Interchange Plus Optimizer
Lower Your Transaction Processing Costs With the “Interchange Plus Optimizer” Program Paul W. Lonsford, Business Development – FDIS DALLAS
Making Practices More Profitable Services by Cardservice International.
The First Data Independent Sales Agent Program is operated by Cardservice International, Inc. FDIS DALLAS is an independent agent for Cardservice International.
FDIS DALLAS Paul Lonsford - Bio In The Top 2% Of All Payments Professionals In The U.S. Became an agent of the First Data Independent Sales group in April, 2004, after having been an Account Executive for the First Data Direct Business Group representing various banking strategic partners. FDIS DALLAS has been consistently one of the top ranking agent offices for First Data since its’ inception. First Data “Presidents Club” Member for six consecutive years. We specialize in the medical & dental industries and can be seen at industry practice management conferences and have relationships with top speakers, consultants and financial advisory firms in the areas of medical & dental practice management/marketing. "I believe my success is based on my philosophy on serving my customers first and foremost and by providing more value to my future and present clients than any other First Data representative and/or competitor."
What Is Covered In This Presentation First, this short presentation is designed to educate you about how the electronic payment processing industry works in relation to your credit card processing and its associated costs to your practice. Secondly, you will know how the credit card processing system really works and “truly” understand how the fees are calculated. Third, you will see how you currently pay for credit card transactions and see how it is grossly over-priced (no matter how great you think your pricing maybe). Also, how the “Interchange Plus Optimizer Program” will save you 23 – 51 % in your credit card processing fees. Information to be covered… Various Debit & Credit Card Types The Players of the Industry And How They Interact (So you know where the fees truly go). Who Is Visa & Mastercard Really? Interchange System & How You Can Really Understand The Fees You Pay. How “Interchange Plus Optimizer” Program Works Example of a “Interchange Plus Optimizer” Transaction
Card Types Credit Cards − This type of card is attached to a line of credit. Debit Cards − This type of card is attached to a demand deposit account (DDA). ATM Cards − This type of card is used for cash advances from an automated teller machine. Private Label Cards − Issued by companies that have their name on the card and can only be used at this business or affiliates thereof. Travel and Entertainment Cards − Used over the course of business related expenses. Purchase Cards − Used in the procurement of business related expenses. Smart Card − A card that has a microchip embedded on the card that tracks purchases and other related data. Contactless Card − A card that contains a RFID device to allows for a faster transaction.
.
Stored-Value Cards − Cards with the ability to load value or store credit
The Industry Players The Associations − Visa & MasterCard Issuers − Banks who underwrite and issue debit/credit cards to consumers & businesses. Cardholders − Consumers and Businesses Merchants − This is YOU!!! Those who accept credit cards as payment for their products & services. Acquirers − This is FIRST DATA!!! Those who handle the processing of a transaction Discover − Third Party issuer of cards that don’t follow the Visa/MasterCard system American Express − Third Party issuer of cards that don’t follow the Visa/MasterCard system
MasterCard® and Visa® MasterCard® and Visa® are known in the in the credit card industry as the Associations − MasterCard and Visa conduct clearing and settlement processing of transactions. • MasterCard's Clearing and Settlement system is called INET • Visa system is Base I for Clearing and Base II for settlement.
MasterCard® and Visa® supervise the bankcard processing within the member banks. − Financial Institutions are monitored to ensure compliance with Regulations • First Data monitors merchants to help ensure we are in compliance of the Regulation of MasterCard, Visa and the Discover® Network.
MasterCard® and Visa® each have operating regulations, policies, procedures and rules by which members must abide. • MasterCard and Visa create advertising and promotion programs to support their brands. • MasterCard and Visa develop new products.
The MasterCard® and Visa® rules and regulations govern the operational procedures for chargebacks, authorizations, settlement, etc. - Member financial institutions form their own policies regarding cardholder programs, i.e., solicitation criteria, pricing, credit limit, billing procedures, etc. • All are subject to federal and state regulations. − These guidelines follow the Fair Credit Rule ACT also known as Regulation Z
INTERCHANGE: Clearing & Settlement 1. The exchange of financial transaction information is called CLEARING. 2. The exchange of the actual funds for the transaction and the fees associated with them is called SETTLEMENT. 3. The term used to refer to the clearing and settlement system as a whole is INTERCHANGE. 4. INTERCHANGE is the exchange of transaction data between acquiring and issuing institutions 5. INTERCHANGE makes it possible for issuing banks and acquiring banks around the world to exchange information, transactions and money on a standardized system. 6. The same process occurs during the Discover or American Express cardholder transactions: − The exception is that the host is connecting to the Discover or American Express Networks.
INTERCHANGE: Clearing & Settlement Authorization Process
Clearing & Settlement
Types Of Pricing Models Tiered Pricing (Over Priced) 3 Tier Levels Qualified Discount Rate – Swiped & Basic Transaction Mid-Qualified Discount Rate – Downgraded Transaction Based Higher Interchange Non-Qualified Discount Rate – Downgraded For Combination Items
Interchange Plus (Optimally Priced) Also known as “Cost Plus” Transparent Pricing Most Cost Effective This is what Fortune 500 companies use.
“Interchange Plus Optimizer” Pricing Breakdown What Are Interchange Fees? Visa & Mastercard Association Fees Interchange - Interchange Fees are a variable cost based on the type of card, how it was processed and the timing of the individual transaction. - Multiple cards can clear at multiple interchange levels - Interchange fees go to the Card Issuing Bank - See Interchange Tables that are attached PDF’s in this email communication Assessments & Network Access - Assessments are fees that are billed out from the Visa & Mastercard Associations. This is how they produce revenue to support the Visa & Mastercard system. - .0011% is added to the Interchange Rate for each particular card (this was increased from a rate of .0925% in July 2010) - Visa “APF” or Mastercard “NABU” fee - .00269 (this is a new fee implemented in July 2009)
What Is The Merchant Discount? The acquirer (First Data) is paid for its services and costs to process debit & credit card transactions, by charging the merchant a Merchant Discount rate. “Interchange Plus Optimizer” Discount Rate is 0.20% & $0.10 is added to Visa/Mastercard’s Interchange & Assessments rates
“Interchange Plus Optimizer” Pricing Example What Are Interchange Fees? Interchange Discount Rate
1.65% & $0.04 per transaction Plus
Assessments
.0011 x the transaction amount Plus
Network Access
.00269 x transaction amount Plus
Merchant Discount Rate
.20% x the transaction amount
Equals
Total Fee For That Transaction
“Interchange Plus Optimizer” Example Transaction
Assumptions
Accept A Visa Rewards Credit Card Payment From Customer (most common) Transaction Amount - $10,000.00 Interchange Plus Optimizer Pricing vs. Tiered Pricing (Typical Medical Association Tiered Rates)
Tiered Pricing Example (Unfair & Over-Priced) Pricing is Qualified – 1.69% & $0.25, Mid-Qualified – 2.64% & $0.25, Non-Qualified – 3.64% & $0.25 Transaction Process 1) Swipe credit card and is a Rewards/Miles type credit card and is downgraded to Mid-Qualifed transaction (common because Rewards/Miles cards are not Qualified transactions) 2) $10,000 transaction at 2.64% & $0.25…results in $264.25 fees to process that transaction
Interchange Plus Pricing Example “Rewards 1” Interchange Discount Rate (from Visa Interchange tables) – 1.65% & $0.04 per transaction Assessments Rate - .0011% & Visa APF - .00269 per transaction “Interchange Plus Optimizer” Discount Rate – 0.20% & $0.10 per transaction Transaction Process 1) Swipe credit card and is a rewards type credit card and there is only interchange plus so no downgrades 2) $10,000 transaction using interchange, assessments/APF, transaction plus…results in a rate of 1.85% & $0.14 and $185.14 in fees to process that transaction.
Savings Difference “Interchange Plus Optimizer” saved you $79.11 or 30% on that transaction!!! NOW…that type of savings on every transaction will result in greater PROFITS. “Interchange Plus Optimizer” is truly the best way to process your customers transactions.
Making Practices More Profitable
Paul W. Lonsford Business Development – FDIS DALLAS Phone: (888) 557-3554 Direct: (214) 562-0203 Mobile: (214) 250-9043 Email: [email protected] Website: www.fdismerchantservices.com
Making Practices More Profitable Services by Cardservice International.
The First Data Independent Sales Agent Program is operated by Cardservice International, Inc. FDIS DALLAS is an independent agent for Cardservice International.
FDIS DALLAS Paul Lonsford - Bio In The Top 2% Of All Payments Professionals In The U.S. Became an agent of the First Data Independent Sales group in April, 2004, after having been an Account Executive for the First Data Direct Business Group representing various banking strategic partners. FDIS DALLAS has been consistently one of the top ranking agent offices for First Data since its’ inception. First Data “Presidents Club” Member for six consecutive years. We specialize in the medical & dental industries and can be seen at industry practice management conferences and have relationships with top speakers, consultants and financial advisory firms in the areas of medical & dental practice management/marketing. "I believe my success is based on my philosophy on serving my customers first and foremost and by providing more value to my future and present clients than any other First Data representative and/or competitor."
What Is Covered In This Presentation First, this short presentation is designed to educate you about how the electronic payment processing industry works in relation to your credit card processing and its associated costs to your practice. Secondly, you will know how the credit card processing system really works and “truly” understand how the fees are calculated. Third, you will see how you currently pay for credit card transactions and see how it is grossly over-priced (no matter how great you think your pricing maybe). Also, how the “Interchange Plus Optimizer Program” will save you 23 – 51 % in your credit card processing fees. Information to be covered… Various Debit & Credit Card Types The Players of the Industry And How They Interact (So you know where the fees truly go). Who Is Visa & Mastercard Really? Interchange System & How You Can Really Understand The Fees You Pay. How “Interchange Plus Optimizer” Program Works Example of a “Interchange Plus Optimizer” Transaction
Card Types Credit Cards − This type of card is attached to a line of credit. Debit Cards − This type of card is attached to a demand deposit account (DDA). ATM Cards − This type of card is used for cash advances from an automated teller machine. Private Label Cards − Issued by companies that have their name on the card and can only be used at this business or affiliates thereof. Travel and Entertainment Cards − Used over the course of business related expenses. Purchase Cards − Used in the procurement of business related expenses. Smart Card − A card that has a microchip embedded on the card that tracks purchases and other related data. Contactless Card − A card that contains a RFID device to allows for a faster transaction.
.
Stored-Value Cards − Cards with the ability to load value or store credit
The Industry Players The Associations − Visa & MasterCard Issuers − Banks who underwrite and issue debit/credit cards to consumers & businesses. Cardholders − Consumers and Businesses Merchants − This is YOU!!! Those who accept credit cards as payment for their products & services. Acquirers − This is FIRST DATA!!! Those who handle the processing of a transaction Discover − Third Party issuer of cards that don’t follow the Visa/MasterCard system American Express − Third Party issuer of cards that don’t follow the Visa/MasterCard system
MasterCard® and Visa® MasterCard® and Visa® are known in the in the credit card industry as the Associations − MasterCard and Visa conduct clearing and settlement processing of transactions. • MasterCard's Clearing and Settlement system is called INET • Visa system is Base I for Clearing and Base II for settlement.
MasterCard® and Visa® supervise the bankcard processing within the member banks. − Financial Institutions are monitored to ensure compliance with Regulations • First Data monitors merchants to help ensure we are in compliance of the Regulation of MasterCard, Visa and the Discover® Network.
MasterCard® and Visa® each have operating regulations, policies, procedures and rules by which members must abide. • MasterCard and Visa create advertising and promotion programs to support their brands. • MasterCard and Visa develop new products.
The MasterCard® and Visa® rules and regulations govern the operational procedures for chargebacks, authorizations, settlement, etc. - Member financial institutions form their own policies regarding cardholder programs, i.e., solicitation criteria, pricing, credit limit, billing procedures, etc. • All are subject to federal and state regulations. − These guidelines follow the Fair Credit Rule ACT also known as Regulation Z
INTERCHANGE: Clearing & Settlement 1. The exchange of financial transaction information is called CLEARING. 2. The exchange of the actual funds for the transaction and the fees associated with them is called SETTLEMENT. 3. The term used to refer to the clearing and settlement system as a whole is INTERCHANGE. 4. INTERCHANGE is the exchange of transaction data between acquiring and issuing institutions 5. INTERCHANGE makes it possible for issuing banks and acquiring banks around the world to exchange information, transactions and money on a standardized system. 6. The same process occurs during the Discover or American Express cardholder transactions: − The exception is that the host is connecting to the Discover or American Express Networks.
INTERCHANGE: Clearing & Settlement Authorization Process
Clearing & Settlement
Types Of Pricing Models Tiered Pricing (Over Priced) 3 Tier Levels Qualified Discount Rate – Swiped & Basic Transaction Mid-Qualified Discount Rate – Downgraded Transaction Based Higher Interchange Non-Qualified Discount Rate – Downgraded For Combination Items
Interchange Plus (Optimally Priced) Also known as “Cost Plus” Transparent Pricing Most Cost Effective This is what Fortune 500 companies use.
“Interchange Plus Optimizer” Pricing Breakdown What Are Interchange Fees? Visa & Mastercard Association Fees Interchange - Interchange Fees are a variable cost based on the type of card, how it was processed and the timing of the individual transaction. - Multiple cards can clear at multiple interchange levels - Interchange fees go to the Card Issuing Bank - See Interchange Tables that are attached PDF’s in this email communication Assessments & Network Access - Assessments are fees that are billed out from the Visa & Mastercard Associations. This is how they produce revenue to support the Visa & Mastercard system. - .0011% is added to the Interchange Rate for each particular card (this was increased from a rate of .0925% in July 2010) - Visa “APF” or Mastercard “NABU” fee - .00269 (this is a new fee implemented in July 2009)
What Is The Merchant Discount? The acquirer (First Data) is paid for its services and costs to process debit & credit card transactions, by charging the merchant a Merchant Discount rate. “Interchange Plus Optimizer” Discount Rate is 0.20% & $0.10 is added to Visa/Mastercard’s Interchange & Assessments rates
“Interchange Plus Optimizer” Pricing Example What Are Interchange Fees? Interchange Discount Rate
1.65% & $0.04 per transaction Plus
Assessments
.0011 x the transaction amount Plus
Network Access
.00269 x transaction amount Plus
Merchant Discount Rate
.20% x the transaction amount
Equals
Total Fee For That Transaction
“Interchange Plus Optimizer” Example Transaction
Assumptions
Accept A Visa Rewards Credit Card Payment From Customer (most common) Transaction Amount - $10,000.00 Interchange Plus Optimizer Pricing vs. Tiered Pricing (Typical Medical Association Tiered Rates)
Tiered Pricing Example (Unfair & Over-Priced) Pricing is Qualified – 1.69% & $0.25, Mid-Qualified – 2.64% & $0.25, Non-Qualified – 3.64% & $0.25 Transaction Process 1) Swipe credit card and is a Rewards/Miles type credit card and is downgraded to Mid-Qualifed transaction (common because Rewards/Miles cards are not Qualified transactions) 2) $10,000 transaction at 2.64% & $0.25…results in $264.25 fees to process that transaction
Interchange Plus Pricing Example “Rewards 1” Interchange Discount Rate (from Visa Interchange tables) – 1.65% & $0.04 per transaction Assessments Rate - .0011% & Visa APF - .00269 per transaction “Interchange Plus Optimizer” Discount Rate – 0.20% & $0.10 per transaction Transaction Process 1) Swipe credit card and is a rewards type credit card and there is only interchange plus so no downgrades 2) $10,000 transaction using interchange, assessments/APF, transaction plus…results in a rate of 1.85% & $0.14 and $185.14 in fees to process that transaction.
Savings Difference “Interchange Plus Optimizer” saved you $79.11 or 30% on that transaction!!! NOW…that type of savings on every transaction will result in greater PROFITS. “Interchange Plus Optimizer” is truly the best way to process your customers transactions.
Making Practices More Profitable
Paul W. Lonsford Business Development – FDIS DALLAS Phone: (888) 557-3554 Direct: (214) 562-0203 Mobile: (214) 250-9043 Email: [email protected] Website: www.fdismerchantservices.com
