I received an interesting question in the comment section of my YouTube channel. What is reverse surcharging? I have five things to say about that subject.
#1. I HATE the term “reverse surcharging”! The first reason is because it’s confusing to merchants.
The second reason is that it has the word “surcharging,” which everyone hates. Using the word “surcharging” is similar to asking a prospect to sign a “contract” or give a “social security number.” Those are terms to avoid. Sales is all about what you say; say something else!
The third reason is that using the term “surcharge” implies compliance issues. There are specific legal rules for surcharging.
I highly recommend that you NOT use the term “reverse surcharging.”
#2. Reverse surcharging is actually cash discounting. Cash discounting is here to stay in the foreseeable future. A couple years ago I had a conversation with a company CEO who I know pretty well. He was adamantly opposed to cash discounting at that time. He had a sincere concern that it wouldn’t work and was bad for his merchants. However, I discovered in a recent conversation he is now all in with cash discounting. He has implemented it and found it does work and is good for everyone.
#3. I still believe cash discounting, non-cash adjustment, reverse surcharging, or whatever you call it is best to use for lead-in conversation with merchants. Although surcharging is sometimes a good option, it doesn’t offer as much savings to merchants. Surcharging is not available for debit cards, and debit is more profitable than credit for merchants. Instead of saving merchants 95% with cash discounting, you can only offer savings of 40%-60% with surcharging.
Why not start with the program which gives more money to the merchant and the agent? Then if surcharge is obviously a better fit, introduce it later.
#4. Closing merchant accounts is easier using cash discounting. There are certain ways to close the merchant account. You’re still going to get “no’s”. Don’t make merchants feel boxed in; give them options at closing. Cash discounting is still a relatively new idea to merchants.
I like to give two proposals. I say,
“Here’s the traditional processing deal where we save you ____. Here’s the cash discounting deal where we can save you ________. I think the cash discounting will be great for you, but I could be wrong. So, I want to make very clear to you that if cash discounting isn’t a good fit, I’ll put you right back on traditional processing. You can see how low my rates are on the traditional because I believe you’ll love cash discounting. As my thanks for trying cash discounting, you can see I’m offering you a great deal if you want to return to traditional.”
#5. Educate the customers, merchants, and employees. Make sure everyone knows how the program works. One agent with whom I spoke said 7 of 8 of his merchants went back to traditional. That is an unusual precedent. 1 out of 10 is more realistic. However, I was impressed all the clients were still with agent. Probably the reason so many returned to traditional was failure to educate.
If a consumer in the business complains, employees should be trained to respond properly. A good explanation would be, “The cost of accepting credit cards keeps going up, so we decided to do a price increase across the board. However, we felt that would be unfair to those paying with cash. So, the price increase is only added to those paying with cards. That way cash paying customers get the same price.”
Training employees to say something like that or give a brochure containing that information goes a long way to help consumers understand and limit complaints.
“Reverse Surcharging” is the same thing as cash discounting but with a bad name, in my opinion.
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