May 9, 2007

“Extra 1.5% Surcharge on Credit Card/Debit Card & 3% on Sodexho Pass” (Mumbai hypermarket)

This picture was taken at the mobile phone counter of a hypermarket in Mumbai. Currently, debit cards in India carry the same level of interchange as credit cards, hence the 1.5% surcharge on both. But what in the world is Sodexho Pass and why does it cost twice as much as plastic?

Sodexho Pass is a tax-exempt meal voucher given by companies to their employees. Since hypermarkets sell food, they are entitled to accept the vouchers for anything in the store, even mobile phones. What struck me wasn’t the apparent loophole; rather it was the high cost to the merchant.

Sodexho Pass vouchers need to be counted by hand at the end of the day, so they require more manual work by the retailer. On top of that, they carry a much higher cost of acceptance than credit and debit card interchange. Since the vouchers are tax-exempt, customers probably don’t balk at paying the higher surcharge. So basically what is happening here is that taxes are being diverted into Sodexho’s pocket.

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