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Retailers coping with economic turmoil are asking their independent sales organizations for help in controlling costs. "Retailers are being asked to do more with less," John Mayleben, vice president of technology and product development at the Michigan Retailers Association, tells CardLine sister publication ISO&Agent Weekly. The Lansing, Mich.-based association operates an ISO for its members and merchants in 20 states. Debit transactions tend to be cheaper for merchants because it is assumed the risk is lower as consumers must enter a PIN, which only the consumer should know, to complete a transaction. Part of the ISO response is to not just look at the number of merchant transactions that can be converted from credit to debit, but to examine the merchant's behavior, Mayleben says. "We ask merchants how they do business today and make sure that description matches the interchange categories they are paying," Mayleben says. When there is a significant number of transactions that fail to get the optimal interchange rate, such as when a card number is keyed in instead of swiped, the conversation with the merchant will focus on the behavior of store clerks. "How do we help the merchant train its staff to modify their behavior so transactions qualify at a better interchange rate?" Mayleben says. Another way to help merchants is by examining their account agreements to see if a pricing change might be beneficial. For example, 888QuikRate.com, a Dallas-based ISO, changed contracts for merchants that generate most of the ISO's revenue to a pass-through model, which is interchange plus a fee, says owner Jon Perry. This helps merchants by potentially lowering how much they pay in transaction rates. Many merchants otherwise are on a tiered-pricing model that has set rates for qualified, mid-qualified and non-qualified transactions. Qualified transactions typically have the lowest rates of the three, and the acquiring bank upon authorization of the transaction determines which category it falls into. For example, Perry says a qualified rate might be 1.59% of the sale, but as a pass-through transaction that rate could be 1.03% plus a fee, which may be less costly to the merchant. The pass-through model helps reduce the potential for transactions to be assessed higher interchange rates in the tiered-pricing model, he says.
