We all know by now that the EU legislation to reduce card acceptance charges has failed spectacularly with respect to Visa debit, with most merchants facing increased costs. But all is not lost – heres some tips on how to negotiate the best Visa debit rates with your merchant acquirer.
1. Get capped rates
Your merchant acquirer’s interchange costs for Visa debit are capped by Visa, so why shouldn’t you benefit from this? If you process transactions above £245 you should be able to benefit from the cap and if your current merchant acquirer won’t cap your rates then find one who will. The caps vary for Consumer debit and Business debit and for secure transactions (chip & pin, Verified by Visa ecom) and non-secure transactions (all others) :
|Card type||Secure transactions||Non-secure transactions|
2. Don’t pay a premium/exception charge for Visa business debit
We all know that business/corporate credit card costs more, but what about Visa business debit ? If you are a B2B supplier then this will be an incredibly common card type for you to accept. As of 1 March 2015, the interchange costs on Visa business debit are the exact same as Visa consumer debit, ie 0.2% + 1p (secure) / 0.2% + 11p (non-secure). But, despite their costs being the same, some merchant acquirers still charge a premium for Visa Business debit :
- Elavon – exception charge of 0.7%
- Barclaycard – variable premiums of around 0.25% (click here)
If you take a lot of Visa business debit, find a merchant acquirer who doesn’t charge a premium. Interchange caps do vary as shown at 1. above but the transaction rate you pay should be the same!
3. Get a fixed rate for high value transactions
If you frequently process higher value transactions then you may be better off by paying a fixed rate per Visa debit transaction rather than a percantage of transaction value. Gone are the days when this fixed rate might be 12p-14p but most merchant acquirers will be prepared to set a fixed rate equal to the interchange cap plus a profit margin. Getting the benefit of a cap would be better, but if you cannot secure that then this is the next best option. Of course, you would lose out on lower value transactions by paying a higher fixed fee than you would otherwise have paid if you had a percentage rate but you have to balance this downside against the upside on the higher value transactions.
4. Get a percentage rate for low value transactions
You might be one of those merchants who hasn’t been re-priced for Visa debit and are wondering what all the fuss is about? Well guess what, the reason you havn’t been re-priced is probably because your merchant acquirer is now realising a cost saving that isn’t being passed onto you. If your average transaction value (“ATV”) is less than £35 then the new Visa debit interchange rules are beneficial to your merchant acquirer’s costs.
An example :
If your ATV is £20 then prior to 1 March, your merchant acquirer’s interchange cost was fixed at 8p per transaction for all chip and pin transactions. Since 1 March, your merchant acquirer’s interchange cost is 0.2% + 1p which for a £20 ATV is equal to 5p. So they are making a saving of 3p per transaction or 37.5% of interchange costs.
Visa debit rates of below 0.4% are readily available in the market for almost any business. So, for an ATV of £20, the cost per transaction would only be 8p.
5. Can you avoid telephone transactions?
Visa debit telephone transactions or “card not present” (“CNP”) transactions as they are technically known are now much more expensive than chip and pin transactions. Previously the interchange rate differential was 2.5p (with CVV2) but now it is 10p per transaction, whether or not you capture CVV2. Its not practical for most businesses to avoid taking payment by phone but if you can then there is a saving to be had. The good news is there is every chance that the UK regulator will seek to restrict this 10p difference at some point later this year.
6. Use Verified by Visa for ecom transactions
Similar to telephone transactions above, Visa debit ecom transactions face a 10p interchange premium if Verified by Visa is not used. Again we appreciate there is a judgement call to be made on cart abandonment rates when additional security is introduced but the deployment of 3D Secure / Verified by Visa has improved a lot recently and in some businesses it has actually been demonstrated to reduce abandonment. The other benefit is that there are still cheaper rates on some credit cards when 3D Secure / Verified by Visa is used.
7. Beware of “average transaction value” capped rates
We did some work for a Barclaycard merchant recently who told us they were on capped Visa debit rates however the way the cap worked was not to cap the rate paid on individual transactions, but on the average of all transactions over each month. Thus if you processed one £1,000 transaction and nine £1 transactions then your average transaction value would be £100.90 and the cap wouldn’t kick in for any transaction despite the £1,000 transaction being above the cap on an individual basis.
Most merchant acquirers apply their caps on a per transaction basis, thus the rate for £1,000 transaction would fall below the cap.
8. High volume merchants – consider dynamic transaction routing
There is still an interchange cost difference between secure UK domestic Visa debit transactions and secure EU cross border Visa debit transactions. The UK transactions incur interchange at 0.2% + 1p whereas EU cross border transactions only incur interchange at 0.2%, so a 1p per transaction difference. That penny will make no difference to most merchants but if you are a large multi-national retailer with high volume then it could be material. Most merchant acquirers can offer access to the European Cross Border Domestic interchange Program which will route all of your UK domestic Visa debit transactions through their offshore processing subsidiaries and access the lower interchange rate. This advantage may be short lived if the UK regulator reduces the UK domestic debit interchange rates later this year.
9. Shop around
No Cardswitcher top tips list is complete without the instruction to shop around…..simple but true. Even on our website, there is a wide difference in pricing for Visa debit with some suppliers pricing at 0.2% + 8p per transaction right up to 1.1% of transaction value. The average in the market seems to be settling down at c.0.35% – 0.4%. Click here for a quote or upload a recent statement below.