- WHITE PAPERS
More restaurants, frustrated with expensive swipe fees, have completely banned credit card payments from their operations, according to a story in the New York Post.
From the story:
Some cash-only venues plant ATMs in a corner. Staffers point flustered customers in its direction, and the restaurant or bar profits from the transaction fees.
Passing on the expense is one way operators can supercede costly transaction fees, which can eat 5 percent of sales, sometimes more. That approach, however, can backfire by thwarting card-toting customers who don’t want to incur ATM fees.
Recent legislation may offer a better way. Profit-cannibalzing merchant swipe fees spurred the Dodd-Frank Wall Street Reform and Consumer Protection Act that was signed into law by President Barack Obama in July.
Much has been discussed in regard to its effect on card-swipe fees; however one overlooked aspect of the bill could save individual pizza and other restaurant operators several hundreds of dollars.
While a majority of restaurant operators process credit card transactions at the POS, it’s possible that operators could save more by enabling PIN-based debit card transactions, said Henry Helgeson, co-CEO of Merchant Warehouse.
Under the old system, the highest priced network would get the most transactions; however, the Dodd-Frank will now allow merchant payment processing systems to pick the cheaper network for conducting debit-based payments.
“When you swipe a debit card, people have the option of using their PIN or using it as a credit card. What the banks would do is pick the most expensive (transaction processor) because that was the most profitable for them,” Helgeson said. “Now what this bill does is says every debit card has to have at least two (partner processors) so the merchant can pick which network they want. And, of course, they will pick the lowest one.”
While the swipe-fee reform will save merchants such as Wal-Mart tens of millions of dollars per year, Helgeson said it will not have much impact on mid- to small-sized operators, which is where PIN debit reform has its benefits. It also could open the door for the restaurant industry’s further adoption of pay-at-the-table devices.
*Valerie Killifer contributed to this report.