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MAG Member Corner: Member Perspective – MAG Best Practice Survey on Interchange (MAG Quarterly- Volume Three, Issue Four)

By Greg Pellegrino, Director, Contracts and Performance, Phillips 66

December 8, 2015

Interchange is our biggest spend.  And that makes it the biggest opportunity we have to continue to squeeze costs out of our business.  Lessons learned from the MAG interchange survey are helping us improve our business and shape plans for 2016.

I know my group is the hardest working optimization group in the industry……but I also know that we are not necessarily the smartest.  (I hope my team doesn’t read this!) We miss things, and sometimes, even worse, we don’t even know what we are missing.  I always say, “It is just as good to borrow great ideas as it is to come up with them on your own.”  

When my team gets any information on best practices they are like hound dogs on a coon (I hope they don’t think I’m calling them dogs).  And that’s exactly what happened when the data came in from the first MAG Best Practice Survey.  Interchange is our biggest spend.  And that makes it the biggest opportunity we have to continue to squeeze costs out of our business.  Reducing costs is a critical driver in our business today as we find fuel prices at their lowest levels in years.  

What are some of the items that interested us the most from the MAG survey?
First, the survey validated what we also believed to be true.  The biggest opportunity right now in our business is debit routing.  We need to ensure that we are putting the appropriate amount of resource time and effort into this area.  Survey data noted that we need to engage our acquirer to help us learn how best to capitalize on the opportunities that debit routing is offering.  I am not sure that we are asking our acquirers to assist us enough.  That point was evident in the survey results…it is their role to help us be better!

Interchange analytics is another area that we saw as an opportunity.  We have done a good job of analyzing downgrades when they flare up and then trying to eliminate the same things from happening again.  However, we have not done much at looking at our base set of downgrades.  The ones that happen consistently every month.  The survey pushed us to put some new analytics in place on these base downgrades to find out better what they are and why they are happening.  We are going to chop them up every way we can, by region, by site, by reason, by card type, etc.  Sites that are repeat offenders are an example of a new learning that we think will help us reduce our numbers even more.  We are digging into this first.

Finally, we are going to work to put into place better methods of downgrade monitoring.  Again, this is something that jumped out at us in reviewing the survey results.  The companies that are being successful are watching their numbers daily and that allows them to take action much more quickly when problems arise.  We are looking at some baseline numbers and defining exception amounts that will pop up and alert us to investigate further.  

All of this is being built into our business plans for 2016.  We are excited about the opportunity to improve our business and thankful to the merchants at the MAG for taking the survey seriously and making it a tool that truly helps us to improve our business.  This is exactly why we joined the MAG. There is value that comes from our investment in the MAG.