Interchange rates for international cards (cards issued outside the U.S. and processed by a U.S. based merchant) can be very confusing. Beyond the interchange rates and other processing fees charged for international cards, every network adds two fees to every international transaction. Here’s a quick guide to understanding these fees. Continue Reading»

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We prepared the following analysis before the Durbin amendment became effective on October 1, 2011.  We will be updating this analysis in the near future but the general guidelines presented are still very valid.

Reducing your healthcare organization’s cost of processing credit and debit card payments from patients or businesses can be a herculean task because the payments industry is unnecessarily complex and confusing. There are so many industry terms—such as qualification tiers, downgrades, interchange, assessments fee, batch fee, automated clearinghouse fee, authorization fee, settlement fee, address verification service fee, and payment card industry compliance fee—that even a sophisticated healthcare finance leader can get cross-eyed.

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Last fall, Visa and MasterCard announced a settlement with the Department of Justice (DOJ) and several state attorneys general to resolve antitrust investigations into the card networks merchant acceptance rules in the United States. American Express is litigating this suit with the DOJ. On July 20, 2011, the court approved the settlement and entered final judgment in the case. The final judgment is available at www.justice.gov/atr/cases/f273100/273170.pdf. Continue Reading»

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About four years ago, Discover and American Express started updating their business model by letting acquirers add its cards to the payment options they offer to merchants.  Traditionally, acquirers or payment processors could only offer Visa and MasterCard processing, and merchants had separate agreements with Discover and AmEx.   Therefore, merchants became accustomed to getting three sets of merchant statements, with three difference customer service phone numbers, and three different funding time frames. Continue Reading»

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In slightly more than a decade convenience fees on credit and debit cards have evolved from application in a specific market to wide adoption across many industries.  This article looks at the growth in usage of convenience fees, application within specific verticals, and card network regulations. Continue Reading»

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Today the Federal Reserve Board issued final rules of the Durbin Amendment, part of the Dodd-Frank Act signed into law in July 2010 by President Obama.  The Durbin Amendment gave authority to the Federal Reserve to regulate debit (signature, PIN, and PINless) interchange fees and transaction routing.

The Fed presented draft rules on December 16, 2010, where they had two alternative approaches  to capping debit interchange fees and two alternative approaches to transaction routing.  After considering over 11,000 comments from consumers, lawmakers, academics, and industry personnel over the last six months, the Fed presented the following rules.  Here are the salient points and dates.  Click here to read the full text of the final rules or a shorter memo of the final rules. Continue Reading»

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Two weeks ago, Visa announced that it will support a two-tier debit interchange structure – the current debit interchange rates for issuers with assets less than $10 billion and the new capped debit rates being developed by the Federal Reserve for larger issuers.   Read more about this here.

“MasterCard is continuing to evaluate the viability of a two-tier interchange structure…” read a statement from MasterCard.  It is likely that MasterCard will follow Visa or otherwise, risk being less competitive to smaller financial institutions.

Lastly, if you didn’t get a chance to see the Federal Reserve hearing proposing new rules in regulating debit interchange fees and routing, check here to see an archive on C-Span.  It is very interesting to hear the Fed’s perspective on our industry, particularly in the Q&A session.

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A common and frequent question we get asked is, “who is the best credit card processor?”  I usually smile because it is like asking a frequently flyer which airline is the best.  There are travelers who have horror stories about each and every airline, at least amongst domestic carriers.  Similarly, we have not found a single best credit card processor, or merchant acquirer, that addresses every need in the marketplace.  Tier one firms typically offer similar levels of service, competitive pricing, and technology.  Few distinctions amongst acquirers can be based on their product/service functionality (online chargeback management, electronic signature capture, configurable reporting, etc.) and certification to various gateways and point-of-sale systems.  So determining the best processor really depends on a merchant’s needs. Continue Reading»

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Merchants finally received a long awaited holiday present last month in the form of proposed rules regulating debit interchange fees.  The Federal Reserve proposed new rules on December 16^th, 2010, to govern debit interchange fees and network routing.  These proposed rules are subject to a 60-day comment period, and the Fed is scheduled to issue a final version by April 21, 2011, with the rules going into effect June 21, 2011.  As background, the Federal Reserve was empowered to implement the Durbin Amendment, a provision of the Dodd-Frank Wall Street Reform Act of 2010 signed into law in July 2010 that regulates debit interchange fees and network routing.

The salient points of the Fed proposed rules that pertain to most merchants along with our analysis are as follows: Continue Reading»

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An amendment sponsored by Senator Dick Durbin to tackle “swipe fees” passed last Thursday in a 64-33 vote. This amendment focuses on how much Interchange fees issuing banks can charge merchants for accepting debit cards. Although this amendment still has to go through several hurdles Continue Reading»

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