Money Access Service Inc., which operates the MAC electronic banking network, announced a plan to restructure its debit point of sale fees in an effort to raise transaction volume.
Beginning April 1, issuers of MAC debit cards will see a reduction in switch fees and the adoption of new reimbursement policies that will increase their point of sale revenues.
Meanwhile, acquirers -- banks and processors that connect merchants to the network -- will see a reduction in switch fees.
The new pricing is part of a drive to increase point of sale transactions by motivating the involved parties to encourage card usage and to expand the number of places accepting debit cards for purchases.
"We believe that putting together this pricing package will greatly encourage overall transaction volume," said John R. Beran, president and chief executive of Money Access Service Inc., which is a unit of Wilmington, Del.-based Electronic Payment Services Inc.
Experts have long maintained that merchant acceptance is the most important variable in the point of sale debit growth equation. The new pricing is evidence that MAC executives believe this to be true.
By replacing a flat acquirer access fee of 4.5 cents per transaction with a variable fee structure that rewards high volumes, MAC executives believe they have given acquirers incentive to place terminals in more merchant locations. More terminals will presumably translate into increased volume.
Under the new pricing scheme, acquirer fees will range from 2.5 cents to 3.5 cents per transaction, with those that generate more than three million transactions per month paying the lowest fees,
Issuers also will get an opportunity to reduce their fees.
Under current MAC policies, card issuers pay between 5 cents and 10 cents per transaction. The new structure will reduce the fee range to between 3 cents and 7.5 cents, with the lowest fees assessed to those with more than one million
However, in a twist experts said is clearly designed to push banks to promote debit use among their customers, the new fee structure will be based entirely on the point of sale volume an issuer brings to MAC.
Currently, MAC point of sale fees to issuers are based on the combined point of sale and automated teller machine transactions that an issuing institution brings to the network.
The new pricing gives issuers further incentive to promote point of sale use through a reimbursement fee. For each MAC point of sale transaction conducted by its cardholders. an institution will receive 6.5 cents from the merchant acquirer.
Simple math reveals that it behooves issuers participating in MAC's point of sale business to encourage cardholders to use the payment option. The incentive is needed, merchants say, because financial institutions have done a notoriously poor job of promoting debit point of sale to their customers.
"Banks have got to get more involved in educating their customers if debit's going to grow beyond the realms we see it in now," said Thomas Randolph, manager of banking services at Mobil Oil Credit Corp., Lenexa, Kan.
Mr. Randolph, whose parent company operates nearly 8,000 debit-accepting service stations, said startlingly few banks inform new customers that ATM cards can be used for retail purchases.
MAC hopes the new fee structure will help to remedy this situation, though under the current pricing system the network's point of sale transactions have grown by an average of more than 70% per year since 1990.
"We feel that by employing a reimbursement fee, [the banks] will work harder at educating and encouraging use of their ATM cards at the point of sale," said Mr. Beran of Money Access Services.
In addition to the pricing changes, MAC announced several new requirements for institutions participating in the point of sale network. Beginning Sept. 1, 1995, card issuers' computer systems must be able to support daily point of sale purchase limits, stand-in processing at the network switch, and an enhanced transaction set that differentiates point of sale transactions from ATM transactions. MAC's Tiered OS Pricing Structure*Issuer Fees Monthly transactions Fee per transaction1 - 100,000 7.5100,001 - 250,000 6.0250,001 - 500,000 5.0500,001 - 1 million 4.0Above 1 million 3.0 Acquirer Fees Monthly transactions Fee per transactions1 - 500,000 3.5c500,001 - 1 million 3.01,000,001 - 3 million 2.75Above 3 million 2.5 * Effective April 1, 1995