Someone using the name Nathaniel Roberts, who claims 20 years of financial industry experience, has written a manual that is critical of merchant processing banks and gives retailers advice on how to negotiate to reduce their card acceptance fees.

The book's distributor, Thomas Pencek of Sales Plus in Mountain View, Calif., said the author used a pen name because the book could hurt his career.

"Mr. Roberts" wrote the 68-page document out of "sheer frustration" that merchants do not get good deals because they do not understand how the card business works.

The book pays most attention to direct marketing businesses, which accept card numbers by mail and phone and cannot put the plastic through an authorization terminal.

The risk of loss forces them to pay higher than average transaction discounts to banks.

Just as merchants need to educate themselves about the business and its fee structure, merchant banks need to sharpen their understanding of "the risks and rewards of the fastgrowing audiotext, home shopping, and direct response segments," the book says.

The author encourages bankers to customize services for a merchant, rather than take a one-size-fits-all approach.

Despite the book's inflammatory tone some observers concede it raises valid issues. "There were some atrocities in the industry," said William Westervelt, a merchantside expert and principal of Annapolis Consulting.

Big, reputable direct marketers may have a legitimate gripe over the bank card associations' differential interchange rates. Companies like J. Crew and L.L. Bean have helped to combat fraud and credit abuses in hopes of getting lower rates, Mr. Westervelt said.

Thomas J. Litle, chairman of Litle & Co., which processes for direct marketers, says bank costs do not justify the higher prices, which inhibit card usage.

Thinking Small but Acting Big

"The banks were taking tremendous advantage of the direct marketers," he said.

"They can't get away with it any more," Mr. Litle said.

Banks "can't offload chargebacks on direct marketers and get away with it any more," he said.

In the end, smaller merchants may have to think small, but act big to get ahead in the interchange game.

"The larger the merchant, the more the company acts like a corporation, the more they know about business," Mr. Westervelt said.

"The smaller the merchant, the more they look like a consumer, or act like one."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.