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September 27, 2018 • Issue 18:09:01

Is cash discounting next big wave

in merchant services?

Durbin Amendment also stipulates that payment card
networks cannot restrict merchants from offering customers
discounts for using one method of payment over another.

Under a cash discounting scenario, merchants mark up
prices on all their products and services to cover the cost of
card processing, then offer discounts equal to the markup
to customers choosing to pay by cash. The net effect is that
these businesses eliminate nearly all card processing fees.
According to those familiar with cash discounting programs
(and an informal survey by this reporter of 20 friends and
colleagues), consumers overwhelmingly like the idea of
discounts for cash, and they understand businesses incur
costs when customers pay with credit and debit cards.

"Payments professionals are struggling to find ways to
accommodate merchants who are clamoring for relief" from
By Patti Murphy card processing costs, said Holli Targan, a partner in the
law firm Jaffe Raitt Heuer & Weiss.
erchants long have decried the cost of credit
and debit card acceptance, often locking horns While cash discounting has been allowed for several years,
with the card companies over interchange. Jill Miller, a partner in the law firm Varnum LLP, said she's
M Now there's a movement afoot among ISOs, seen a recent uptick in inquiries from ISOs, MLSs and other
merchant level salespeople (MLSs) and solution provid- merchant services firms that want to offer surcharging and
ers to help shift the cost of acceptance to cardholders who cash discounting support to merchants. "Over the past 12
choose to pay with their credit and debit cards. And of the months we've seen a lot more client interest," she said.
options available, cash discounting seems to be carrying
the day.

Gas stations in many states have been offering discounts Contributed articles inside by:
to cash customers for years. But most other merchants felt
hamstrung by consumer protection laws and card brand Josh Herndon.........................................................................................22
rules that discouraged the practice.
Steve Norell ............................................................................................34
That all changed with the Durbin Amendment to the Dodd- Jeff Fortney .............................................................................................36
Frank Act, which in addition to requiring the capping Bill Pirtle ...................................................................................................38
of debit interchange also gave merchants the go-ahead Don Bush .................................................................................................40
to offer discounts or other incentives to customers using
certain payment methods (like checks or cash) provided TOC on page 3
the discount program is "conspicuously disclosed." The

Continued on page 32