Cash Discounting and Surcharging

Get the introductory basics here as I lay the foundation for a brand new training course entitled “Cash Discounting and Surcharging.”  To find the rest of the course, go to instantquotetool.com.  Be ready to launch into the unique benefits and challenges of cash discounting and surcharging.  After this introductory episode, please take advantage of the great content on instantquotetool.com.  To seize this opportunity, sign up for your free trial.  For those who are already active users of IQ, you can view the course under the training tab.  You’ll get the entire course only on instantquotetool.com.

I’ve published quite a bit of content about cash discounting.  But I’m realizing some of it is already out of date.  This is common when discussing something brand new.  There are also other emerging issues which I haven’t addressed.  Now that cash discounting has stabilized a bit, I want to make an entire course of study on the subject.  So, please be sure you subscribe right now for the free trial period on instantquotetool.com.  The course is available now at: https://www.instantquotetool.com/courses/23

Cash discounting and surcharging has become a hot topic in the payments industry.  Understanding interchange fees is vital to this trend.  First, banish the idea that cash discounting and surcharging is only for opportunistic processors to rip-off merchants.  These are not just sales ploys or marketing gimmicks.  Unfortunately, there is going to be some of that in our industry.  But there is an underlying problem and truth involved.  To offer this option for your merchants is truly important.

Interchange cost varies from country to country.  In the UK the rates are between .3% and .4%.  You may recognize the names of those who set and charge these fees:  Visa, MasterCard, American Express, and Discover.  And the banks who back them are Wells Fargo and Chase.  Do these names ring a bell?  Yes, these are the same ones who are in the United States (along with some others who are not the same.)  However, the interchange rates set by the same brands and banks in other countries have set the U.S. rate at 1.74% average.  This is four or five times that of other countries!  Australia, for instance, is about .5% or .6%.

Usually buying in bulk renders good savings on products.  So, the expectation would be that the country who generates the most transactions for Wells Fargo and Chase would get the lowest interchange rate.  The United States provides the most business, which means the most efficiency and benefits, along with the most profit.  However, we have the worst interchange rates.  The reason for this imbalance is free market capitalism.  We are closer to a free market.  The other countries have set government regulations, placing a cap on the amount of interchange allowed.  These governments maintain that interchange is a collusion between big, big companies.  Thus, merchants have no voice.  They have done studies to decide the allowable rates.  Our U.S. government has regulated check cards in the Durbin Amendment.  But credit card transactions and even unregulated check cards are still subject to high interchange rates.  As the check card rates came down, the credit card rates went up.  So, this regulation was a “wash” anyway.

In a free market the consumer can choose what to buy and where to buy.  So, the seller must be careful of pricing too high to entice consumers.  In the U.S. free market capitalism has moved forward as it always does.  The business owners are finally saying, “No, these interchange rates are too much.  Enough!  These same companies are serving the same businesses in smaller countries.  The businesses there are doing less volume and doing it at half, quarter, or fifth of the rate we’re paying.  We’re not paying it anymore. Business owners are capitalists and don’t like regulation, so they applaud a government who isn’t regulating.  However, they have no choice but to accept payments through the huge companies.

To solve this dilemma, business owners are opting to pass the cost of processing to the consumer.  When consumers pay cash, the business owners have no charge.  But payments by card cost business owners’ money.  Therefore, consumers get the real benefit of paying with a card.  The owners’ mentality says, “Pass the cost to consumers.  Let them decide whether the benefit of using the card is enough to warrant the charge.”  The free market only works if the person receiving the benefit can put pressure on the person providing the benefit.

There are primarily two models for passing the cost of credit card processing to consumers.  Those are surcharging and cash discounting.  They are very different.  Each has unique benefits and unique challenges.  The remainder of this course of study will help you decide which of these models to use and will answer the following questions:

• How do you sell it?
• How do you find the right processor to offer it?
• What is the compensation like?
• How do you figure your residual?
• How do you run the numbers for a realistic proposal for merchants?

All this and other benefits and challenges will be addressed.  Don’t miss this great resource.  Go to instantquotetool.com today and sign up for your free trial!  Once signed in, you can view the Cash Discounting Course under the training tab.

Read the previous post here:  Three Types of Prospecting – Selling Payment Processing  http://www.ccsalespro.com/three-types-prospecting-selling-payment-processing/

Read the next post here:  Cash Discounting Deep Dive with James  http://www.ccsalespro.com/cash-discounting-deep-dive-james/