Many of you may already be aware of this big development in the cash discounting world. For months I’ve been warning reps not to do cash discounting...
The Mistake Big Processors are Making with Cash Discounting
Today I would like to talk about the mistake that big processors are making with cash discounting. I started talking about the idea of passing costs onto the consumer about a year and a half ago. When cash discounting started it seemed that it would never be anything big. As you all have seen, […]
Today I would like to talk about the mistake that big processors are making with cash discounting. I started talking about the idea of passing costs onto the consumer about a year and a half ago. When cash discounting started it seemed that it would never be anything big. As you all have seen, it has become one of the hottest topics in the industry! Cash discounting will probably account for a huge chunk of “new profits” next year. In spite of it growing and multiplying there are a lot of processors, especially the larger acquirers, who really don’t want to touch cash discounting at all.
I think this is a big mistake. If you are not doing cash discounting today, make sure that you think through a couple of things.
First of all, a lot of people are saying that cash discounting won’t last. Many processors do not believe it will even be in use after the next two years. I personally feel cash discounting could possibly be around for five years by the time all of the appeals go through the court system. However, let’s assume they are correct and cash discounting is over in twenty-four months.
What do you think is going to happen? Do you think that all of these merchants are going to stop accepting credit cards? No, not at all. They are going to keep processing. Who are merchants going to process with? Are they going to immediately switch processors because there is no more cash discounting? No.
These merchants you are losing right now are going to stay with their current processor. Once your competitors inform their clients of the change in the laws and pricing, they are only going to lose ten to fifteen percent of their customers. Yes, a few merchants will do price shopping. The other eighty to ninety percent will stay with their current processor.
You may be a processor or ISO that says, “James, I still don’t like cash discounting.” Have you considered that your worst-case scenario would be your profits tripling for two years? You also gain several merchants whose accounts you wouldn’t have had. That’s it! You have to understand even if cash discounting goes away, these merchants are still going to have a relationship with their processor. The relationship will be revised, but it isn’t going away.
I suggest thinking carefully about your decision not to offer cash discounting. This decision is really going to cost a lot.
- You are going to lose reps who want to do cash discounting.
- You are going to lose merchants who want to do cash discounting.
- You are going to lose a huge opportunity when cash discounting goes away. You could be gaining merchants who are probably going to stay with you regardless.
Don’t make that mistake. If you have questions, feel free to reach out to me. My schedule is a bit crazy, but I try to put a day aside every week or two to take random phone calls. Email me at email@example.com. I’m always glad to have a conversation.
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