SWIPING THE QUALITY & COST OF MERCHANT CARD SERVICES:
Expense Reduction Analysts (ERA) merchant card services cost management specialist, shares his thoughts on how to achieve cost reduction and improve service in this cost category.
"We first analyse the Client's merchant statements to assess how much is being spent on credit and debit transactions, how many credit and debit transactions are going through, what the average transaction size is, the proportion of card present and card not present transactions, and the rate that the client is paying. We will also discuss service related issues with the Client and find out how the transactions are being processed. The credit transaction rate will be typically a low percentage, say from 1% for a very large client to 2.5% for a smaller client. For the debit transactions the rate will be based on a small number of cents per transaction".
Once this information has been assessed, ERA is able to approach and negotiate with the incumbent bank before, if necessary, putting the job out to market. "We prefer to work initially with the client's current bank wherever possible primarily because of the transition issues but also from the relationship loyalty perspective," they advise.
The suppliers are asked to re-assess their rates and services based on the client's:
Total transaction value per annum.
Average transaction size.
Number of transactions that are card present (ie. swiped through/eftpos) and card not present (ie. over the phone or internet). This is an important point as the latter are charged at a higher rate because of the higher risk factor and the differential on the bank interchange rate.
In this process ERA are clearly putting the supplier under competitive pressure and they will have a good idea of the rate that the client should be paying.
"If the client does change supplier it is usually not a particularly hard change to make if properly managed. However, Clients will often stay with the incumbent bank even when dissatisfied because the concept of changing over hundreds of merchant card eftpos machines nationally is far too daunting even to
contemplate."
"We recently handled this service for OPSM and changed their 400 retail outlets to a new bank over a four to six week period with relatively few problems and a very large saving to boot."
The successful bank arranged training sessions for the new system after installation and provides ongoing hotline support for any questions that may arise. In the OPSM case the system also checks the customer's private health fund allowance while they wait and deducts this from the customer's bill. The health fund then credits this amount to OPSM. This is a major benefit for the customer who doesn't have to claim the allowance back from the private health fund. It also reduces the amount of money that is processed on credit card hence saving money for the Client.
ERA then follows through by checking their client's transactions every few months to ensure that the client is still receiving the correct rates as negotiated. ERA get client feedback on service issues and consult the supplier to ensure that the service continues to run smoothly.
Here is another overhead solution that can effectively be out-sourced to achieve considerable savings and improved service.
Expense Reduction Analysts - Working in partnership with our clients to maximise profits
