Durbin’s Debit a Trick or Treat for Small Merchants

Merchant statements soon to reveal who gets savings from lower debit Interchange.

Next week, most merchants will get their first chance to see if they saved money on their card processing fees due to the Fed’s mandated lower debit rates that took effect October 1st. Typically merchants receive monthly statements at the beginning of each new month showing both processing activity and how fees were applied. Some merchants don’t open their statements and many merchants don’t understand how to read them when they do, but clearly if there was ever a statement to pay attention to, it would be the October statement that’s about to be delivered.

Merchant service providers are not required to directly pass the reduced rates of the Fed regulated debit transactions (and the associated savings) on to the merchants they process transactions for. The Fed’s rule lowered the debit Interchange rate, yet Interchange is only one component of the discount pricing schedules merchants pay to process transactions.

So the yet unanswered question is will YOUR merchant service provider pass all, some or none of the savings on to you? The answer awaits you when you open your October statement.

At an industry level I believe we can go ahead and make an educated guess as to the answer to this question now. And the answer is… it depends.

If your processor already actively promotes an Interchange pass through pricing model and works to educate merchants on how to best manage Interchange qualifications like Vantage does, then yes, chances are that you will see the all the savings available.

However, we don’t expect that merchant service providers who don’t do this today will change course and pass through all the possible savings. Consider for a moment that to do so would mean that they would have to change their entire business philosophy, company culture, and business model. All of their merchant statements would have to be reformatted. All of their merchant contracts would need to be rewritten. Their entire sales force would have to be re-trained, all the training materials rewritten, all the recruiting ads and marketing material changed.

We just don’t expect a mass exodus of sales organizations to move away from their current “rate as low as” marketing and non-qualified pricing approach. Just the opposite, moving forward we expect merchants to be bombarded with even more calls and marketing messages like this one:

In all offers like this, merchants must pay close attention for undisclosed fees and recognize that long term contracts indicate introductory rate quotes, so read the fine print carefully.

The smart shopper knows that Interchange pricing is the key to merchant savings. Vantage has lots of resources available to help. Fax us your merchant statement to 888-857-2207 for a no obligation analysis. And get an instant Interchange quote at http://merchantrates.com.


by Ty Hardison

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