Q: How does the new "Swipe" fee reform legislation impact my business?
A:
NACS: INTERCHANGE FEES
QUESTIONS AND ANSWERS
Can I offer discounts?
Yes. As soon as the legislation is signed into law, networks will no longer be able to penalize you for offering discounts and in-kind incentives to customers who use your preferred form of payment. You can offer discounts to customers who use debit cards, checks, cash, or even credit cards based on which of those forms of payment you would like to incentivize. However, networks can require that your discounts be neutral, which means that you must treat all banks that issue cards equally and treat all card networks (Visa, MasterCard, Discover, etc.) equally. Therefore, for example, you could offer a certain percentage or dollar discount for using any debit card, but will not likely be able to limit that discount only to Discover Cards or to debit cards issued by a particular bank. The discount should either apply equally to all debit cards or not apply at all.
Retailers should also be aware that discounts will have to comply with state and local pricing laws, many of which require such discounts to be clearly and conspicuously disclosed to all customers.
What is an “in-kind incentive”?
An “in-kind incentive” is any offer by the merchant other than a pricing difference aimed at inducing the customer to use the merchant’s preferred form of payment. The legislation does not specifically define “in-kind incentive” but, for example, an incentive may include benefits such as free merchandise, services such as preferred check-out lines, or other perks that might provide value to customers prompting them to use the form of payment the merchant prefers.
While merchants may start offering in-kind incentives immediately, it is important to remember that, as explained above, any incentive offered to customers will likely need to be neutral with regard to the card network and card issuer (that is, it will have to be open to everyone using the preferred form of payment such as a debit card). Retailers should also be aware that incentives will have to comply with state and local laws, many of which require such incentives to be clearly and conspicuously disclosed to all customers.
Can I surcharge?
No. The major credit card companies threaten fines if merchants create a surcharge for the use of one of their cards, and the legislation does not change those rules.
Can I discount for cards from my local bank?
No. Unless the card network rules change, any discount must apply equally to a given form of payment (such as a debit card), and cannot distinguish between the cards issued by your local bank and cards issued by other banks. Therefore, if you offer any discounts to customers who use a debit card, you must offer the same discount to all customers who use a debit card regardless of which bank issues that card.
Can I discount for cards that are part of my co-branded program?
Yes. The network rules for co-branded card programs were not changed by the legislation. Typically, those rules require that any such discount be applied after the transaction (such as a discount/credit that comes when the customer receives a card statement). We urge you to review the card network rules to ensure compliance with their limitations on this practice.
Can I give cash discounts?
Yes. The legislation reaffirms merchants’ ability to offer discounts to customers who pay in cash.
How much will interchange be?
That question will depend on the rulemaking by the Federal Reserve Board (“the Fed”). The Fed will have nine months after the President signs the legislation into law to write rules ensuring that all interchange fees on debit card purchases are “reasonable and proportional” to the cost of processing the transaction. Those regulations will become effective one year after the date the law is signed.
Will the Fed reduce interchange fees?
For debit cards: It depends upon the Fed’s findings with respect to card issuers’ costs for processing transactions, and the Fed’s view of what is “reasonable and proportional” to those costs. As noted above, the Fed will write rules ensuring that all interchange fees on debit card purchases are “reasonable and proportional” to the cost of processing the transaction. NACS and most observers believe those rules will result in much lower interchange fees on debit card transactions, but no one will know for certain until the Fed publishes its rules in nine months.
For credit cards: The Fed will not have a similar ability to change credit card interchange fees. Those fees may, however, finally be subject to some downward market pressures if merchants take advantage of the ability to discount for cheaper forms of payment.
Can I set minimums for taking cards?
Yes. You may set a minimum dollar value for accepting a credit card, so long as the minimum does not exceed $10 (though the Fed might increase that amount in the future). Note that no minimum amount can be set for accepting debit cards or prepaid cards – only credit cards. This provision takes effect immediately.
Can I set a minimum payment for all types of cards, or just credit cards?
The legislation only allows merchants to set a minimum dollar amount for credit card transactions. It does not allow minimums to be set for debit card or prepaid card transactions.
Can I set maximum amounts for taking cards?
Not unless you are a federal agency or university. Under the legislation, those are the only entities that can set a maximum dollar amount for accepting a credit card without risking a penalty from one of the card networks.
Does the legislation affect network fees?
Yes. The Fed will be able to regulate network fees charged on debit card transactions – that is, the fees charged by Visa, MasterCard and Discover as opposed to those charged by card issuing banks. However, the Fed’s authority to regulate network fees is limited to ensuring that network fees are not, in any way, used to compensate issuers or otherwise circumvent its regulations relating to interchange fees.
Can I decide which network to use to route transactions?
For debit transactions the answer will be yes. The Fed will write rules to take effect in one year that will prohibit card networks and banks from creating exclusive deals to route transactions. The networks and bank issuers will be prohibited from limiting the networks over which a debit transaction can be routed to only one network (or only affiliated networks). The rules will also require that merchants be given the right to select the network (of the applicable choices) over which their transactions will run.
When does the legislation take effect?
Two provisions in the legislation take effect as soon as the bill is signed into law: 1) Merchants can start offering discounts or incentives to customers based on the form of payment they use; and 2) merchants can set a minimum dollar amount ($10 or less) for accepting credit cards without a penalty from issuers or networks. The rest of the provisions in the legislation, including the Fed’s regulation of interchange rates, will take effect twelve months from the date of enactment.
If I have more questions, who should I contact?
Lyle Beckwith, Senior Vice President of Government Relations, NACS
lbeckwith@nacsonline.com
703.518.4220
Q: Should we be looking into mobile payments now?
A:
Most processors will recommend “not yet”. Unlike Japan, Korea and Europe, the U.S. as yet had no clear winner as far as a standard for mobile (NFC, or Near Field Communications) payments are concerned. Some pundits think that mobile loyalty applications may be the “killer” application for mobile technology in the retail environment rather than payments.
Also, there are still a number of questions surrounding the security of mobile payments that still need to be addressed. There appears to be little pressure from American consumers for mobile payments at this point.
Again, you can ask you processor or KGA/KACS’s payments industry contacts to keep you in the loop as far as developments in mobile communications applications are concerned. Call the KGA/KACS office at 502-696-9153 or email to info@kgaonline.org for more information.
Q: We seem to have too many outages compared to other retailers. What can we do to reduce the number of outages, if not eliminate them?
A:
“Outages” can result from many different issues… software, hardware, communications, downstream provider issues, process issues or any combination of these areas. Documenting the time, duration, symptoms of outages and tracking any in-house and processor-level systems is critical to isolating the true causes. Some times, hasty efforts to resolve outages can actually make situations decidedly worse. If the cause of an outage is not obvious, getting your processor involved as soon as possible is critical… they may not be contributing to the outage, but that may have access to data that you and/or your communications carrier may not have.
Having a well-documented and well-enforced change management procedure for any software, hardware and network changes in place can be an effective tool in terms of mitigating internal sources of outages. Such procedures may seem bothersome, but they are effective.
Q: How do we find out more about prepaid card products? Are they handled any differently that credit or debit cards as far as the front-end is concerned?
A:
Your current processor may be able to support some prepaid cards transaction already; if not, you may need to establish a direct link with a processor, e.g., Black Hawk or InComm, that serves as a pass through processor for prepaid card transactions. The nice thing about prepaid cards is that merchants selling the cards earn commissions from the sales (the commission rates usually vary depending on the issuers of the cards). But, prepaid cards will involve more complicated procedures than “traditional” card transaction on both the front and back end.
If you are interested in the potential of selling prepaid cards in your stores, the KGA/KACS can provide you with some contacts, as can your processor. Call the KGA/KACS office at 502-696-9153 or email to info@kgaonline.org for more information.
Q: Do smaller retailers actually have any voice when it comes to expressing concerns about new interchange rates and fees or mandated changes in how transactions are processed?
A:
You do have a voice through the KGA/KACS and other trade associations to which your organization belongs. Recently, merchant groups and their trade associations have been at least getting some attention from Congress regarding our grievances related to interchange setting practices and unilateral mandates issued by the card issuing world. Unfortunately, keeping up the pressure will probably be necessary barring any major changes in the attitudes of the card issuers. Current economic conditions and recent federal crackdowns on fee-related practices will continue to make the credit card portfolios of the majority of card issuers unprofitable for the foreseeable future, so they are not likely to loosen up much when it comes to interchange rates, transaction fees and royalty assessments.
Q: What is end-to-end encryption? Should we be looking into using it?
A:
The objective of end-to-end encryption is to encrypt transaction data before it even leaves the magnetic stripe reader or key pad of a payment terminal and pass it through the entire payment processing stream out and back. Two or three large merchants are experimenting with this process, but it ‘s still early in the game. Standards for end-to-end encryption are not in place, and probably will not be for some time. Investing in a particular end-to-end solution at this juncture could result in some expensive reworking later on. Ask you processor to at least keep you informed on the direction of end-to-end encryption; we do not want to wake up two years from now and find out it has to be in place tomorrow.
Q: Our transaction processor/merchant bank seems to take too long responding to our questions or issues. How can we get them to be more responsive?
A:
One would hope that the intensifying competition for acquiring new merchants would drive processors to maintain good service levels. Some merchants put very specific SLA’a (Service Level Agreements) that define acceptable/expected turnaround times related to operational as well as technical matters. Also, some merchants comment having periodic meetings/calls with processors to review outstanding issues and other payments-related topics help keep their processors more attuned to their needs. Developing a proactive interface with a processor’s client support reps can help keep problems from escalating.
If a processor is just not being adequately responsive or evasive, then the KGA/KACS’s payments industry contacts can follow up with processors to expedite the resolution of specific issues. Call the KGA/KACS office at 502-696-9153 or email to info@kgaonline.org for more information.
Q: How can we tell if our payments-related software and communications lines are "hacker" resistant?
A:
Your processor can help arrange for periodic testing of your systems’ potential vulnerability by third parties certified to perform such testing if your are not already required to have quarterly tests performed. If you are a Tier 4 merchant, you may not be required to have the quarterly tests performed, but they may be well worth the cost, especially if you have made any recent changes in your payments-related software, hardware and/or network.
Q: We think we're getting an excessive number of charge backs. What can we do to reduce the number of charge backs?
A:
If you feel you are receiving too many charge backs, you will want to work with your processor to determine what is triggering the charge backs. There might be one of several reasons. Late submission of transaction files, employee dishonesty, customer dishonesty, “lazy” card issuing banks and lack of adequately supportive procedures on your processor’s part are just some of the causes for charge backs. The processor should be able offer specific suggestions as to how your volume of charge backs can be reduced.
Some card issuers have been known to “stretch” the rules with respect to charging back transactions. In these cases, the processors need to appeal to the card companies, e.g., VISA, MasterCard, etc., to help curtail such behavior. If you feel you are not getting helpful or timely responses, KGA/KACS’s payments industry contacts can pursue the issue with your processor or the card issuers. Call the KGA/KACS office at 502-696-9153 or email to info@kgaonline.org for more information.
Q: How can we determine if our credit card transactions are qualifying for the best possible interchange rates?
A:
The periodic billing/settlement statements you receive from your processor should provide a detailed breakdown of the types and volumes of your transactions to show at which levels they were “qualified” for different interchange rates and fees. Keep in mind, there are several components to costs associated with each transaction. If you need or want an explanation of the breakdown of your transaction costs, ask your processor to review them with you. The processor should be able to alert you when your costs are out of whack with those incurred by comparably sized merchants.
Although you may be paying what you consider to be a favorable “click” charge to your processor, there are numerous conditions that may be causing you to pay higher overall transaction costs than necessary.
Q: How do we know if our payments-related software and hardware are PCI DSS compliant?
A:
VISA’s PCI site (www.visa.com/cisp) provides a comprehensive description of PCI standards and compliance validation requirements. It also provides updated lists of PCI-compliant service providers and software vendors. If you are a Tier 4 merchant, you may not be required to complete an annual SAQ’s (Self-Assessment Questionnaires), but we highly recommend you work with your acquirer processor to do so. You may be charged a modest fee by the acquirer, but it could be money well spent if any deficiencies are found.
The best place to start with any questions you may have about PCI compliance or issues is your processor. Since the processor is responsible for ensuring its merchant clients are PCI compliant, they should be willing to help address any PCI questions or concerns you might have.
Q: Where can I find more information about the new FDA Food Code?
A:
New regulations and requirments regarding proper food handling and safety go into effect in May 2010.
As you know, you must prominently display your health department inspection reports for customers to view. In order to protect the safety of consumers and the reputation of your business, please take a moment to review the attached document containing important information about changes in the food code.
Be prepared for the new rules and avoid a possible situation that could jeopardize your health department inspection score!
Be sure to contact your local county health department with questions or click HERE to visit the Kentucky Cabinet for Health Website. As always, you may
call our office at 502-696-9153 and we'll work to get you the answers you need.
Q: When does the new FDA Food Code go into effect?
A:
The new FDA Food Code goes into effect in May 2010.
Q: What do I need to do to be able to accept Food Stamps (SNAP) EBT transactions?
A:
You must first submit an online application to be able to accept Food Stamps, now called SNAP, transactions. The online application process is located at http://www.fns.usda.gov/snap/retailers/application-process.htm or click HERE. You may also obtain a paper application by calling the FNS toll free number at 1-877-823-4369.
If you are planning to purchase an existing store you MUST obtain a NEW SNAP program authorization - existing authorizations are NOT transferable.
New authorizations may take up to 45 days so plan accordingly if you are purchasing or building a new strore.
Make sure all required SNAP application paperwork is complete and accurate. You risk having your authorization delayed from incomplete or missing forms.
SNAP administrative funtions are no longer managed in Kentucky. There are regional offices throughout the southeast that handle administration of the program.
Submit your question(s) to the KGA/KACS "Ask Us" Center or call the office at 502-696-9153 for additional help.
Q: Do retailers or producers have to pay anything to participate in the Kentucky Proud program?
A:
No and in fact there are copperative marketing funding opportunities for both retailers and producers who participate in the program. Contact the KGA/KACS office at 502-696-9153 or info@kgaonline.org to learn more.
Q: We are going to have a stand alone WIC EBT machine. Can the WIC EBT machine be setup for credit and debit cards also? We do not currently take credit/debit cards at this store and are getting ready to go with a company. We were hoping the WIC machine can be setup for this so we would have one machine for both. Our space is very limited
A:
The state provided stand-beside WIC EBT terminals process WIC EBT transactions only. You will need to have a separate terminal to process credit and debit card transactions.
Q: When will my county implement the WIC EBT program?
A:
UPDATED 05/27/10
The Kentucky WIC office has released a tentative WIC statewide EBT rollout plan to allow retailers (vendors) time to prepare for implementation. The schedule is subject to change.
NOTE: Pages 1-5 lists the respective health districts with pages 6-10 breaking the named districts into associated counties.
Click HERE or on the link below to learn the projected time for your county WIC EBT implementation.
The document lists the KY district health department timelines and associated counties.
NOTE: Pages 1-5 list the ealth respective districts with pages 6-10 breaking the named districts into associated counties.
Please remember that the state will provide retailers with equipment to process the online WIC EBT transactions IF YOU DO NOT WISH TO INTEGRATE PROCESSING INTO YOUR CURRENT POS SYSTEM.
If you wish to integrate the new online WIC EBT processing system into your POS system you need to contact your system provider to plan for your implementation. The state WIC office has a limited amount of funding available to assist retailers (vendors) with their integration plans.
If you have additional questions regarding this rollout schedule or how to work with the state regarding system integration, please call the KGA/KACS office.
Q: What is the new "WIC EBT" program and what do I need to do to get ready?
A:
As many of you are aware, the Kentucky WIC Program began piloting a live integrated EBT system in 2009. The first electronic benefits were issued in Barren County during the second week of August and in Warren County on September 28, 2009. Once the pilot is successfully completed, our plan is to aggressively implement WIC EBT across the state of Kentucky, with an optimistic goal of having the entire state implemented by the end of 2010.
In order for us to move this plan forward, it is essential that retailers who desire to have an integrated WIC EBT system in their store begin contacting their point of sale and software providers to indicate and interest in this program. We have found the development of integrated systems to be a slow process, so it is critical that these contacts be made as soon as possible. As long as funding is available, the Kentucky WIC Program will provide subsidies to retailers for assistance in integrating their systems. Request for subsidies may be forwarded to Joe Wilson at joe.wilson@ky.gov or Dennis Hill at dennis.hill@ky.gov.
Additionally, interested parties may visit our website at http://www.wicdirectsystem.com/Home.aspx for technical specifications for WIC EBT. Once you are on the web page, you can click the "For Retailers” link and then the "Systems Integration Documents" link. This will provide detailed specifications of the technical requirements needed to participate in the Kentucky WIC online EBT system.
Vendors who do not wish to establish an integrated system, will be provided with a stand-beside POS device, to make sure that grocers in Kentucky can accept WIC EBT transactions. The state is funding the development of two stand-beside devices. The high end device has a touch screen technology. The base product is limited to WIC transactions but for an incremental cost this device may be upgraded to provide fully functional electronic cash register system.
The low-end alternative uses a POS device with a three line display and an internal printer. The state will provide the low-end solution at no cost to stores that do not wish to develop an integrated system. We will also provide this solution to retailers who are in the process of integrating but do not have integration completed by the time we are ready to implement EBT in their area.
The Kentucky WIC program staff is excited about the opportunity to pilot a live online WIC EBT program in our state. We look forward to working with retailers and point of sale and software providers in this endeavor. Should you have comments or questions, you may forward those to the above e-mail addresses or contact our office directly at (502) 564-3817.
Q: How do I apply for a WIC license?
A:
You must first submit an application for approval to become a "vendor" for the Kentucky WIC program. New stores and store ownership changes must obtain a WIC authorization - program authorizations are not transferable.Click on the link below learn about the program and begin the application process.
