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Education

all payment types, as there is no evidence to suggest
one payment type over another drives a difference in
the transaction size. In the same way, as the average
transaction size rises or falls, the pricing will stay relative
to the cost. A buyer will buy the same number of supplies
needed for a job regardless of the payment type they use
to settle their invoice.

Given a $1,000 transaction, we can see that ACH, with an
average cost of $0.30 per transaction, runs about .03 bp of
cost on the transaction on the low end versus credit, with
a cost on the same transaction of 250 bp. On the face of it,
that's a massive 247 bp premium for a supplier to absorb
on straight payment cost comparisons.

Banging a square peg

into a round hole

By Roger McNamara
Guide2Interchange LLC

he image of trying to bang a square peg into a
round hole conjures up several thoughts. First, ACH, check, and to some extent wire are more popular
it is probably not the most effective strategy. If because of cost. But does that mean credit and debit have
T the peg doesn't fit, why are you banging it into no place at the payments table. Absolutely not. If a business
the hole? Second, if you have a big enough hammer and can realize a combination of value and cost reduction in
use enough strength, you probably can get some of the the payment, credit acceptance can become part of the
peg through the hole—but will be messy, probably with payment solution and a large customer satisfaction tool
bits of the peg scattered everywhere, leaving you a little for any business.
sweaty and tired.
To present credit as a cost-effective solution to a supplier,
This process reminds me of the current credit card ISOs should look deep into the transaction and beyond
offering in the B2B payments space. The hole is clear. It is price. They need to look far deeper than services and even
only so big, and only so much can fit through it, meaning deeper than Level II and III data. Why? With the cost of
there is only so much cost a business will tolerate. Right funds at the low end of the scale today for borrowing,
now, the round pegs that are fitting better in the hole are why would any business want to pay 2.50% - 3% for a
check, ACH, and wire. The square pegs are all credit. The transaction they believe they can settle for less?
competitive forces are check, ACH, andwire payments
versus plastic of all sorts. It's easy to see the general cost The simple answer is they would not.The deeper dive will
differentials; this is part of the issue with credit cards not reveal that through a mix of items, the seller can be more
being universally accepted for payment in B2B. successful in positioning credit as a collection tool rather
than an overhead. Ask yourself this: How many times in
selling a B2B merchant have you asked about the terms the
supplier offers? If you haven't been doing this, you've been
missing the key opportunity that credit delivers.

The path to open acceptance in B2B is far greater than
price when suppliers believe they can settle invoices for
far less than our cost. Can they?

Roger McNamara, President, Guide2Interchange LLC is a 25+-year
veteran of the payments industry, most recently as the director of busi-
ness development with American Express in the United States. He has
If we dive in further to depict total cost by payment sold more than $200 billion worth of card processing and now leads
type, we'll have to add a scenario involving an average a B2B merchant sales training organization. Contact him by email at
transaction/invoice type. It would be the same for Guide2Interchange@gmail.com or by phone at 561-379-3151.

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