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Dave Holman, Division Sales Director at Beyond, believes Merchant names must also be consistent with store
understanding prospects' and clients' businesses and signage, advertisements and brochures, telephone
needs is crucial to sales and ongoing service. "We want directory listings, and MCC descriptors.
our merchants to understand that we're advocating for
them, just like an attorney or doctor would," he said. High-risk categories
Mastercard and Visa impose higher rates and stringent
Providing good pricing need not be a race to the bottom. underwriting guidelines on high-risk merchants, which
Seasoned agents understand the strategies that drive include furniture stores, health clubs, Internet businesses
interchange pricing and evaluate prospective customers and card-not-present (CNP) businesses. Underwriters may
accordingly, Wactlar noted. For example, with some require additional information with high-risk merchant
businesses (particularly in emerging markets like schools, applications, such as website URLs, marketing materials,
government agencies and child care providers), card-not- merchandise samples and return policies. Some even
present transactions are assessed the same interchange review business plans.
rates as swiped transactions. Agents need to understand
these types of intricacies. "If you're not picking the right According to the Visa Global Acquirer Risk Standards,
category [for those businesses] you're not using interchange acquirers must additionally "identify the service
to your advantage," Wactlar said. provider(s) the merchant uses to process, transmit, or
Diversified merchant categories, codes store cardholder data and whether the service provider is
compliant with the PCI DSS."
Experienced MLSs understand that interchange pricing
is based on merchant categories and industry codes, and Card brands are also wary of free trial offer business
can be a valuable resource when evaluating prospective models, which are deemed to pose heightened risks of
customers. Misrepresenting interchange categories to give chargebacks. Many consumers don't understand the terms
merchants unfair pricing advantages or make them look and conditions of free trials or may dispute the automatic
better than they should can cause problems. billing that occurs at the end of a product or service trial.
Visa's risk standards require additional controls and
Mike Ackerman, President of DigiPay Solutions Inc., oversight with merchants that use free or discounted
related a story involving one merchant whose incorrect trial periods. "Acquirers that fail to properly supervise
designation as a restaurant resulted in an expensive Visa merchants and agents that abuse free trial periods may
audit. "Incorrectly classifying a merchant account can be included in Visa's merchant chargeback and fraud
have harmful consequences for everyone involved: for the monitoring programs and subject to the imposition of
agent, ISO, issuing bank and merchant," Ackerman said. Member Risk Reduction Measures," Visa stated.
Visa defines the Merchant Category Code (MCC) as a Variations in pricing models
four-digit number that describes a merchant's primary Interchange represents the wholesale price of acquiring
business based on annual sales volume. According to the a merchant transaction; it's the largest contributor to a
Card Acceptance Guidelines for Visa Merchants, assigning merchant's discount and approximately 70 to 80 percent of
an accurate MCC "assists in the analysis of merchant the per-transaction fee. Actual all-in costs, however, vary
sales, performance, assessment of levels of risk, and the considerably.
development of programs that are the most useful to
clients, merchants, and cardholders. MCCs can also be One reflection of this variability is the use of different
used to help in recognition of a transaction if the merchant pricing models by acquirers and ISOs to assess the all-in
name is not familiar to the cardholder," which can reduce cost of transactions (the merchant discount rate). Holman
cardholder inquiries and requests for receipt copies. suggested some pricing models clearly benefit acquirers.
"The more creative they are, the easier it becomes to
Merchant payment processing performance and bottom- charge more than they possibly should," he said. Examples
line success are directly tied to how merchant businesses of pricing models include interchange pass-through,
are identified when they sign with acquirers. "Merchant interchange plus, interchange plus-plus, tiered and
name and MCC description clarity and accuracy are key blended.
to avoiding cardholder transaction recognition issues
and misclassification of the nature of your business," Blended pricing was one of the earliest models to emerge.
Visa stated in its guide. "Keep in mind that the purpose "It was pretty easy to understand," said payments industry
of the merchant name is to identify the merchant to the consultant Paul Martaus. That's because every transaction
cardholder. Work with your acquirer to ensure your name gets priced the same, regardless of interchange. An
is clear and discernible to cardholders when they read acquirer/ISO calculates the blended fee based on a
their statement." merchant's mix and number of transactions. Blended
pricing has fallen out of favor with acquirers and ISOs,

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