How Can You Cut the Cost of Commercial Credit Card Processing?

by Phil Spradlin 0

The high cost of commercial credit card processing has plagued utilities, insurance and other billers, but the recent court decision provides a new option: surcharging businesses for making commercial card payments.

Historically Billers Struggled with Commercial Credit Card Processing

Billers wanted to satisfy their business customers who wanted to pay their bill with a commercial credit card, but the cost of accepting these electronic bill payments could be large. “It kills us to pay $1,000 to accept a $30,000 corporate payment,” said the director of operations at a leading utility. To address this some billers created separate online payment services for their consumer and commercial customers, enabling them to accept cards for consumers and not for commercial customers. Other billers simply did not accept commercial card payments.

Far fewer utilities accept corporate purchasing cards than other industries, according to First Annapolis Consulting and the NAPCP survey (see below). Though the number has doubled the past four years.ACI Commercial Blog

Court Decision Provides New Opportunity

US District Court Judge John Gleeson approved an interchange fee settlement with a class of approximately 12 million merchants and Visa U.S.A. and MasterCard, as well as issuing and acquiring banks. Gleeson wrote, “Specifically, although the settlement either obtains or locks in place an array of rules changes, at its heart is an important step forward: a rules change that will permit merchants to surcharge credit cards at both the brand level (i.e., Visa or MasterCard) and at the product level (i.e., different kinds of cards, such as consumer cards, commercial cards, premium cards, etc.), subject to acceptance cost and limits imposed by other networks’ cards.” Billers can now offset their cost of accepting commercial cards by charging the commercial customer a surcharge. Surcharging is not entirely new though, Visa and MasterCard have allowed surcharging previously in select categories.

What Do You Think?

What will happen next? Will billers begin charging a surcharge to commercial card payments? Will commercial customers be willing to pay the surcharge for the convenience and rewards that come with their commercial card payment? Will billers not want to upset their commercial customers by surcharging? Will billers call commercial customers individually to ask them to pay with ACH? What do you think?

There are special card association rates given to certain industries that prevent billers from surcharging to get the rate and my expectation is that these will prevent biller surcharging from becoming widespread.

Phil Spradlin is a Product Marketing Manager for ACI Worldwide. He has a decade of experience solving the industry’s biggest billing and payment challenges. His research has been published by CNN, MSNBC and the Washington Post. He has spoken at NACHA Payments, CS Week and other industry conferences. Phil holds a bachelor’s degree in Commerce from UVA. When he’s not in the office, he enjoys traveling to rural Africa.