Cash discounting push continues

The trend toward ISOs and merchant level salespeople offering to support merchant cash discounting initiatives is gaining steam. VizyPay LLC, headquartered in Des Moines, Iowa, is the latest ISO to disclose it has created a cash discount program for card-accepting merchants.

"The program creates a more reliable, transparent payments process for business owners and incentivizes customers to pay in cash," the company said in a statement.

Cash discounting is not a recent phenomenon. Gas stations and utilities have been offering discounts to cash customers for years. But widespread adoption had been hampered by card brand rules. Those rules were abandoned following passage of the 2010 Dodd-Frank Act, which specifically authorized merchants to offer discounts or other incentives to customers who use certain payment methods (like checks or cash), provided the programs are "conspicuously disclosed."

Drive for transparency

With cash discounting, merchants mark up the prices on all their products and services to cover the cost of card processing, then offer an equivalent discount to customers choosing to pay by cash. The net effect is that these businesses eliminate per-item card processing costs.

ISOs offering cash discount programs report that markups and corresponding cash discounts hover around 4 percent, but note that there are no legal requirements or card brand rules on markups or discounts. Merchants, however, are required to post signs on entrances to their stores and at checkouts notifying customers that prices reflect costs to card-paying customers and that discounts are offered to cash-paying customers.

"Credit card companies have been the driving force into a cashless society, yet small business owners are the ones left footing the bill on the rising and hidden rates that come with credit card acceptance," Austin Mac Nab, managing partner at VizyPay, said in discussing the company's cash discount program. "We want to create a transparent payments ecosystem where merchants not only understand the fees that come with credit card acceptance, but also have the option to avoid them completely."

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