions are very simple. They primarily relate to the following areas:
Debit vs. Credit
PIN and signature-based transactions are processed through different networks with different rate structures. Typically, PIN-debit transactions have higher fixed cost, while signature-based transactions usually have a higher variable cost. Therefore, there are instances when a PIN-debit sale may be less expensive than credit and vice versa. By establishing a "rule of thumb," based on a business's processing costs and the transaction amount, there can be significant savings on processing costs each year.
A smaller sale, below $40 for instance, is more likely to be less expensive to process as a signature transaction because of the lower fixed cost. Higher ticket purchases, are less expensive on the PIN Debit networks because of the lower variable cost. The higher the value, the larger the savings.
Corporate Credit Cards
Corporate card transactions typically have a higher variable cost than other signature transactions. To minimize costs on these transactions, merchants must enter in the customer code and the sales tax amount, if applicable. If the equipment does not prompt for these fields automatically, the merchant's account provider can activate the prompt.
As described above, there are now products available to help merchants save on their processing costs by automating the through process involved in evaluating the factors above and then estimating the least expensive way to process each transaction.
This technology, and those like it, identify debit cards at the point of purchase and then prompt the users to enter their PIN when it is likely to yield a lower cost or pay by credit when this method is estimated to be less expensive. Additionally, these types of products can detect corporate card transactions, making it simpler for merchants who need to submit tax amounts and customer codes to receive the best rates.
In this current economy, resellers need every possible advantage; and what better advantage can there be than cost-effectively improving your offerings, thus saving your customers money on their credit card processing.
A down economy brings up many questions for business owners regarding spending, saving and profitability. One issue that merchants are becoming more and more interested in is how they can decrease costs associated with payment processing Interchange fees. 
