Merchants frustated by the complexities of their monthly credit card transaction statements ought to consider having an analyst review them to avoid overcharges, in part because the industry lacks formal standards and protections, a payments processor executive says.
“There are not a lot of standards in this industry for revealing all of the details on a statement,” Bob Baldwin, president and chief financial officer of Princeton, N.J.-based Heartland Payment Systems Inc., tells PaymentsSource. “It’s not as much like the Wild West as it used to be, but there are still people that will take advantage of you.”
Merchants and their supporting organizations have been pushing for a simplified monthly statement that does not overwhelm a business owner with hundreds of pages of credit card transactions, many of which carry different interchange rates and fees for acquirers, processors and credit card companies. (see story) http://www.paymentssource.com/news/iso-merchants-need-statement-account-focus-3007503-1.html
One reason for the complexity of merchants’ statements is the diversity of interchange pricing schemes among the various card brands, Baldwin notes. But certain acquirers may be taking advantage of that complexity to squeeze out more profit on a transaction at the expense of the merchant, Baldwin suggests.
“A merchant in this economy would find it very worthwhile to have an analyst, or a team that is very analytical, looking over statements,” Baldwin says.
Moreover, many entrepreneurs may lack the time or aptitude to pore over complex statements and spreadsheets to spot excess charges, he suggests.
A return to a pricing approach common in the 1990s in which a couple of interchange rates were bundled, with a few tiers below it for qualified, mid-qualified and non-qualified payments, could go a long way toward simplifying the statements, Baldwin feels.
“If it gets more complicated than that, the sales person doesn’t know where to slot the transaction, and the result is the merchant and the ISO are not on the same page about where it should be categorized,” Baldwin says.
John Mayleben, Michigan Retailers Association senior vice president for technology and product development, agrees that too many categories for transactions exist, opening the door for errors and overcharging.
Businesses must determine each transaction’s category, and as a result of the complexity, some retailers may end up paying more than others for the same transaction, Mayleben contends.
Mayleben uses the analogy of four buckets representing transaction types – check, qualified, mid-qualified and non-qualified, with retail prices of 1%, 2%, 3% and 4%, respectively – and the sales clerk having 400 pieces of paper, each one with a different interchange rate listed on it.
“Now, you have to decide which bucket to put each piece of paper in,” Mayleben says. “One company owner might decide to put a card-not-present transaction in the mid-qualified bucket to create a profit because the interchange rate is less than 3%, but what happens if another company owner decides to put that same transaction in a non-qualified bucket at a higher rate?”
In the end, that retailer could end up overpaying for a transaction, Mayleben suggests.
Additional complexity arises when the processor charges a percentage fee and transaction fee but does not assess them on the same statement, he explains.
“Some merchants can see their ‘transaction fee’ portion of the monthly billing turn up the following month, which makes it difficult to track your expenses,” Mayleben says.
Baldwin feels a statement showing interchange rates plus acquirer markup fees would more fully disclose what the merchant is paying for.
“Card brands have so many different interchange levels, so there are a lot of charges and a lot of things to look at, making it hard for the merchant to decipher,” Baldwin says. “There can be markups on the interchange rate, but the acquirer may just call it interchange, and the merchant is paying more than he should, and would not know it.”
The fee reductions associated with new Federal Reserve Board debit-pricing rules are significant enough to prompt a new level of attention to monthly statements and potential hidden charges, Baldwin says. (see story) http://www.paymentssource.com/news/merchants-not-see-debit-interchange-reduction-durbin-3007530-1.html
“I don’t want it to sound like everyone in this business is a crook, because they are not, there are many honest ones,” Baldwin says. “But there are others who take advantage of the complexity to fatten their bottom line with deceptive practices.”
If federal regulators feel a need to protect a consumer from overcharges on a telephone bill, business owners should have similar protections in dealing with credit card transaction monthly statements, Baldwin reasons.
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