03 interchange pricing grids presentation feb 2012

8/10/2019 03 Interchange Pricing Grids Presentation Feb 2012

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Copyright 2011 | First Data Corporation

First Data Learning Organization

Interchange, PricingOptions and GridsOmaha Retail ISO Training

Developer: HMM/AM| Rev: 02/06//2012


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2| Copyright 2011 | First Data Corporation

Objectives

This presentation will prepare you to: Demonstrate knowledge of the basic knowledge of Interchange.

Identify the Pricing Options supported by the Omaha backend.

Identify the benefits and features of American Express One Point andDiscover Full Acquiring card types.

Identify the purpose of the authorization income grid, user defined monthly reoccurring grid, merchant pricing and tiered pricing grids.


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Interchange


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Interchange OverviewVisa, MasterCard and Discover have over 500 differentinterchange programs. Each program provides a specific set ofcriteria and requirements for qualification.

Some of the general elements that produce the qualification include: Type of card (Visa, MasterCard, Discover, Debit, Reward, T & E,

Corporate) Merchant Classification (Face-to-Face, Mail Order, Internet, B2B) Type of point of sale entry (Swiped, keyed) Variety of specific requirements (see next slide)

Most common merchant industry types are:Retail RestaurantSupermarket PetroleumHotel MOTOB2B Internet


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Interchange Puzzle PiecesInterchange:

The fee paid by the acquirer (merchant client) to the issuer of the creditcard (cardholder bank) to compensate the issuer for their risk inaccepting, carrying, and collecting cardholder charges.

Dues & Assessments:The fee paid by the acquirer (merchant client) to the Association.

This fee is a set rate applied to the volume of transaction and is notcontingent upon the type of merchant or how the transaction is presented.

Discover = 0.10%

MasterCard = 0.110% for Signature Debit Cards, Consumer and Corporate Cards under

$1000.00 MasterCard = 0.120% Consumer and Corporate Cards over $1000.00 (Effective January 2012

this amount will increase to 0.130%

Visa = 0.110%


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Interchange Puzzle Pieces, contd Discount:

The percentage fee assessed to the merchant by the client in attempt to recoupthe cost the client paid in Interchange and Dues and Assessments.

Interchange + Dues and Assessments + Base Discount +Surcharge Discount < Discount Charge to Merchant

Definition of Base Discount / Surcharge Discount /Downgrade:

Base Discount: Fee calculated by applying a fixed percentage to the dollaramount of the gross bankcard sales dollar volume.

Surcharge Discount: Fee calculated by applying a fixed percentage to thedollar amount of the downgraded bankcard sale dollar volume.

Downgrade: When a transaction clears at a more expensive interchangeprogram than what is set on their account as their baseline.


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What is a Fee Class?Fee Classes

A three-digit number identifying a VS, MC, DSCV interchangeprogram. Each merchant will be assigned a fee class per card typefor their industry type based on where they should qualify themajority of the time (this is their baseline).

Common Fee Class Assignments:

Retail Merchants:

Visa Credit CPS Retail 007 and Visa Debit CPS Retail Debit 101

MasterCard Credit Merit III 012 and MasterCard Debit Merit III Debit 078

Discover Credit PSL Retail 112 and Discover Debit PSL Retail Debit 113


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What is a Fee Class ? contd MOTO Merchants:

Visa Credit CPS MPITN 011 and Visa Debit CPS CNPDB 107

MasterCard Credit Merit I 001 and MasterCard Debit Merit I Debit 076

Discover Credit PSL CNP 120 and Discover Debit PSL CNP/Ecomm Debit 121

Restaurant Merchants:

Visa Credit CPS Restr Credit 099 and Visa Debit CPS Restr Debit 132

MasterCard Credit Merit III 012 and MasterCard Debit Merit III Debit 078

Discover Credit PSL Restr 114 and Discover Debit PSL PSL Restr Debit 115


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What is a MCC/SIC Code?MCC (SIC) Codes:

MCC - Merchant Category CodeSIC Standard Industrial Classification

MCC/SIC codes are 4-digit numbers used to classify the

merchant's business by the type of goods or services provided. Specific codes can qualify for unique interchange programs

exclusive to their industry that normally have lower rates. Ex: Small ticket restaurant, Supermarket, utility, Quick Service Restaurant, Business

2 Business

To locate a full list of all MCC/SIC universal codes, access:My Sales Office > Training > MCC Guide .


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Durbin - Regulated vs. Unregulated New Durbin Legislation changes how debit transactions are handled from an

interchange perspective beginning September 30, 2011. Under the Durbin Amendment, debit transactions are split into two categories: Regulated andUnregulated .

Regulated Any signature or pin based debit transaction that is processed on a card that is issuedby an Issuing Bank with over 10 billion dollars in assets will be considered a regulated transactionand will be eligible for a lower interchange rate:

.05% (basis points) + .21 (per item) + .01 Fraud Prevention

Unregulated - Signature or pin based debit transactions that are processed on a card that wasissued by an Issuing bank with assets less then 10 Billion in assets will be subject to the debitinterchange rates that exist today.

This change will significantly impact the profit margin experienced by ISOs on

regulated debit transactions and may lead to the need for you to analyze debitpricing in order to reduce attrition within your portfolio.

The next slide offers insight on cost differential between transactions that areclassified as Regulated vs. Unregulated within various industries.


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Durbin-Regulated vs. Unregulated IllustrationHere are some examples Regulated versus Unregulated:

Retail Signature Debit Scenario: $100 transaction

Regulated 05% (basis points) + .21 (per item) + .01 Fraud Prevention = $0.27

Unregulated 1.15% + $0.15 = $1.30

Regulated Pin Debit Scenario Start: $100 transaction

Regulated 05% (basis points) + .21 (per item) + .01 Fraud Prevention =$0.27

Unregulated 80% (basis points) + 17 (per item) + .0325 switch fee + .01 addl fees=$1.0125


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Omaha Backend Pricing Option s

Pricing Options Explanation

Tiered PricingBuckets 1, 2, 3

Expanded 4, 5, 6, 7, 8

Regulated 1, 2, 3, 9Expanded Regulated 1-9

Most difficult to maintain

Applying discount rates to be assessed depending on where thetransaction qualifies at: Qualified

Mid Qualified Non Qualified Up to Tier 9 > Expanded to include Visa Rewards, MasterCard

World, and Regulated Debit programs

Enhanced Recover Reduced(ERR)

Also called Billback (EBB)

Applying a qualified discount rate to all transactions as well as asurcharge rate to be assessed only on all of the non qualifiedtransaction volume.

Pass Thru Pricing Also called Interchange Plus

Pricing

Taking the interchange and dues and assessments cost assessed tothe client and passing that cost on to the merchant.

Bundle Pricing A flat rate pricing structure that allows separate rates for regulated vsunregulated cards. Can be used in conjunction with ERR pricing.

No matter which option used youll always have Interchange,

Dues and Assessments, and FD contractual costs to accountfor.


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Tiered Pricing


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Tiered PricingTiered discount pricing allows you to group interchange programs intodifferent tiers buckets and then price those buckets separately basedon the range of interchange costs grouped into each buckets.

With tiered discount pricing (Q, M, N) you have the option to set a priceper discount category.(**Recall that the discount rates you assess must cover interchange,dues and assessments, First Data discount (contractual) costs as wellas your profit margin.)

Example Buckets and Discount Pricing: Qualified ex: 1.75% Mid Qualified ex: 2.45% Non-Qualified ex: 3.10%


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Tiered Pricing, contd

Ultimately your goal in assigning discount percentages is tocreate an average to cover the spread between the lowest andhighest interchange rates within each discount tier, makingsure you are gaining a profit margin no matter where themerchants transaction qualifies.

You have the ability to price MasterCard, Visa and Discoverseparately as well as Credit and Debit separately.

This is often times referred to as split pricing.


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Qualification Buckets-Three TieredTiered pricing groups interchange plans into qualificationbuckets and then applies discount rates by bucket.

Qualified Rate 1

Non -Qualified Rate 3

Mid -Qualified Rate 2


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Qualification Buckets-Three Tiered + Regulated

Qualified Rate 1



RegulatedRate 9 on MPG Grid


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Qualification Buckets-Expanded Tiered

Qualified Rate 1



Rewards 1 Rate 4 on MPG

Grid

Rewards 2 Rate 5 on MPG Grid

World Card Qual Rate 6 on MPG Grid

World Card Mid -Qual Rate 7 on MPG Grid

World Card Non-Qual Rate 8 on MPG Grid


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Qualification Buckets-Expanded + Regulated

Qualified Rate 1


Mid -Qualified Rate 2 Rewards 1 Rate 4 on MPG Grid Rewards 2 Rate 5 on MPG Grid

World Card Qual Rate 6 on MPG Grid

World Card Mid -Qual Rate 7 on MPG Grid

World Card Non -Qual Rate 8 on MPG Grid

RegulatedRate 9 on MPG Grid


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Summary of Card Fees Section

MasterCard/Visa/Discover Full Acquiring Qualification of transactions willbe listed by the qualification (Qualified/Mid Qualified/Non Qualified) totaldollar volume of transactions for each bucket, the rate for that bucket & totalfee for that bucket.

Merchant Statement


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Tiered PricingPros

Relatively simple pricing. Fewer possible discount

rates to explain. Easier for merchants to

reconcile. Typically higher margins

on downgrades.

Cons Low merchant visibility

regarding downgradereasons.

Challenges withspecialized interchangeprograms (i.e., Rewards).


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Enhanced Recover

Reduced (ERR)


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Pricing Enhance Recover Reduce (ERR)Recover Reduced allows you to charge the merchant for Nonqualifying

interchange fees. Nonqualifying interchange fees are the difference between thequalifying fees for the merchants current interchange fee reduction program andthe actual fees. The system assesses the merchant the difference for theNonqualifying interchange.

The Recover reduced Fees program is controlled by the Interchange

Fee Flag transaction on the Card Type screen. The system used themerchants fee class for the baseline in the calculation to recover thedifference in interchange fees.

The system uses the merchants fee class to determine the baselinefor the calculation of recovered fees for your recover reduced fees

merchants. You must set the fee class field correctly on themerchants account to ensure the system applies the correctbaseline. The system does not automatically rebate merchants forfee differences.


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Pricing Enhance Recover Reduce (ERR)Pass Non-qualifying Interchange costs to merchants.

Using Enhance Recover Reduced, you have the option to assess asurcharge to the merchants downgraded sales volume.

The surcharge is a client defined percentage that is applied to thedowngraded sales volume of participating merchants.


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ERR ExampleIn this Enhanced Recover Reduced scenario, the merchant pays the Discount Fee ($1.70) thedifference in interchange ($.76) plus the ERR Surcharge ($1.50). Note: Ensure you are covering fordues and assessments costs. Totaling a fee of $3.96 whereas Interchange Cost was $2.40.

Merchant Fee Class = 007 CPS Retail (1.54% + .10)

Transaction Amount = $100.00Discount Fee = 1.70%

ERR Surcharge = 1.50%

Transaction 1 Qualifies @ 007 CPS Retail ( 1.54% +.10)

Discount Charge = $1.70 Actual Interchange = $1.64Net Profit = $.06

Transaction 2 Qualifies @ 055, EIRF (2.30% + .10)

Discount Charge = $1.70Potential Interchange = $1.64 Actual Interchange = $2.40Difference = $0.76ERR Surcharge 1.5% = $1.50


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ERR BenefitsMerchant only sees one percentage rate on their Statement:

The Qualified % is presented with the volume and the total discount fee The Difference in Interchange and the Surcharge are combined on one single

line item labeled Non Qualifying Fees

Protection from competitors analyzing your merchantsstatements. There is no way to back in to the surchargeamount.


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Merchant StatementSummary of Card Fees Section

MasterCard/Visa/Discover Full Acquiring Qualified transactions will be displayedas Discount 1 (6) , with the rate & total fee .

*Note this is the flat rate fee the merchant is assessed for all transactionsregardless of qualification.

Non-qualified (downgrade) transactions will be displayed as Non-Qualified Fees

with only the fee .*Note this line is made-up of the difference in interchange & the ERR%

(surcharge).


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ERR Pros and ConsPros

Built-in interchangeexpense insulation.

Can maintain highermargins on downgraded

transactions using theenhancement (surcharge).

Visibility to downgradereasons.

Cons Challenging to explain. Difficult to reconcile.


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Pass-through Pricing Plus

(Credit / Signature Debit)


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Pass-Through Interchange PricingUsing interchange pass through allows the expenses

associated with interchange fees and dues and assessments tobe billed directly to the merchant.

If you are using Interchange Pass Through Plus, a saletransaction fee and/or a percentage rate would be assessed

against the monthly volume and would be billed to themerchant along with the dues and assessments andinterchange fees.

Note: Pass-through Interchange pricing does not cover anyFirst Data contractual pricing.


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Pass-Thru Interchange, contd How do you make money and recoup your FDR contractual

costs?

Pass Through Interchange Plus offers the ability ofcharging MasterCard, Visa and Discover Interchange ratein addition to dues and assessments plus:

A sales Transaction Fee

And/Or.

A percentage rate against the monthly volumes(either on net or gross volume).

Merchant Statement


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Merchant Statement Interchange Print Option = 1Summary of Card Fees Section

MasterCard/Visa/Discover Full Acquiring Qualification oftransactions will be in a summary with a line item of interchangewith the total fee paid.

Merchant Statement


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Summary of Interchange Fees Section

MasterCard/Visa/Discover Full Acquiring Qualification of transactions willbe listed by the interchange program name & rate with the count oftransactions, total dollar volume of transactions & total fee for that program.

Merchant Statement Interchange Print Option = 2


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Pros and Cons: Pass-thru PricingPros

Transparent pricingsystem.

Easy to identify clearedinterchangeplans/downgrades.

Preferred pricing structureof larger, moresophisticated businesses.

Cons Typically lower, fixed

margins. Challenging to explain. Difficult to reconcile. Difficult to justify

ISO/processor-initiatedrate increases.


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Pass-through Pricing (PIN-

Debit)


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Pass-thru PIN Debit Allows you to pass through PIN debit network fees to the

merchant.

In addition to passing the network fees to the merchant youcan bill a(n):

per item charge percent on the volume monthly flat rate debit access fee


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Summary of Card Fees SectionEach PIN debit network will have its own line item with a description ofOnline Debit Fees with the rate & the total fee.

Merchant Statement


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Bundled Pricing


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Bundled Pricing

Bundled pricing is a flat rate pricing structure that allows clients to priceregulated debit cards with a discount rate that is different than theunregulated cards, or they can be priced at the same combined rate.

4 options to choose from: Pin Only

Signature debit only

Pin and signature debit only

Pin debit, signature debit, and credit

This pricing model cannot be used with tiered or pass through pricingwith those card types selected, but can be combined with ERR pricing.

Regulatory Product Bundle - Flexible Price


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Bundle Options:Bundle Pricing(Statement Bundle)Option

Tiered PricingMethod

Recover ReducedEnhanced (ERR)Pricing Method

Interchange PassThrough / Cost PlusPricing Method

Pass Through PINDebit Network Fees

1 PIN Debit Only Available for Credit &Signature Debit

Available for Credit &Signature Debit.

Available for Credit &Signature Debit.

Not available.

2 PIN Debit &Signature Debit

Available for Credit only Available for Credit andUnregulatedSignature Debit. Note -Regulated Debit willnot downgrade orSurcharge

Available for Credit only Not available.

3 Signature DebitOnly

Available for Credit only Available for Credit andUnregulatedSignature Debit. Note -Regulated Debit willnot downgrade orSurcharge

Available for Credit only Available

4 PIN Debit, SignatureDebit & Credit

Not available. Available for Credit andUnregulatedSignature Debit. Note -Regulated Debit willnot downgrade orSurcharge

Not available. Not available.


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Bundled Pricing, c ont .

NOTE All Flexible Bundle Price Options are set at the MERCHANT LEVEL.You do no t choo se one op t ion and apply tha t to you r en t i re por t fo l io

Option 1 PIN Debit Only

Option 2 PIN Debit and Signature Debit

Option 3 - Signature Debit Only

Option 4 Signature Debit, PIN Debit and Credit


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Bundle Option 1 PIN Debit Only Use this option for merchants that are most sensitive to PIN Debit

transaction costs. This pricing option allows you to continue to price Credit and Signature

Debit transactions in your usual fashion including; Tiered pricing, ERR orPass through.

When you choose Bundled Option 1 for PIN Debit transactions only you can:

Offer merchants a single Bundled rate for al l PIN Debi t t ransact io nsand/or fixed Per Item charge per transaction.

Alternatively you may choose to offer:

Separate pricing for Regulated and Unregulated PIN Debittransactions

And you may also charge a different Per item charge for Regulatedand Unregulated transactions


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Other benefits to consider The merchant statement will be simplified to display consolidated PIN

debit network line item details Helps the merchant reconcile their statement faster. Instead of trying to reconcile up to 15 PIN

debit networks on their statement, theyll see either one (bundled) or two (regulated andunregulated) line items on their merchant statement.

Competitive price point offer rates based on the classification ofregulated versus unregulated and offer the same price point flexibilityfor a per item fee for regulated versus unregulated activity.

Continue to price Credit and Signature Debit transactions in your

preferred price method of; Tiered, ERR or Pass Through Offer simple flat rate pricing alternative for PIN Debit volume

Bundle Option 1 PIN Debit Only contd.


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Charge one fixed rate 1.25% and $0.25 per item for PIN Debit only

Or Charge

Unregulated PIN Debit 1.75% AND $0.25 PER ITEM

Regulated PIN Debit .05% AND $0.22 PER ITEM

Example: BUNDLE OPTION 1 PIN Debit Only


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Merchant Statement ExamplesSummary of Card Fees section of the statement for Bundle Pricing Option 1 PIN Debit Only .

Using Bundled Percent and/or Rate

Using Unregulated/Regulated Percents and/or Rates

Bundle Option 2 PIN Debit and Signature


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Use this option for merchants that are most sensitive to PIN Debit andSignature Debit transaction costs.

This pricing option allows you to continue to price Credit transactions in yourusual fashion including; Tiered pricing, ERR or Pass through.

When you choose Bundled Option 2 for both PIN Debit and Signature Debittransactions you can: Offer merchants a single Bundled rate for both PIN Debit and Sign ature Debit

t ransact ions and/or fixed per item charge per transaction.

Alternatively you may choose to offer:

Separate discount pricing for Regulated and Unregulated PIN and Signature Debittransactions.

You may also charge a different per item charge for Regulated and Unregulatedtransactions

Debit

Bundle Option 2 PIN Debit and Signature


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Debit contd.

Other benefits to consider: Potential increased revenue on Unregulated PIN debit volume - if priced @

Signature Debit Unregulated interchange rates (see examples)

Competition cannot determine PIN versus Signature Debit volume, thus making itmore difficult to price compete

ERR pricing still available for Unregulated, while offering competitive pricing forRegulated Signature Debit transactions The actual downgrade rate is blurred even more than exists in standard ERR today

The merchant statement will be simplified to display consolidated Signature Debitand PIN network line item details Disguises the true transaction counts and amount for each payment type

Continue to price Credit transactions in your preferred price method of; Tiered,ERR or Pass Through

Offer simple flat rate pricing alternative for PIN an Signature Debit volume.

Example: BUNDLE OPTION 2 PIN Debit and


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Charge one fixed rate 2.00% and $0.25 per item for both Signature Debit and PINDebit transactions

Or Charge

Unregulated Signature Debit and PIN* 2.75% AND $0.25 PER ITEM

Regulated Signature Debit and PIN .05% AND $0.22 PER ITEM

**Note** By choosing to have both Unregulated PIN and Unregulated SignatureDebit volume charged at the UNREGULATED rate of 2.75% and $0.25, you wouldsee increased revenue on PIN debit activity.

ERR pricing still available for Unregulated, while offering competitive pricing forRegulated Signature Debit transactions

Signature Debit


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Merchant Statement ExamplesSummary of Card Fees section of the statement for Bundle Pricing Option 2 PIN Debit and Signature Debit.




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Other benefits to consider Allows you to offer very attractive percentage rate and/or per item for Regulated

transactions, and a competitive percentage rate and/or per item for Unregulatedtransactions. Non participating clients can only select one percentage rate to charge for both regulated &

unregulated making it very inflexible

Offer simple flat rate pricing alternative for Signature Debit volume

The merchant statement will be simplified to display consolidated Signature debititem details Helps the merchant reconcile their statement faster

Continue to price Credit and PIN Debit transactions in your preferred price methodof; Tiered, ERR or Pass Through

ERR pricing still available for Unregulated, while offering competitive pricing forRegulated Signature Debit transactions

Bundle Option 3 Signature Debit Only contd.

Example: BUNDLE OPTION 3 Signature DebitO l


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Example:

Charge one fixed rate 2.00% and $0.25 per item for Signature Debit only

Or Charge

Unregulated Signature Debit 2.75% AND $0.25 PER ITEM

Regulated Signature Debit .05% AND $0.22 PER ITEM

ERR pricing still available for Unregulated, while offering competitive pricing forRegulated Signature Debit transactions versus Unregulated

Only

M h S E l


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Merchant Statement ExamplesSummary of Card Fees section of the statement for Bundle Pricing Option 3 Signature Debit Only



Bundle Option 4 Signature Debit, PIN Debitd C di


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Use this option for merchants that are most sensitive to Signature Debit, PIN

Debit and Credit transaction costs. This option provides advantage for the client who utilizes flat rate pricing as

their strategy today.

When you choose Bundled Option 4 for Signature Debit, PIN Debit andCredit transactions you can:

Offer merchants a single Bundled rate for Signatur e Debit , PIN Debit and Creditt ransact ions and/or fixed per item charge per transaction.

Alternatively you may choose to offer :

Separate discount pricing for Regulated and Unregulated Signature Debit, PINDebit transactions. Credit transactions would also receive Unregulated pricing

You may also charge a different per item charge for Regulated, Unregulated.

Credit transactions would also receive unregulated per item fees.

and Credit

Bundle Option 4 Signature Debit, PIN Debitd C dit td


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Other benefits to consider

Competitive flat rate pricing - simple to understand price points. Non participating clients are unable to show consolidated statement totals

Potentially increases revenue for Unregulated PIN and Signature Debittransactions (if priced at credit interchange rates see example)

Allows you to offer very attractive percentage rate and/or per item for

Regulated transactions, and a competitive percentage rate and/or peritem for Unregulated transactions.

This option offers competitive advantage when pricing a merchant asERR. Offer an attractive percentage rate and/or per item for Regulateditems and a separate percentage rate and/or per item for Unregulateditems. The actual downgrade rate is blurred even more than exists in standard ERR today

The merchant statement will be simplified to display consolidated detailsfor all transactions Disguises the true transaction counts and amount for each payment type

and Credit contd.

BUNDLE OPTION 4 PIN Debit, SignatureDebit nd Credit E mple


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Debit and Credit Example

Example :

Charge one fixed rate 3.00% and $0.25 per item for all Signature Debit, PIN Debitand Credit (excludes American Express) transactions

Or Charge

Unregulated Signature Debit, PIN and Credit** 3.50% AND $0.15 PER ITEM Regulated Signature Debit and PIN .05% AND $0.22 PER ITEM

**Note** When you choose to have Unregulated PIN, Unregulated SignatureDebit and Credit volume charged at the same UNREGULATED rate of 3.50%

and $0.15, you would see increased revenue on Signature and PIN Debit activity.

ERR pricing still available for Unregulated, while offering competitive pricing forRegulated Signature Debit transactions versus Unregulated

Merchant Statement Examples


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Merchant Statement ExamplesSummary of Card Fees section of the statement for Bundle Pricing Option 4 PIN Debit, Signature Debit and Credit




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American Express One

Point

Key Benefits of the Program


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Key Benefits of the Program

The American Express OnePoint Program provides thefollowing merchant benefits:

- One ACH for all cards

- Single source for customer service

- Single merchant statement

- One dispute center- More payment choices for consumers

- No Cost of entry into the program

American Express OnePointUse only this Pricing set by American Express


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Use only this Pricing set by American Express

*The Discount Rate and the Transaction Fee pricing are dictated by AMEXand are not negotiable by merchant.

Pricing Changes


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g g Authorization Fee for American Express

The Authorization Fee for American Express must be lessthan or equal to the Authorization Fee for MasterCard /Visa / Discover Network.

Split Dial is not supported since both the authorization and settlement mustcome through First Data.


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Discover Full Acquiring

Discover Full Processing


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gDiscover Full Processing Benefits to the Client:

Operates just like Visa/MasterCard. Can be priced the same way or separately from Visa/MasterCard. Allows client to collect discover residuals for the lifetime of the

merchant instead of a referral fee at signing.

Discover Full Processing Benefits to the Merchant: One Statement for Visa/MasterCard/Discover No Separate Discover Contract/Pricing No Discover Setup Fee One Deposit for Visa/MasterCard/Discover Next Day Funding Available for Discover transactions


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Grid OptionsAuthorization Income Grid, User Defined IncomeGrid, Tiered Discount Grid, and Merchant PricingGrids

Concept of Grids


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pGrids provide the capability of creating portfolio level pricing thatthey can apply to merchant accounts.

Allow the client to provide their sales agents standard pricing towork from when pricing a merchant.

Grids allow the client to create a pricing infrastructure for their

portfolio. Grids are created at the portfolio level and then applied

to individual merchant accounts when needed. Grids are used because there is no field on the master

file for a certain fee.


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Authorization Income Gr ids


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The authorization income grid is used to collect rates forauthorizations for each card type the merchant accepts, exceptPIN-debit network, Wright Express (WEX) and Voyager cardtypes, according to the modes of authorization that the merchantuses.

Card types that fall into this pricing grid include: MasterCard

Visa

JCB

AmEx AmEx One Point

DiscoverDiscover Full Acquiring

Authorization Income Grids


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Authorization Income Grids allow you to bill for the followingcommunication types:

Voice Authorizations CPU Authorizations

POS Authorizations Electronic POS AVS

ARU Authorizations VRU AVS

Communication Type Definitions

VRU (Voice)Communication

Voice Authorization the merchant receives from a live operator

ARUCommunication

Audio Response Unit Authorizations the merchant requests using a toll freetelephone line

POS AuthCommunication

Point of Sale Authorizations the merchant requests using a local telephoneline LAN phone line (CPU or LAN line).

Address VerificationCommunication

Verification of the cardholders name and address the merchant requestsduring a transaction. Mainly used by mail, phone, internet merchants whowant to verify a valid name and address prior to shipping

Authorization Income Grids, contd


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While there are no pricing requirements on the FD System, it ishighly recommended that an Authorization Income Grid beapplied to every single merchant boarded.

By using an authorization income grid, you avoid the scenario inwhich you are assessed fees for declines, auth only, and batchclosings but do not recoup the fees from the merchant.

Note: You are responsible for maintaining yourauthorization income grids.

Authorization Income Grid Example


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In general, you are competingwith the POS Auth fee and thePOS AVS fee.

All other communicationmethods are specialcircumstances.

To limit the amount of grids inyour portfolio, the example tothe right standardizes theVRU, ARU, ARU AVS cost butallows you to create grids with

escalating auth fees for POS AVS and POS AUTH.

MC VS AMX /JCB

DSVR

VRU 1.75 1.75 1.75 1.75

ARU 1.75 1.75 1.75 1.75

ARUAVS

1.10 1.10 1.10 1.10

POSAVS

.05 or

.10.05 or.10

.05 or

.10.05 or.10

POS

AUTH

At

costthrucost+22

At

costthrucost+22

At

costthrucost+22

At

costthrucost+22

User Defined Grids


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The User Defined Income Grid allows you to add, change, or customizecharges you assess merchants for providing specific services. Use thisoption to collect fixed, reoccurring monthly fees.

Common User Defined Income Grid items include (these areexamples):

Customer Service Wireless ISO Club Fee

Supplies Global Gateway (Yourpay)

Debit Access Fee eMerchantView

The statement fee and minimum fees are not part of the User DefinedIncome Grids. The items in the User Defined Income Grids do not havefields in the boarding tool and are represented in the Monthly Fees boxon page 3 of the MPA.

User Defined Grids, contd


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Each grid is assigned a three position numeric identifier by theclient.

Each grid description can have up to 20 positions that willappear on the merchants monthly statement.

Once you establish these grids, you then assign the Grid ID

number of the grid you want to use to the merchant account.**You can only assign one (1) User Defined Income Grid to a merchant account.

If you have a merchant who needs to multiple assessed to recurring monthlyfees, you will have to build a grid that houses all elements. The grid cansupport up to 6 elements.

Note: A grid can be used by more than one merchant. System supports up to999 grids per agent level.

User Defined Grid (Example)


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Limit:1 grid per merchant and 6 items per grid.


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Merchant Pricing Grid (MPG) Example


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Note: The System supports the discount rate (MPG % Rate) for qualified, mid-qualified and non-qualified tiers within the MPG, however, these rates should never be entered within the MPG. Thediscount rate for qualified, mid-qualified and non-qualified tiers should be entered within theappropriate parameters / fields on the entitlements / card types at the merchant level. If the discountrate for qualified, mid-qualified and non-qualified tiers are populated within the MPG and at themerchant level BOTH rates will be assessed to the merchant, thus the merchant would be doublebilled.

Tiered Discount Grids (TDG)d d d h h d ff


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Tiered Discount Grids determine where the differentinterchange programs will qualify:

Qualified , Mid Qualified, Non Qualified, Expanded Tiers 4-9

The Tiered Discount Grid will point interchange programs to thevarious tiered buckets of discount. First Data has createddefault grids for you to use based on the below industry types:

Retail Hotel

MOTO/Internet

Restaurant

Petroleum

Business to Business

Tiered Discount Grids (TDG ), contd Th id d id ifi b l i di Ti d Di G id


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The grid code identifiers below indicate Tiered Discount Gridsavailable for your use if you are using the standard three tieredpricing. (These grids are already created):

FACSRTL FACSHTL FACS MOTO

FACSREST FACSPETR FACSB2B

The Tiered Discount Grids direct the individual interchange programs to one ofthree interchange buckets:

Qual Mid Qual Non Qual

Note: Regulated Debit transactions will be assessed thequalifying rate.

Example Three Tiered Discount Grid


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Tiered Discount Grids (TDG ), contd Th g id d id tifi b l i di t Ti d Di t G id


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The grid code identifiers below indicate Tiered Discount Gridsavailable for your use if you are using the standard three tieredpricing that breaks out Regulated Debit interchange programs.(These grids are already created):

REGRTL REGHTL REGMOTO

REGREST REGPETR REGB2B

The Tiered Discount Grids direct the individual interchange programs to one offour interchange buckets:

Qual Mid Qual Non Qual Tier 9 (Regulated Debit)

Example Regulated Tiered Discount Grid


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Example Expanded Tiered Discount Grids


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Expanded Regulatory Tiered Discount GridsThe grid code identifiers below indicate Tiered Discount Grids


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The grid code identifiers below indicate Tiered Discount Gridsare available for your use if you are using the expanded tieredpricing (Pricing Visa Rewards / MasterCard WorldCards /Regulated Debit separately):

EXRGRTL EXRGHTL EXRGMOTO

EXRGREST EXRGPETR EXRGB2B

By using an EXP (expanded) Tiered Discount Grid ID you areallowing the system to point interchange fee programs to tiers 4-9 to bill separate pricing for Visa Rewards, MasterCard worldprograms and Regulated Debit.

Note: You must use a MPG and a TDG if Expanded TieredPricing is utilized to cover the Visa Rewards and MasterCardWorldCard pricing.


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Grid Guide Cheat Sheet


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Pricing Method Auth

Grid

User

DefinedGrid

Tiered

Discount GridTDG

Merchant

Pricing GridMPG

Tiered Pricing(Standard - buckets 1, 2,3)

ALWAYS MAYBE ALWAYS MAYBE

Tiered Pricing (Standardw/Regulated Debit -

buckets 1, 2, 3, 9)

ALWAYS MAYBE ALWAYS ALWAYS

Tiered Pricing (Expanded buckets 4, 5, 6, 7, 8)


Tiered Pricing(Expanded w/Regulated Debit- buckets 4, 5, 6, 7, 8, 9)


Pass Thru (Interchange Plus) ALWAYS MAYBE NEVER NEVER

ERR ALWAYS MAYBE NEVER MAYBE


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Attributes of InterchangeTransaction attributes determine the Interchange program


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Transaction attributes determine the Interchange programassessed. Primary items that affect Interchange are: Timeliness Valid electronic authorization Entry mode (swiped vs. manually keyed)

Environment (card present vs. card not present) Type of merchant / Industry (MCC) Type of card product Transaction amount

Transaction tolerance Special Interchange program registration Profile set-up

Attributes of Interchange, contd


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Timeliness - The time between the authorization / transaction date ANDthe transaction / settlement date.To obtain the best interchange rates, the following must be met:

Transactions should meet a 2 day settlement time frame.

One day between authorization and the transaction date, except for Card Not Present / EcommerceMerchants which have seven days.

The next best rates: 3 day settlement time frame.

Greater than 3 day settlement:

Results in higher interchange fees referred to as downgrade. A downgrade indicates the transaction did not meet the required criteria to achieve the best

interchange rate.

Attributes of Interchange, contd Valid Electronic Authorization At


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Valid Electronic Authorization - Atthe time of the purchase, anauthorization request must besubmitted to the issuer and the issuersupplies an approved response withan authorization code. Authorization request is submitted by the

merchant to First Data.

First Data sends the request to theappropriate Card Company.

The Card Company routes the request tothe issuing bank who provides the

authorization response. Merchants who call in for a voice

authorization will pay higherinterchange fees.


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Attributes of Interchange, contd Environment (Card Present or Card Not Present) - The


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( )environment a merchant utilizes will dictate the interchangeprogram for which their transactions qualify. Card present is an environment when the customer is face to

face with the merchant. Cardholder-Activated terminals (CAT), the card is present but the merchant is not

(e.g. automated fuel pumps). Card not present is an environment when the customer is not

face to face with the merchant at the time of the authorizationrequest. Ex: online bill payment, deferred/recurring payments, electronic commerce, or

mail/telephone orders. Card not present merchants and some CAT transactionstend to pay higher interchange because the transactions pose a potential greaterrisk for fraud and chargebacks.

Attributes of Interchange, contd Type of Merchant and Industry -Refers to the type of


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yp y ypproduct or services offered / sold by the merchant and theindustry the products or services are offered within. The Merchant Category Code (MCC) identifies the products /

services and industry to the card companies during theauthorization and settlement of a transaction: The MCC MUST match the business type, failure to do so may result

in rule violations as well as the repayment of undue interchange.

Merchants may offer several services or products classified underdifferent Merchant Category Codes.

If this is the case, it is suggested to use the MCC that best describes the majorityof the merchants business.

In some cases, it may be appropriate to set up another merchant account/MCCbased on the merchants different lines of business.

Attributes of Interchange, contd Type of Card Product - Refers to the card product being


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presented by the consumer at the time of purchase. Each card company has specific types of card products

including but not limited to consumer, commercial,signature, and rewards card products.

These have additional breakouts within such as: Signature Preferred Infinite

Corporate

Purchasing Many Interchange programs are based upon the card

products presented.

Attributes of Interchange, contd Transaction Amount - Refers to the amount of the settled


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transaction. Some interchange programs are determined based upon

the settled amount of the transaction. (ex: Purchasing Card Large Ticket, Small Ticket, etc)

Attributes of Interchange, contd Transaction Tolerance - Refers to any amount restrictions


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placed on the interchange program. May be a percentage difference between the authorized

amount and settled amount: Requirement: the auth and settlement amount must match or a

maximum purchase amount allowed under that interchange program. (i.e. Merit III for restaurant MCC 5812 is allowed a 25% tolerance)

Attributes of Interchange, contd Special Program Registration - Refers to the registration


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required to participate in special interchange programs. Examples: Utility merchants can register to participate in special

programs with Visa.

Program code assigned: MasterCard assigns a 3-digit program code (i.e. Rxx, Qxx, etc).

Visa assigns a Merchant Verification Value (MVV) 6-digit numericvalue.

Attributes of Interchange, contd Profile Set Up - Refers to the primary entry points within


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system profiles that affects interchange pricing a merchantmay pay for transactions.Examples:

MCC 5812 is described as an Eating Place while MCC 5814 is describedas a Fast Food Restaurant.

MCC 5812 cannot qualify for MasterCards Convenience Purchaseinterchange program but a 5814 is eligible to qualify. A fast food restaurant set up as a 5812 will be charged a higher interchange rate due to an

inappropriate MCC code.


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Questions?


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First Data Learning Organization

Thank You

Interchange, Pricing Options andGrids

03 interchange pricing grids presentation feb 2012

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