2. Using Data to Optimize Costs

4. 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.

5. 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

6. 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

7. Optimizing Interchange Costs

8. Effective Interchange by Industry

9. Understanding the Factors Affecting Interchange
1,000+ Interchange Products

10. 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.

11. Managing Interchange

12. 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% Small Ticket Debit was eliminated.

13. Managing Interchange
Uncontrollable Factors – Durbin Regulated Debit Trends

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

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

16. 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%

17. Optimizing Assessment Costs

18. Effective Assessments by Industry

19. Visa Assessments Assessments that apply to every transaction
Volume Assessment – 0.13%
NAPF Fee - Auth
$ on credit cards
$ 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 - $
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

20. MC Assessments Assessments that apply to every transaction
Volume Assessment – 0.12% (0.14% for credit/comm > $1,000)
ALF Fee – %
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 - $ $0.01 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

21. 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%

22. 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

23. DCC Revenue Stream = Optimized Costs

24. What They See is What They Pay

26. DCC Opportunities by City

27. 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

28. DCC Opportunities by State

29. DCC Customers by Country

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

31. 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

32. 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

33. Questions?