The Case for Compliant Surcharging
There has been a lot of uncertainty lately around dual pricing
– where the merchant adds a fee to the ticket when a customer pays by card. The one exception is compliant surcharging. Done properly, surcharging credit card payments is rock solid and compliant with card brand rules.
Before proceeding down the path of selling compliant surcharging, though, ask yourself these three questions:
1. What is the average ticket size of a prospect/client? Larger average tickets ($200 and up) are the best candidates. Think in terms of auto repair shops, home services, furniture stores.
2. Do you have a solution that integrates with merchant billing? Merchants need to be able to view each month the money they are saving, and paying.
3. Is the solution omnichannel
? It should look and work the same in card-present and card-not-present environments.
What is Compliant Surcharging?
In compliant surcharging a line-item fee gets added to the customer credit card receipt. This fee cannot be added to a debit card (PIN debit or signature debit), prepaid card or other form of payment.
Because it can only be done with credit cards, surcharging requires BIN lookup technology at the terminal, gateway or POS system. The BIN (or bank identification number) identifies the card as a credit card, which makes the transaction eligible for surcharging.
The question is, how can you convince merchants they’re getting a good deal with surcharging? Right now, there are a lot of really good processor-agnostic technology solutions that can handle the authorization piece of compliant surcharging. But you couldn’t tell that from the monthly billing statements merchants receive. Most are head-spinningly confusing, with no way to verify savings. To them, it looks like any other credit card processing statement, with lots of fees, when in reality there was revenue collected that offset some of those fees.
While there are APIs available to build out this capability, these may not be workable for smaller ISOs and individual agents.
, the sponsor of the Merchant Sales Insight, has done an excellent job of developing a omnichannel surcharging program it calls RewardPay that meets all the requirements for compliant surcharging. Plus, merchants receive statements that spell out all fees in a format they can understand.
Visa’s Surcharge Cap
In April, Visa lowered the allowable cap
on compliant surcharging, from 4% to 3%. There has been a lot of discussion around how this impacts dual pricing
, cash discounting, non-cash adjustments and other legacy programs for shifting the cost of payments processing from sellers to buyers.
If you’re an ISO or agent selling to merchants with higher than average tickets, the lower cap may actually be to your advantage. Some agents have found it difficult to sell surcharging at the higher rate to businesses with large average tickets, like home services companies. A 3% surcharge may be an easier sale.
So, don’t let the Visa cap scare you off of selling compliant surcharging. There are still savings to be offered merchants, and decent margins to be made by ISOs and agents.
And if you’re thinking about selling surcharging, head on over to payroc.com/go
. Ask about RewardPay and see if it’s a good fit for you and your merchants.