MAG Insights

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Board Member Corner: Don't Fear the Merchant Statement (MAG Quarterly- Volume Three, Issue Four)

dean_sheaffer
By Dean Sheaffer, SVP Financial Services, Chief Compliance Officer, Boscov’s Department Store LLC

December 8, 2015

A colleague and I were recently discussing a paper statement I received from my processor that detailed all the fees associated with cost of acceptance for the month.  Curious about the details, I had decided to open it and take a look.  What I found for a single location revealed a troubling reality of today’s merchant statements.  One monthly statement contained more than 75 line items representing the various fees associated with just one site.  I asked my colleague a simple question, “is 75 line items normal?” to which she replied with a slightly sarcastic “sounds ‘bout right.”

In the days following our conversation, my colleague couldn’t help but take another look at one of her own merchant monthly statements.   She was curious to see if the number of line items was similar to mine, even though we are in very different industries. In fact, her business processes under multiple MCCs per site and includes an augmented card deck to accommodate commercial customers, so she expected to see a few more lines.  She was shocked to find close to 170 unique descriptors with over 250 individual line item fees for a single location, for a single month’s business.

The conundrum my colleague and many of us face is not one of cost, but of the inability, as the owner of a business process, to meet SOX requirements for invoicing given the lack of transparency associated with the billing process.  How do you, as a payments professional, assure your accounting and compliance departments that you are paying the correct amount for payments acceptance?  Let’s face it, most of us don’t qualify and clear transactions in house, so we can’t provide that assurance without input from another source.  I suggest partnering with your processor / acquirer to substantiate the billing for you by providing a periodic audit of a day’s transactions.

An audit should substantiate the many fees on your merchant statement, and often times may reveal errors or opportunities for savings.  Ultimately, processors / acquirers rely on the card brands’ technical specifications to apply the appropriate interchange and assessments.  This means that every data element must be precisely populated, contain the correct bytes, characters, and in proper justification to assess the correct fee.  It is complicated, with many fields populated based on card product, merchant vertical, using multiple cross-reference or translation tables as well as data received from the POS.  Improper field population can result in downgrades or reclassifications, a merchant’s worst enemy.  Consequently, while the card brands will downgrade a transaction at a higher cost when it qualifies for a worse rate than originally submitted, they do not upgrade transactions or charge a better rate when applicable.

Learning how interchange for your transactions is derived and validating merchant statements on a regular basis, knowing what qualification rules matter most to your industry, along with understanding how fields are mapped and translated vs. those that come from the POS should be on every merchant’s to do list for the coming new year.