Merchant-acquirers and independent sales organizations are finding it harder to recoup the costs of signing up new merchant accounts, which are lately going as high as $1,500 per account, First Annapolis Consulting Inc. says.
The Linthicum, Md., firm, which keeps tabs on acquirers and ISOs through surveys it conducts for its own research purposes, also says its latest survey, conducted this year and asking about 2000 pricing, found that heated competition among acquirers has led to a convergence in the fees they charge their small to midsize merchants. 
To a much greater degree than in 1999, acquirers have gravitated to the same price points on key fee items, said Charles Marc Abbey, a partner at First Annapolis.
Thirty-eight acquirers and ISOs, both of which hook up retailers to the credit card acceptance networks, participated in First Annapolis latest survey. It found that Visa U.S.A., MasterCard International, and American Express Co. per-transaction prices were mostly ranging from 10 to 25 cents, and that most acquirers were not charging a separate fee for the initial credit card transaction authorization.
Other fees, including those for PIN debit and automated teller machine transactions, were greater than 10 cents, the firm said in a July 6 release that gives some of the survey findings. The interchange downgrade fee, which is charged when a card cannot be swiped, either because of a power outage or a broken terminal, usually exceeded 50 basis points. In addition to these fees, merchant-acquirers typically added roughly 9 basis points to the discount fee Visa, MasterCard, and American Express charge for each transaction.
First Annapolis does not sell reports of its survey findings. But part of its agreement with participating acquirers is that all that return a completed survey get to peek at the results. This has boosted the questionnaires response rates, the firm says.
Everyone wants this info to know the price points, said Barry L. Davis, a senior consultant at First Annapolis. Most ISOs are going after smaller merchants. They want to know if price points have changed.
The survey results come in the form of price ranges rather than averages, because the participants are afraid they might help the competition if they get specific in their answers.
Though pricing is becoming more standardized for small and midsize merchants, their monthly statements from their acquirers are becoming more complicated, and acquirers frequently price services in different configurations. This a la mode pricing has helped acquirers to maintain profitability, though it does lead to more merchant confusion, Mr. Davis said. There are a lot of sales reps who try to educate the merchant.
Acquirers sales efforts focus on smaller merchants because those are the most profitable accounts; the fees can be marked up more.
With larger merchants, the fee is exactly what Visa and MasterCard charge, with no margin to the acquirer, Mr. Davis said. For regional merchants there is a little bit of a markup. On such accounts the acquirers profit comes mainly from the transaction fee added to each transaction.
Though smaller merchants offer a better possibility for profits, the acquirers will continue to seek ways to cut the costs of selling to thousands of far-flung retailers who may operate only a store or two, Mr. Davis said.
Its a fine balance that sales reps have to maintain when it comes to educating the merchant and getting the sale as quickly as possible, he said.
