Using Data to Optimize Costs

Interchange - Definition Interchange is a fee a merchant pays to the card issuer which is typically a % rate and transaction fee. These fees can differ for many different reasons: Risk Rewards points Incentives Government Regulation Note: Interchange is only one component of a the transaction cost. There are Card Scheme Assessments as well as an Elavon Mark Up.

Assessments - Definition Assessments are fees paid to the card brands for maintaining the payment processing networks. Network Fees Access Fees Penalty Fees Foreign transaction fees

Processor Fees - Definition Processor fees are fees charged by your bank or payment processor (Elavon/USBank) Processing fee Monthly statement fees Chargeback fees PCI support/non-compliance fees Authorization charges

Optimizing Interchange Costs

Effective Interchange by Industry

Understanding the Factors Affecting Interchange 1,000+ Interchange Products

Card Classifications Visa – Card Types MasterCard – Card Types Consumer Credit Rewards Signature Signature Preferred Consumer Debit – Check Card Regulated Debit Unregulated Debit Prepaid Commercial Card Business Business Tier 1 Business Tier 2 Business Tier 3 Business Tier 4 Business Debit Regulated Unregulated Corporate Purchasing GSA Purchasing (Govt) and Fleet Non-GSA Purchasing and Fleet MasterCard – Card Types Consumer Credit Enhanced World High Value World Elite Consumer Debit – Check Card Regulated Debit Unregulated Debit Prepaid Commercial Card Business Business Spend 2 Business Spend 3 Business Spend 4 Business Debit Unregulated Corporate Purchasing Fleet Specific card type break out Card brands are shifting more and more toward higher end cards.

Managing Interchange

Uncontrollable Factors – Government Regulation (Durbin Amendment) Managing Interchange Uncontrollable Factors – Government Regulation (Durbin Amendment) Capped IC Fees on Debit cards to 0.05% + $0.22 Big Banks ($10B in assets) vs Small Banks (credit unions) Transactions over $12 saved significant costs Transactions under $12 actually paid more due to this regulation Even though it is a “cap”, none of the networks chose to publish a rate lower than 0.05% + 0.22. Small Ticket Debit was eliminated.

Managing Interchange Uncontrollable Factors – Durbin Regulated Debit Trends

Question: Does AVS have to match? AVS - $1,000,000 Question Question: Does AVS have to match? Answer: Depends…

Downgrade Research Common Reasons for Downgrades AVS Timeliness Missing sales tax Mismatched MOTO/ECI indicator with ACI Auth/Settle amounts do not match

Managing Interchange How do I track downgrades? Statements Merchant Connect / Payments Insider EMR Report What to look for? EIRF and Standard categories Visa TIF fees Zero Floor Limit fees Effective Interchange costs about Industry averages or above 2.50%

Optimizing Assessment Costs

Effective Assessments by Industry

Visa Assessments Assessments that apply to every transaction Volume Assessment – 0.13% NAPF Fee - Auth $0.0195 on credit cards $0.0155 on debit cards Base II Clearing Access Fee – $0.0018 FANF Fee Assessments that apply on a case-by-case basis Misuse – Auth that is never reversed or settled - $0.0.045 Zero Floor Limit – Settled transaction without Authorization - $0.10 Acct Verification - $0 Account Status check - $0.025 ISA Fee – Assessed on Intl volumes – 0.80% IAF Fee – Assessed on Intl volumes – 0.45% TIF Fee – Assessed on debit card downgrades (reg and unreg) - $0.10

MC Assessments Assessments that apply to every transaction Volume Assessment – 0.12% (0.14% for credit/comm > $1,000) ALF Fee – 0.0047% NABU Fee – Auth - $0.0195 Assessments that apply on a case-by-case basis Processing integrity fees – Auth that is reversed late, never reversed or never settled - $0.045 + $0.01 reporting fee Acct Verification - $0 Account Status check - $0.025 Intl APS Fee – Assessed on Intl volumes – 0.85% Intl Cross Border Fee – Assessed on Intl volumes – 0.60% CVC2 Fee – Match or No Match Response - $0.0025

Assessments that apply to every transaction Volume Assessment – 0.13% Discover Assessments Assessments that apply to every transaction Volume Assessment – 0.13% Data Trans Fee – $0.0025 Data Usage Fee – Auth – $0.0195 Assessments that apply on a case-by-case basis Intl Processing Fee – Assessed on Intl volumes – 0.80% Intl Service Fee – Assessed on Intl volumes – 0.50%

Managing Assessments Penalty Fees Always get electronic authorizations and pass all authorization data at settlement Never do $1 status checks – these should be Zero Dollar Account Status checks Limit forced or offline transactions Keep downgrades to a minimum Fixed Network/Location Based Fees Limit the number of locations/MIDs Understand how your tax ID setup affects assessment fees (Visa FANF fee) International Assessment Fees Occur when cardholder is from a different country than the merchant Several fees apply for each of the card brands Uncontrollable, but could be subsidized with a Dynamic Currency Conversion solution

DCC Revenue Stream = Optimized Costs

What They See is What They Pay

DCC Opportunities by City

The Sky’s the Limit Large metro areas win BIG with DCC: Los Angeles San Francisco Las Vegas Chicago Boston New York City Miami Honolulu Washington D.C. Orlando

DCC Opportunities by State

DCC Customers by Country

Complete solution that integrates with POS/PMS Single provider of payment needs

Offset expensive international interchange From 2.48% to 3.78% (interchange + card brand assessment fees) DCC helps subsidize those fees Offset expensive international interchange Revenue sharing between Elavon and you Typical conversion fee is 3.00%-3.50% DCC is a revenue source Collaborative approach between Elavon and you to set the conversion fee that best fits the business Opportunity for increased revenue share from conversion fee Flexibility is key

Managing Total Costs of Processing Interchange Management Controllable versus uncontrollable factors Assessment Management Penalty fees versus fixed and unavoidable fees Converting transactions into a Revenue Stream Possible way to subsidize the high costs of International transactions

Questions?