Yesterday, I purchased a sandwich from this shop and noticed their #cashdiscount sign / program. As I have done 50+ times, I asked about their experience. They are 2 years in and they have had “very few complaints” and no significant impact on revenue or customer behavior. This is what I always hear.  Scroll down for my thoughts on these programs.

Here is the answer to several commonly asked questions about Cash Discounting and Surcharging that I wanted to share.  (I am not an attorney and this is not legal advice, these are my personal opinions)

Why do I believe these programs are the right thing for the consumer? Because every business is passing the cost of processing on to the consumer in the form of higher prices. The only question is if those higher prices will effect all consumers (unfair) or just the ones who don’t pay cash.

Why do I believe Cash Discounting has a slight advantage over Surcharging? Because why would a business save 60% when they can save 100% and why would you leave yourself open to a competitive threat? Visa has not taken any meaningful action (see below), merchants love the program and worst case scenario, you flip the merchant to surcharging when you have to.

Why doesn’t the merchant do a price increase on their own instead of with a sign? Because it is slightly less convenient and requires them to implement a discount on their register, not to mention re-printing signs or menus. Why do all of this when the consumer doesn’t care either way and it can potentially cut us out?  Also, keep in mind that the merchant isn’t exactly sure how much to raise the price in order to cover the cost of processing.  I know some companies are helping merchants implement these types of programs now and I think it will be interesting to see how this developments.

Why don’t I think Visa will “Shut Cash Discounting down”?  Because Visa doesn’t have a police force and they don’t make laws (at least not directly).  These types of moves are all about timing and leverage.  If Visa wanted to squash these programs, they should have done it at the acquirer level 2 years ago.  They started down that path, but never followed through and we haven’t seen any action lately.  Meanwhile, thousands of merchants each month have signed up for these programs and love it!

These business owners are going to continue these programs and with each passing day, Visa has less and less leverage to shut them down.  Large merchants are already screaming about interchange fees with COVID-19, does Visa really want to antagonize hundreds of thousands of small business owners right now with a program born out of the high cost of processing in the US?  I don’t think so.

One other thing I will point out, the Durbin Amendment states… “A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to provide a discount or in-kind incentive for payment by the use of cash, checks, debit cards, or credit cards”

I’m not sure how you could read this section and come away concerned about Visa rules when it comes to cash discounting.  If the merchant feels they are offering a cash discount or in kind incentive and they are informing consumers about their price in one way or another, I don’t think the card brand rules have anything to do with compliance since this law says their contracts don’t apply.

Not to mention the supreme court in the Expressions Hair Design case ruled unanimous that banning surcharging was a free speech issue because these bans regulated the way the price was communicated, which is the whole argument over various forms of cash discounting.  I think eventually Visa will put pressure on congress and state legislatures to clarify and update these laws and that will be their long term play, but with the Durbin Amendment hanging over their head, I personally think they would be crazy to jump into the fray on this issue with all the other battles they are fighting (and mostly losing) around the world right now.

So here are my thoughts about all the industry fights over compliance and cash discount versus surcharging.

#1 – We should try to be as compliant with the law as possible.  However, at the end of the day, if there is no enforcement and the legislative branch in most states does not clarify the language in the Durbin Amendment, it is becoming less and less of a concern.  I believe getting the math right and figuring out issues like accounting reconciliation on sales tax (which drives large merchants crazy!) is much more important at this time than squabbling over the wording of our signs and how the receipt looks on the terminal.

#2 – The jury is out… If you train the merchant and they train their employees, these programs don’t hurt their business and when they try it they will quickly realize this is true.  About 1 in 20 businesses will be the exception to this rule for one reason or the other, but the vast majority of the time, it is not an issue.

#3 – Merchants don’t care one bit how you implement this program, so why not implement it in a way that is easiest for them and most profitable for you?

#4 – If compliance becomes less important or urgent, then Surcharging becomes less appealing.  I still love surcharging, don’t get me wrong, but the appeal of surcharging over cash discounting is compliance, plain and simple.  If you don’t believe compliance with Visa rules on this issue is still relevant, then surcharging becomes the program of choice in a few states, but the vast majority of the cities in the US don’t seem likely to intercede in our industry fight over Cash Discounting vs Surcharging.