There are three elements of the processing charge per transaction. These are interchange, scheme fees, and merchant service charge all of which are included on your statement.
Interchange is a fee charged for each transaction by the card issuing bank (the card holders bank). Interchange pricing can differ based upon geographic region, card type and transaction type. It ordinarily is described in your statement as “i-change”.
This means that the calculation of fees for processing what is essentially the same service for four different customers all purchasing the same product will result in significantly different charges to the retailer accepting these cards. Whilst the majority of retailers will be aware that, generally speaking, debit cards are less costly to process than credit cards, what they may not be aware of is that a corporate or business card, whether debit or credit, is substantially more expensive to accept than the consumer card that is ordinarily used by individuals.
While some merchants may pitch themselves towards corporate or company business and may be happy to pay significantly more to obtain larger-than-average sales of airline tickets, luxury gifts or hotel suites, for those of us it the retail of grocery, fuel and news, the imposition of fees that not only outweigh, but can actually obliterate the profit earned from a sale is sufficient cause for concern.
A recent Statement from AIB Merchant Services was shown to our offices by a member who was very concerned at what they perceived to be a sleight of hand (even with all the transparency that was contained in the statement) regarding how relatively expensive his “corporate” customer was when compared to those described as the “consumer” customer.
His statement showed that he had accepted 2,795 consumer debit cards, a further 146 prepaid cards (which are considered to be debit cards), and 97 credit cards.
Of these cards, 72 (2.4% of the total) were classed as Commercial rather than consumer and attracted i-change rates of €137.23 out of the TOTAL i-change fees charged of €215.66, or 64%.
The i-change charged for the largest category accepted was for the 2,502 VISA Debit card users, it amounted to €59.91, and translated as 2.39 cent per transaction.
Contrast that with the €81.75 paid for the i-change for the 13 Commercial Credit Cards used, or the €55.48 i-change fee incurred for the 59 commercial Debit card transactions. In those instances, the retailer incurred per transaction fees of €6.29 and €0.94 cent respectively.
The central question here is – Can a retailer identify these cards in advance of a transaction being processed and if so, are they entitled to seek an alternative style of payment, e.g., a consumer credit or debit card, or cash? The answer is YES, they can, but identifying can be difficult as not all cards are easy to pick out as more costly types, particularly in the era of contactless and even more so, cards that are stored in a phone wallet.
CSNA have engaged with Central Bank on this matter and will also commence a series of meetings with the other stakeholders in this space- we are of the view that certain styles of cards should have the ability to be either barred from usage in certain terminals at the request of the merchant- similar to the inability of bookmakers to process credit cards, or be the subject of an audible alert, allowing the merchant to choose whether they wished to proceed with the transaction.
The recent changes in the Budget providing for a greater level of staff bonus led to a significant (greater than 70% according to ME 2 You sources) increase in purchases of these products but as the commission level is a flat fee, it is very likely that the sale would result in a loss if paid for with a Corporate card.
Some outlets may elect to take such charges “on the chin” as a business expense but many others cannot afford to be busy fools.