Oct 2, 2006

Commoditized payment services + multiple acquirer relationships = mess


Another example of a store with multiple POS terminals at each checkout. This is in Manila (thanks, Ling, for the picture).

To avoid the threat of merchants adding a surcharge on credit card purchases, each bank installs a terminal and charges the merchant low rates when the bank’s cards are swiped at the bank’s terminal. They essentially forego interchange and agree to very low processing fees.

Merchants also use this technique to negotiate fees on the fly with each bank. “Give me low fees on all cards, otherwise I’ll stop using your terminal.” A banker in Pakistan told me that when they see fewer than usual transactions on a terminal, they send someone out to the merchant and have to negotiate a lower fee structure on the spot.

I imagine the terminal manufacturers kind of like this situation.

Check out my prior post on why merchants in some countries have relationships with more than one acquirer.

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