CNP Expo: Advanced Interchange Management

May 21, 2014

CNP Expo: Advanced Interchange Management Reducing friction and reducing fraud are important to merchants, but another important issue is reducing the cost of accepting credit cards.

“Interchange is a large portion of expenses,” said Linda Bounds of Midway USA, a former mail order business that now operates exclusively over the Internet. Interchange is the rate the card issuer charges the business for using the credit card. At a Wednesday afternoon panel discussion at CNP Expo in Orlando, Fla., Bounds recommended taking the time to study transactions to see where your company is losing money. Midway found it was possible to save a percentage point or more.

“We are always looking at those chargebacks,” Bounds said. “Work with your provider to understand what you can control.” Close on a timely basis, make sure addresses are clean and make sure back orders are clean, she added. “I would encourage you to do a quarterly review to see what you can do better and control costs.”

Credit card fees are the third-largest cost for many businesses, said Anne Fields, director of financial compliance for Crutchfield Corporation. The average merchant has to manage about 60 interchange rates and can reduce those rates with some effort. Find out where in the stream you authorize the card, and try to authorize the card toward the end of the transaction. Simple things can save a lot of money, Fields said.

Make sure you know what the optimal interchange rate is for you, and ask your processor why you’re not qualifying for the lower rate. Competition, including Bitcoin, could force card issuers to reduce interchange rates, Tom Pouliot, payments evangelist of Vantiv/Litle & Co., said.