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Education

In a recent GS Online MLS Forum discussion, member
Clearent asked, "For a merchant, wouldn't it just be
easier to increase your prices 4 percent and call it a day?"
That's a great question, and it may or may not accomplish
the same goal. For instance, cash discount programs are
automated; Clearent's proposal could require manual
calculations. Cash discount programs are also more
transparent because they give customers the option to
pay by cash and save. Simply increasing pricing across
the board without offering a cash discount would result
in cash buyers also paying the full, higher price.
A marketing tool

Additionally, for many businesses, cash discount
programs, when marketed correctly, also function as a
tool to attract new customers. Many customers simply
love the idea of a discount, which is why so many stores
have a SALE sign displayed year-round. An across the
board 4 percent price increase might accomplish the
merchant's goal with respect to covering processing
expenses, but I don't believe it would be as powerful as
a correctly implemented cash discount program.

While merchants love cash discount programs because
they enable them to eliminate up to 100 percent of their
processing fees, merchant level salespeople (MLSs)
enjoy them just as much, as they offer higher average
margins than we've seen in this industry in well over
a decade.

Nevertheless, every time a great opportunity presents
itself in our industry, some ISOs and MLSs seek to
exploit it and resort to less than ethical practices.
Be cautious about whom you partner with when
marketing a cash discount program. It could help you
build a solid portfolio with a low attrition rate, while
saving your merchants a tremendous amount of money,
but it's essential that you and the ISO you partner with
understand what a cash discount program is so you
may properly educate your merchants.

Aaron Nasseh is the founder and Chief Executive Officer at Finical
Inc. His extensive sales and management experience includes having
previously served as the General Manager of CardPayment Solutions
and Vice President of Sales at iPayment Inc. He may be reached at
anasseh@finicalinc.com or at 818-330-4055.

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