There is No Better Time to Offer Cash Discounting
There has been a shift in merchant processing. As a result of the 2011 Durbin Amendment Act, Cash Discounting has evolved through various interpretations of what it means for merchants to remain compliant. It wasn’t until the beginning of 2020 that regulations from card brands started to take shape, which makes this a great time to offer Cash Discounting to your merchants.
Benefits to Merchants and Partners
How Merchants Benefit
A true Cash Discount program eliminates ALL merchant processing fees that are regularly paid by the merchant at the end of the month. Instead, the fees are passed on to the consumer as a non-cash adjustment at the time of the sale.
How Partners Benefit
No one enjoys a bidding war when discussing rates. It devalues your service and solutions. By eliminating processing fees under a Cash Discount program, it is extremely rare for any merchant to switch providers for a lower bid. Cash Discounting allows providers to finally emphasize the value of their service without rates getting in the way.
Guidelines for Implementing
How Merchants Should Present Cash Discounting
Priority I.S. has always approached Cash Discounting with caution. We have witnessed trends shift full speed ahead only to be stopped in its tracks by card brands regulations. Many providers present their Cash Discounting solution as a “surcharge” from the merchant to the consumer. This is the quickest way for a merchant to be shut down.
The card brands do NOT want their customer, the cardholder, to feel as though they are being penalized for using their credit card. It is important for the merchant to present the program as an “in-kind incentive” for customers paying with cash, not a “surcharge” for credit cards. For a merchant to remain compliant, they must specify that ALL marked and advertised prices reflect their “cash price” and that their “regular price” includes a X.XX% non-cash adjustment.
Verbiage for the Sign
As with the regulations, the Cash Discount sign has had its share of heated debates. For years, merchants and processors were unclear as to what the sign should say.
There are a few reasons for the sign.
It is for the consumer’s knowledge. The sign should be clearly visible at the entrance of the store, at every register, and verbiage should be included on menus.
It is also a valuable tool for the merchant when disputing chargebacks. Merchants may see a slight increase in chargebacks due to the fact that the final charge on the credit card receipt will include the non-cash adjustment. When disputing chargebacks, it will be important to include documentation on how the Cash Discount Program is presented at the time of sale.
Card brands have made it clear that any merchant that is found to “trick or mislead” consumers will face repercussions. This is why it is crucial that the merchant sign is clearly visible and the staff is trained to confidently explain the program to any customer that might ask for information.
Below is sample verbiage that Priority I.S. recommends for the merchant sign:
"Customer Notice" (Big bold letters)
Prices listed in-store and on advertisements reflect our cash price.
OUR REGULAR PRICE INCLUDES A X.XX% NON-CASH ADJUSTMENT
We offer savings at the point of sale when you pay with cash!
(SMALL PRINT) The purpose of the non-cash adjustment is to incentivize customers to pay with cash. This is an "in-kind incentive" in compliance with section (2)(A) of the Durbin Amendment, a provision of United States Federal Law, 15 U.S.C & 169o-2. We further provide a Cash Discount from the regular price in accordance with section (4)(c)(4) of the same document. This sign is meant to inform customers of our regular price in compliance with this law.
Training Merchants and Handling Customer Complaints
There are a few steps I like to follow when implementing a Cash Discounting program in order to get the merchant fully on board.
Step One: Set expectations with the merchant that they may receive customer questions/complaints from about 3% of their customers during the first 30 days of Cash Discounting.
Step Two: Make sure the business owner is on board with the idea that implementing a Cash Discount program benefits the merchant AND the consumer. The cost for merchants to run credit cards is consistently going up, which means the cost of goods goes up to offset the rise in fees. Rather than a price increase across the board, implementing a Cash Discounting program benefits customers who choose to pay with cash to take advantage of lower cost of goods and services.
Step Three: It is imperative that EVERY team member is trained to understand the how and why of the program. The biggest red flag for any customer is a cashier/server learning about the program at the same time as them.
After the initial staff training, merchants should have regular meetings with the staff as a refresher course. The meeting should cover the program guidelines and a reminder that the customer has the option to avoid the “non-cash adjustment” by paying with cash. The more confident the employee is explaining the program to the customer, the less of a chance there is for chargebacks. It is also a good idea to provide merchants with a Quick Reference Guide that the staff to refer to if questions ever arise.
Hardware
The landscape for Cash Discounting is continuously changing, and some hardware providers are keeping up more than others.
For years, Dejavoo has been at the forefront when it comes to Cash Discounting. The software offers flexibility allowing it to change with card brand regulations.
Another great option is Pax Technologies. Pax terminals are cost effective and their software allows any provider to build files for the machines and integrate into their POS system. With their shift to the Android platform, Pax also allows third party applications to be loaded into their Pax store offering greater flexibility around any program or POS.
Selling Cash Discounting
The Right Candidate
For some transaction types, the Durbin Amendment allows a cap on interchange fees for small ticket purchases. Because of this, Cash Discounting is best utilized for any merchant running more than $10-15 per ticket on average.
Once a merchant is determined to be a good fit, the task becomes how to present Cash Discounting without sounding like a “gimmick”? I like to emphasize a few things in my pitch when I am talking to a merchant:
I want them to understand how their fees will truly be zero. I explain the flow of money (described below) so they can understand how the non-cash adjustment is deposited then used to pay what would have been their merchant processing fees.
I do not sugarcoat the fact that the fees are passed to the customer. This will need to be something the merchant considers when making the switch.
I want to reiterate that it is completely up to the customer if they decide to pay with a credit card and incur the non-cash adjustment fee.
Sample Pitch
This Cash Discount program allows you to opt out of paying 100% of the transaction cost by passing the merchant processing fees off to any customer who chooses to pay with a credit card. Moving forward, your monthly out of pocket for credit card processing bill will be zero.
Sample Pitch Pertaining to the COVID-19 Crisis
Due to the effects of COVID-19 and the drop in consumer spending, many businesses are looking to offset their merchants processing costs by switching to a Cash Discount Program.
A Cash Discount program allows you to opt out of paying 100% of the transaction cost by passing the merchant processing fees off to any customer who chooses to pay with a credit card. Moving forward, your monthly out of pocket for credit card processing bill will be zero.
How Fees Are Collected and Paid
The merchants will receive deposits on a daily basis. The deposit will include Cost of Goods sold + all Non-Cash Adjustment collected. On the same day, the merchant will notice a debit for the total of Non-Cash Adjustment. This debit covers ALL merchant processing fees, and the merchant will not incur any additional daily or monthly fees.
We have all heard the expression “strike while the iron is hot”, and right now, there is no better time to offer cash discounting. The threat of COVID-19 will change consumers' buying habits, and merchants are looking for cost effective solutions to offset those changes. As this economy bounces back in the near future, there is no better opportunity to provide businesses a solution that can eliminate one of their biggest operating expenses.
Take Advantage of Priority I.S.’ Cash Discount Training Program
Priority I.S. is proud to offer our partners an in-depth Cash Discounting training course. Fill out the form below to learn more.